Sketching the mental framework and physical appearance of a fraudster

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Internal Fraud Investigations & Control Conference 2014
Bangalore, India 2014

Sketching the mental framework and physical appearance of a fraudster
• How a criminal mind's work – delving into a devil's mind
• Certain characteristics and behavioral patterns of a corrupt employee
• An overall personality analysis of a fraudster

Published in: Business, Health & Medicine
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  • Refer to Handout 1: Possible General Root Causes for Fraud
  • Refer to Handout 1: Possible General Root Causes for Fraud
  • Refer to Handout 1: Possible General Root Causes for Fraud
  • Refer to Handout 1: Possible General Root Causes for Fraud
  • Refer to Handout 1: Possible General Root Causes for Fraud
  • This looks better right? But… also still not good enough, right?
    Refer to Handout 4:
    1. Priority, Targets and Standards
  • Refer to Handout 1: Possible General Root Causes for Fraud
  • Actions and Behaviors under “Zero Tolerance”:
    theft and fraud**
    violation of confidentiality or security of company information**
    possessing or consuming non-prescribed narcotics on company property
    reporting to work intoxicated/impaired
    instigating a fight on company property
    carrying a weapon on company property
    intentional harassment, including racial, religious, or sexual harassment
    directly or indirectly inciting racial or religious issues
    act of violence toward superior, an employee or customer
    physically threaten or abuse superior, an employee or distributor
    misrepresentation of important facts in seeking employment
    tampering or forging company information and property
    sabotage or intentionally harming the company
    Conflict of interest
    General Treatment for “Zero Tolerance”
    These are behaviors that are commonly excluded from a progressive discipline approach and that subject the employee to either immediate Domestic Inquiry (D.I.) or criminal prosecution. (upon professional legal advice)
    There should also be publication and circulation of the “Zero Tolerance” Handout for all employees.
  • Refer to Handout 2: General Strategies And Policies
  • is important.
  • Here are some ways to for leaders to create a better working environment:
    Educate our core employees all about the business so they understand their impact on its day-to-day success.
    Involve employees in important decisions relating to work processes and customer satisfaction.
    Teach core workers the skills that are traditionally reserved for managers. This helps them learn to make better decisions and support business objectives.
    Identify and eliminate obstacles to employee commitment. These can include giving managers too much status or privilege, micromanaging and restricting employees’ access to information.
  • Sketching the mental framework and physical appearance of a fraudster

