McKonly & Asbury Webinar - Fraud Not If, But When

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Our experts help you to understand the lessons learned from over 50 combined years of fraud experiences. Learn how good processes and internal controls can protect not only your organization, but also you as an individual. Obtain some practical tips on how you might prevent fraud in the future. Remember, it is not a question of “IF” fraud will occur in your organization, it is a question of “WHEN”. Are you prepared?

Check out our Upcoming Events page for news and updates on our future seminars and webinars at http://www.macpas.com/events/.

View a full recap of this webinar at http://www.macpas.com/webinar-cover-your-assets-asset-protection-trusts-and-the-vital-importance-of-trust-jurisdiction/

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McKonly & Asbury Webinar - Fraud Not If, But When

  1. 1. FRAUD NOT ‘IF’ BUT ‘WHEN’ JANICE SNYDER JOSEPH KRZYWICKI D AV I D H A M M A R B E R G
  2. 2. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D C P A , H A M M A R B E R G , C F E , C I S S P , M C S E , W X Y Z
  3. 3. FRAUD NOT ‘IF’ BUT ‘WHEN’ JANICE SNYDER JOSEPH KRZYWICKI D AV I D H A M M A R B E R G
  4. 4. INTRODUCTIONS Janice Snyder • • • • Partner Certified Public Accountant 15 years experience Financial statement and employee benefit plan audits • Industries: Healthcare, Manufacturing and Distribution
  5. 5. INTRODUCTIONS Joseph Krzywicki • Senior Vice President, Market Manager at PNC Bank, N.A. • Certified Treasury Professional • 23 years of banking experience • Represents all types of large and complex businesses
  6. 6. INTRODUCTIONS David Hammarberg • Director of IT • CPA, MCSE, CISSP and CFE - Certified Fraud Examiner • Information Systems and Technology
  7. 7. AGENDA: FRAUD – NOT ‘IF’ BUT ‘WHEN’ A PANEL DISCUSSION Who Cares About Fraud? Different Types of Fraud Exposed – Real Fraud Cases Now what? • Lessons learned • Prevention
  8. 8. WHO CARES ABOUT FRAUD? Headlines from: • The New York Times • The Washington Post • Computer World, • Krebs on Security Source: Fraud Advisory for Business: Corporate Account Takeover
  9. 9. WHO CARES ABOUT FRAUD? 61% “ … of businesses that have experienced attempted or actual fraud in 2012.” Source: 2013 Association for Financial Professionals Payments Fraud & Control Survey
  10. 10. WHO CARES ABOUT FRAUD? Business Fraud Payment Fraud by Method 2012 87% • The typical loss due to payments fraud was $20,300. 27% 3% Source: 2013 AFP Payments Fraud & Control Survey Check Corporate ACH Card Debits 8% 11% ACH Wire Credits Transfers
  11. 11. DIFFERENT TYPES OF FRAUD 1. Internal Fraud Fraud committed by someone inside the organization 2. External Fraud Fraud committed by someone outside the organization
  12. 12. EXPOSED – REAL FRAUD STORIES Organization Fraud • 750 member church (non-denominational) • Credit cards, cash theft, food & supplies
  13. 13. EXPOSED – REAL FRAUD STORIES Organization Fraud • 750 member church (non-denominational) • Credit cards, cash theft, food & supplies Proven Losses - $750,000
  14. 14. EXPOSED – REAL FRAUD STORIES Organization Fraud • 750 member church (non-denominational) • Credit cards, cash theft, food & supplies Proven Losses - $750,000 Common Fraud Theme: Commited by Most Trustworthy Employee
  15. 15. EXPOSED – REAL FRAUD STORIES How was it detected? • Whistleblower • Employees need a safe way to report fraud
  16. 16. EXPOSED – REAL FRAUD STORIES Red Flags • Changes in financial results
  17. 17. EXPOSED – REAL FRAUD STORIES RED FLAGS • Changes in financial results • Living beyond their “means”
  18. 18. EXPOSED – REAL FRAUD STORIES Red Flags • Changes in financial results • Living beyond their “means” • Organization provided the Opportunity
  19. 19. EXPOSED – REAL FRAUD STORIES Common Fraud Themes • No written policies and procedures • Lack of clarity of roles and responsibilities • Inadequate recordkeeping
  20. 20. EXPOSED – REAL FRAUD STORIES Rationale • Health concerns of ailing relatives • College costs • Needs of friends
