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Csoi London08 Fraud Mc Laughlin Kpmg
 

Csoi London08 Fraud Mc Laughlin Kpmg

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    Csoi London08 Fraud Mc Laughlin Kpmg Csoi London08 Fraud Mc Laughlin Kpmg Presentation Transcript

    • FORENSIC The fraud triangle - an aid to assessing fraud risks December 2008 ADVISORY
    • Categorising fraud and misconduct Fraudulent financial Misappropriation of Other threats reporting assets - Improper revenue - Payroll & Pensions fraud - Bid-rigging and other anti- recognition - Expenses fraud competitive behaviour - Overstatement of assets - External theft - Falsifying compliance data - Understatement of - Procurement fraud for regulators liabilities inc tax - Disposals related fraud i.e - Money laundering - Customer over-billing land, plant, vehicles, scrap - Organised crime - Fraud by JV partners - Theft of IP - Insider trading - Treasury & Investment - Sales and Marketing fraud - Recruitment fraud related fraud - Manipulation of apparent performance / KPIs © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 1 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • The United Kingdom Fraud Act 2006 Effective from 15 Jan 2007 Creates for the first time a specific offence of fraud, split into three categories: Fraud by false representation Fraud by failure to disclose information, and Fraud by abuse of position Act also focuses on what the perpetrator intended rather than what necessarily resulted – the mere intention to cause a victim loss through fraud is the crucial point – there does not even need to be an identifiable victim! The act also includes sections on: Possession of articles for use in frauds Making or supplying articles for use in fraud Obtaining services dishonestly © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 2 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Who is committing fraud? KPMG’s 2007 survey “Profile of a Fraudster” looked at 380 investigations performed by our firms in recent years. It found the following: Board members and members of senior management comprised 60% of fraudsters. A further 26% of fraudsters were members of the management group. In 68% of the cases surveyed, the fraudster acted independently. 85% of cases involved only men. 70% of the fraudsters were between 36 and 55. Finance was most likely place in which fraudsters worked followed by sales / operations or the fraudster worked as the CEO. © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 3 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • The impact of fraud on your business? Some or all of the following: Financial loss Reputational damage Diversion of senior management time Damage to morale Loss of confidence by stakeholders Concerns about job losses Unwelcome press interest Increased scrutiny and regulation by government Investigation costs © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 4 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • The concept of the fraud triangle Opportunity Pressure Rationalisation © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 5 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Fraud Triangle - Pressure Revenge Debts Addiction – drink, drugs “Results at any cost” Coercion or blackmail Family pressures “I need the money” Illness © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 6 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 6
    • Fraud Triangle - Opportunity Fraud can be hidden in Poor controls complex transactions Exploiting errors Abuse of authority Lack of segregation of duties Lack of effective oversight Poor corporate governance © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 7 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 7
    • Fraud Triangle - Rationalisation “They do not pay me “Rules are made to be enough!” broken” “Who cares?” “Everyone else does it” “Its only small amount” “I’m the boss!” “It’s a victimless crime” “They can afford it” “I’ll never “It’s a cost of doing get caught!” business” © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 8 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 8
    • Warning signs - some corporate behaviours Lack of trust / poor internal or Dominance / Illegal unethical Significant Undue secrecy external auditor lifestyle issues practices director bonus relationships Declining Highly- High analyst or Aggressive industry / High hope value leveraged other pressures forecasts earnings rewards Aggressive Cash / funding High Unique products Results exceed accounting gap management – unique risks market trend policies turnover Related party Complex arrangements / Profit warnings / corporate Multiple banking Remote unusual credit warnings structures arrangements operations payment methods © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 9 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Warning signs - some people related behaviours Lifestyle / Overextended Addictive Relationship Rarely takes Income personal behaviour “issues” holidays mismatch finances Unreliable, Refuses or does Resists or Poor motivation Stressed, prone to not seek refuses new or unhappy pressurised mistakes, poor promotion positions performance Shifts blame for Inappropriate Bullies or Ability and errors, denies acceptance of Egotistic intimidates performance not responsibility hospitality colleagues in tune with CV Has favourites or Personal pay Vendors and Does not, or is surrounded by and reward suppliers will not Cuts corners or cannot produce “yes men / could be speak to anyone Bends the rules! books or records women manipulated but this person © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 10 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Managing fraud risk – some suggestions (1) Are your internal controls effective and designed so as to respond to identified fraud risks? Is there effective scrutiny in place? Are business decisions subject to regular challenge and review – could a fraudster easily avoid such scrutiny by predicting where and when it will occur? If you have a whistle blowing hotline, does it generate an expected level of reporting? If not – why not? Is it available for use by third parties such as customers, suppliers or other stakeholders? Have managers been required to identify specific fraud risks? Have internal controls been developed in response to these fraud risks? © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 11 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Managing fraud risk – some suggestions (2) What deters fraudsters in your business? If a fraud was to occur – do you have a fraud response plan or mechanism in place to secure evidence, to protect your business, to maximise the chances of recovering stolen assets? Fraud education and awareness –do you educate your employees and managers on the risks posed by fraud? Are appropriate anti-fraud policies in place? Are they accessible to all staff – in local languages, available on the corporate Intranet and regularly reviewed to reflect the business in its current form? Could you use data analytical techniques on your business data to detect fraud or other misconduct? © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 12 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
    • Presenter Danny McLaughlin Senior Manager, KPMG Forensic 020 7311 3662 danny.mclaughlin@kpmg.co.uk © 2008 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted. 13 KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.