    1. 1. 1 http://totallyunrelatedrandomanddebatable.blogspot.com/ DELVING IN THE DEVIL’S MIND Sketching the mental framework and physical appearance of a fraudster. Kenny Ong
    2. 2. 2 http://totallyunrelatedrandomanddebatable.blogspot.com/ Business today… 13th April 2009 •Two Domino’s employees •YouTube •Apology from Domino’s after 48 hours •1 million hits •Twitter: questions on silence •LinkedIn: suggestions by users in forum BusinessWeek, May 4, 2009
    3. 3. 3 http://totallyunrelatedrandomanddebatable.blogspot.com/ €50 Billion Worldwide sales in 2011 2 billion people Use Unilever’s products Each day worldwide 400 Brands Sold in 180 countries 167,000 employees Work for Unilever 130YEARS & STILL GROWING
    4. 4. 4 http://totallyunrelatedrandomanddebatable.blogspot.com/
    5. 5. 5 http://totallyunrelatedrandomanddebatable.blogspot.com/ Contents: A. The Criminal Mind B. Triggers C. Minimizing Incidents D. Future Fraud
    6. 6. When and how do you decide?
    7. 7. 7 http://totallyunrelatedrandomanddebatable.blogspot.com/ How many of us drive with the ultimate intention of breaking the speed limit?
    8. 8. 8 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 1. Character Good Bad 2. Intelligence Smart Not Smart 3. Situation Open Closed 4. Catchability Easy Hard
    9. 9. 9 http://totallyunrelatedrandomanddebatable.blogspot.com/ The Criminal Mind Profile of Potential Fraudster
    10. 10. 10 http://totallyunrelatedrandomanddebatable.blogspot.com/ “Everyone has a price”
    11. 11. 11 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 1. Character 2. Intelligence Good Bad Smart Not Smart
    12. 12. 12 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 1. Character Good Bad 1. Family 2. Education 3. Social 4. Movies 5. Books 6. Religion 7. Record 8. Attribution
    13. 13. 13 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 2. Intelligence Smart Not Smart 1. Education level 2. Talent 3. Analytical 4. Systems 5. Ask questions 6. Years of Service
    14. 14. 14 http://totallyunrelatedrandomanddebatable.blogspot.com/ How would you profile him?
    15. 15. 15 http://totallyunrelatedrandomanddebatable.blogspot.com/ How would you have profiled him?
    16. 16. 16 http://totallyunrelatedrandomanddebatable.blogspot.com/ GENERAL FRAUDSTER PROFILE • Profile: 68.6% – no prior criminal record, – Aged 26-40 years old, – Annual income between RM15k-RM30k, – 2-5 yrs of service • Struggling financially or large purchases – difficult time in their lives – gets out of hand • Merger and acquisition or reorganization activity. – ‘I don’t have a career here’ attitude.
    17. 17. 17 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. "Everyone does it." 2. "It was small potatoes." 3. "They had it coming." – the revenge syndrome 4. "I had it coming." – the equity syndrome
    18. 18. 18 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. "Everyone does it.“ 1. Indiscipline employees commonly organize themselves in cliques or clusters - the inner circle 2. Rarely does a repeat offender not involve an accomplice or at least a confidant. 3. “If my superior can come to work late and still be promoted, it means I can steal RM10. Both are indiscipline cases anyway.”
    19. 19. 19 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. “It was small potatoes.“ 1. “What's a RM30 stolen calculator to a company that makes millions each year or to a boss who drives a Mercedes? 2. “Zero Tolerance Policy” for identified disciplinary cases in any form or for any amount?
    20. 20. 20 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. "They had it coming." – the revenge syndrome 1. “The accounts department cuts down my lead time to submit my claims yet take 60 days to compensate my claims. So I purposely come late to work to compensate.” 2. “The company keeps cutting down our benefits and allowances but keep asking us to produce more. So I compensate by being calculative with the company even for one sen.”
    21. 21. 21 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. "I had it coming." – the equity syndrome 1. Under-compensated or unrecognized -> self- devised "bonus" plan. 2. Employee has been turned down for a raise or promotion; after a company-wide salary freeze has been established; during periods of company turmoil (restructuring, takeover, new management, etc.).
    22. 22. 22 http://totallyunrelatedrandomanddebatable.blogspot.com/ Reminder: Very few people join an organization with the objective to commit fraud.
    23. 23. 23 http://totallyunrelatedrandomanddebatable.blogspot.com/ Triggers Conditions for Fraud
    24. 24. 24 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 3. Situation4. Catchability Open ClosedEasy Hard
    25. 25. 25 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 3. Situation Open Closed 1. Self/Family 2. Straight road 3. Conflicts 4. Bad Bosses 5. M&A 6. Org Character 7. Controls 8. No changes 9. Power Imbalance 10.Amount, $$ 11.Org Systems
    26. 26. 26 http://totallyunrelatedrandomanddebatable.blogspot.com/ Fraud-O-Scope™ Fraud 4. Catchability Easy Hard 1. Check & Balance 2. Oversight 3. Automation 4. Burden of Proof 5. Line of Sight
    27. 27. 27 http://totallyunrelatedrandomanddebatable.blogspot.com/ Who is most likely to commit Fraud? Excellent Very Good Average Not Good Commit Suicide
    28. 28. 28 http://totallyunrelatedrandomanddebatable.blogspot.com/ The Four Desperates 1. Desperate Competition 2. Desperate Consumer 3. Desperate Achievers 4. Desperate Changes
    29. 29. 29 http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Direct Incentives 1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment contract, 9. rebellion from non-incentivised staff, 10. end up incentivising everyone for everything?,