  21. 21. EXPOSED – REAL FRAUD STORIES Cyber Crime • $100M Manufacturing Company • Real-time and very sudden fraud • System logon error • System was compromised • Criminals had taken over accounts
  22. 22. EXPOSED – REAL FRAUD STORIES Cyber Crime - $24,000 Lost Company Consumers • Need to contact bank immediately. • Liability may fall to the Company. • Need processes and procedures in place for immediate detection. • More protection under the Uniform Commercial Code.
  23. 23. EXPOSED – REAL FRAUD STORIES Red Flags • Phishing emails – clicking a link • Malware was downloaded in error • Lack of updated Anti-Virus software Schemes are becoming much more sophisticated.
  24. 24. EXPOSED – REAL FRAUD STORIES Prevention • Never open an unknown email
  25. 25. EXPOSED – REAL FRAUD STORIES Prevention • Never open an unknown email • Avoidance of infected websites
  26. 26. EXPOSED – REAL FRAUD STORIES Prevention • Never open an unknown email • Avoidance of infected websites • Updated Anti-Virus software • Dual controls and segregation of duties
  27. 27. EXPOSED – REAL FRAUD STORIES Prevention • Never open an unknown email • Avoidance of infected websites • Updated Anti-Virus software • Dual controls and segregation of duties • Real-time monitoring of bank accounts • Transactional dollar limits
  28. 28. EXPOSED – REAL FRAUD STORIES Prevention • Never open an unknown email • Avoidance of infected websites • Updated Anti-Virus software • Dual controls and segregation of duties • Real-time monitoring of bank accounts • Transactional dollar limits • Training and education of all employees
  29. 29. EXPOSED – REAL FRAUD STORIES Checking Account Fraud – Sophisticated Schemes • Fictitious checks • Altering existing checks • Lottery schemes • Potential attacks are significant • Happening much more quickly
  30. 30. EXPOSED – REAL FRAUD STORIES Checking Account Fraud – Sophisticated Schemes • Corporate accounts are big targets. • Corporations often bear the full cost. • Immediate detection is critical.
  31. 31. EXPOSED – REAL FRAUD STORIES Lapping Schemes • Tax Collector Example • $250,000 fraud • Poor reconciliation process • Lack of internal controls and oversight
  32. 32. EXPOSED – REAL FRAUD STORIES • All must be present for fraud • Rationalization and Pressure are often outside the control of the Company. • Companies must ensure that Opportunity is minimized.
  33. 33. NOW WHAT? Lessons Learned • Documented policies and procedures are critical. • Internal controls are important: • Security measures • Cameras • Segregation of duties • Appearance of controls may be a cost-effective alternative to doing nothing.
  34. 34. NOW WHAT? Lessons Learned • • • • Communication, Awareness & Training Segregation of Duties Proper Vendor Management Tools can support the prevention of fraud • Positive Pay • Write fewer checks • Smart safe
  35. 35. NOW WHAT? Prevention • • • • Documented Processes are critical. Oversight is a must. Communication, Awareness & Training are a necessity. Segregation of Duties protects everyone (the company and the employees). • There are effective Tools to support organizations.
  36. 36. THANK YOU Additional Questions? Please contact us: • Janice Snyder jsnyder@macpas.com • David Hammarberg dhammarberg@macpas.com • Joseph Krzywicki joseph.krzywicki@pnc.com
  37. 37. MCKONLY & ASBURY, LLP • Audit, Tax and Advisory Firm • Regional presence in Pennsylvania • Variety of clients ranging from construction to manufacturing and other clients • Special capabilities in the risk management area • Certified Fraud Examiner and expert witness • Best Places to Work and Best Accounting Firm PNC BANK, N.A. • One of the Nation’s largest diversified financial services providers • Operates in 19 states and the District of Columbia • Regional headquarters in Camp Hill, PA • Provides specialized services for corporations, non-profit organizations and government entities • PNC Grow Up Great: $350 million, multi-year school readiness initiative that benefitted more than 1.75 million at-risk children since 2004
  38. 38. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D C P A , H A M M A R B E R G , C F E , C I S S P , M C S E , W X Y Z

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