    30. 30. 30 http://totallyunrelatedrandomanddebatable.blogspot.com/ Curse of the Bell Curve ‘A’ Staff ‘B’ Staff ‘D’ Staff ‘E’ Staff ‘C’ Staff
    31. 31. 31 http://totallyunrelatedrandomanddebatable.blogspot.com/ Biggest Issue in Financial Product Innovation?
    32. 32. 32 http://totallyunrelatedrandomanddebatable.blogspot.com/ Power Imbalance 1. Propose 2. Approve 3. Execute 4. Monitor
    33. 33. 33 http://totallyunrelatedrandomanddebatable.blogspot.com/ Possible General Root Causes for Fraud Mindset 1. "Everyone does it." 2. "It was small potatoes." 3. "They had it coming." – the revenge syndrome 4. "I had it coming." – the equity syndrome
    34. 34. 34 http://totallyunrelatedrandomanddebatable.blogspot.com/ Minimizing Incidents Prevent. Deter. Kill.
    35. 35. 35 http://totallyunrelatedrandomanddebatable.blogspot.com/ "Fear not the 10,000 moves practiced once. Fear the one move practiced 10,000 times" Chandni Chow to China
    36. 36. 36 http://totallyunrelatedrandomanddebatable.blogspot.com/ GENERAL STRATEGIES AND POLICIES • B1. Classification of Behaviors –B1.1 Disrespectful Workplace Behavior –B1.2 Progressive Discipline –B1.3 Zero Tolerance
    37. 37. 37 http://totallyunrelatedrandomanddebatable.blogspot.com/ GENERAL STRATEGIES AND POLICIES • B2. Recruitment and Selection • B3. Exit • B4. Employee Assistance Program • B5. Anonymous Hotline • B6. Communication and Feedback • B7. Training and Education • B8. Formal Complaint and Grievance
    38. 38. 38 http://totallyunrelatedrandomanddebatable.blogspot.com/ GENERAL STRATEGIES AND POLICIES • B9 Leadership – 1. Leaders act as role models whether consciously or unconsciously – 2. Leaders determine the working environment
    39. 39. 39 http://totallyunrelatedrandomanddebatable.blogspot.com/ GENERAL STRATEGIES AND POLICIES • B9 Leadership – 1. Educate – 2. Involve – 3. Teach – 4. Eliminate
    40. 40. 40 http://totallyunrelatedrandomanddebatable.blogspot.com/ SPECIFIC STRATEGIES AND POLICIES • C1. Theft and Fraud – Root Causes – Profile: 68.6% - no prior criminal record, Aged 26-40 years old, Annual income between RM15k-RM30k, 2-5 yrs of service – Struggling financially or large purchases • difficult time in their lives • gets out of hand – Merger and acquisition or reorganization activity. • ‘I don’t have a career here’ attitude.
    41. 41. 41 http://totallyunrelatedrandomanddebatable.blogspot.com/ SPECIFIC STRATEGIES AND POLICIES • C1. Theft and Fraud - Prevention – Background checks – Duties segregated – Anonymous hotline – Share the wealth – Communicate successes – Make a big noise when discovered – Video surveillance equipment
    42. 42. 42 http://totallyunrelatedrandomanddebatable.blogspot.com/ SPECIFIC STRATEGIES AND POLICIES • C2. Violation of confidentiality or security of company information - Prevention – a. ICT Security Policies* – b. Ownership of Intellectual Property – c. Inside Information and Trading of company shares
    43. 43. 43 http://totallyunrelatedrandomanddebatable.blogspot.com/ *ICT Security and Fraud (1/3) Biggest ICT risks 1. Security – All matters relating to the ‘coming-in’ and ‘going-out’ of all systems and information 2. Backup - including Storage of critical and non- critical information and Disaster Recovery 3. Continuity – Availability of systems and information at a 24x7x365 standard
    44. 44. 44 http://totallyunrelatedrandomanddebatable.blogspot.com/ *ICT Security and Fraud (2/3) The following are threats faced by organizations from ‘inside’ the company: • Current Employees, • On-site Contractors, • Former Employees, • Vendors/Suppliers, • Strategic Partners, and • OEMs
    45. 45. 45 http://totallyunrelatedrandomanddebatable.blogspot.com/ “Asking the people responsible for preventing a problem if there is a problem is like delivering lettuce by rabbit" Norman Augustine CEO & Chairman, Lockheed Martin
    46. 46. 46 http://totallyunrelatedrandomanddebatable.blogspot.com/ "He has 20 years experience: 1 year of bad experience repeated 20 times"
    47. 47. 47 http://totallyunrelatedrandomanddebatable.blogspot.com/ Future Fraud We all need help
    48. 48. 49 http://totallyunrelatedrandomanddebatable.blogspot.com/ Finance Today… $19.90
    49. 49. 50 http://totallyunrelatedrandomanddebatable.blogspot.com/ New Fraud Opportunities Change in Business Models: Inexperienced eCommerce Partners Franchise Downstream/Upstream M&A Targets
    50. 50. 51 http://totallyunrelatedrandomanddebatable.blogspot.com/ eCommerce Frauds Account Takeover Pharming Counterfeit Advances Phishing Application Lost/Stolen Credit Cards eCom Frauds?
    51. 51. 52 http://totallyunrelatedrandomanddebatable.blogspot.com/ End Points
    52. 52. 53 http://totallyunrelatedrandomanddebatable.blogspot.com/ Mistakes and Lessons Learned 1. Price to Pay for Fraud/Risk Mitigation => Business Flexibility 2. Control vs. Growth 3. Rules vs. Humanity/Motivation 4. Not tackling the root cause i.e. Motive + Opportunity i.e. Humans 5. Focus on F&A vs. Sales/Marketing => who has control? 6. Relationship Role vs. Enforcement Role
    53. 53. 54 http://totallyunrelatedrandomanddebatable.blogspot.com/ In the end… • Great Wall of China – humans are the weakest link – bad treatment of staff will lead to weak link i.e. easier to bribe, easier to con, etc; – bad treatment examples: insulting, lose face, broken promises, no dignity, public criticism, restructure without communication
    54. 54. Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable. blogspot.com/

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