Profile of a Fraudster by KMPG (Presentation)

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Profile of a Fraudster by KMPG (Presentation - June 2011)

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Profile of a Fraudster by KMPG (Presentation)

  1. 1. Profile of aFraudster 2011 Press Conference, Zurich June 15, 2011
  2. 2. Agenda9.00 Andreas Hammer Head of Public Relations & Public Affairs, KPMG Switzerland9.05 Anne van Heerden Head of Risk & Compliance and Head of Forensic, KPMG Switzerland • How does the typical Fraudster look like? Presentation of the world-wide Study: «Profile of a Fraudster 2011»9.30 Prof. Dr. Peter Leibfried Geschäftsführender Direktor des Instituts für Accounting, Controlling und Auditing (HSG) Mag. rer. soc. oec Alexander Schuchter Institut für Accounting, Controlling und Auditing (HSG) • «Forschungsgeschpräche mit rechtskräftig verurteilten Wirtschaftsdelinquenten»10.00 John Ederer Head of Corporate Client Forensic Services, KPMG Switzerland • «Fraud Risk Management Prevention is better than a cure! »10.20 Q&A10.30 End© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 1International.
  3. 3. Profile of aFraudster 2011Anne van Heerden,Partner, Head of Risk and Compliance,Head of Forensic,KPMG Switzerland
  4. 4. Content• Survey Methodology• The «Fraud Triangle»• Who is the typical Fraudster• Detection of the Fraudster• Size of the Crime• Warning Signs• Emerging Trends© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 3International.
  5. 5. Survey Methodology IKPMG gathered data and details from fraud investigations (from January 2008through December 2010), in:• Europe, Middle East and Africa (EMA)• the Americas and• Asia Pacific348 cases from 69 countriesOnly «white collar» crimes with a clear perpetrator© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 4International.
  6. 6. Survey Methodology IIFrauds investigations included in this survey comprise:• material misstatement of financial results• theft of cash and/or other assets and• abuse of expensesThe survey covers:• fraudster profiles• more common types of fraud• conditions that tend to enable fraud• typical follow-up actions by organizations impacted by fraud© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 5International.
  7. 7. The Fraud TriangleWhat do we understand by the term fraud?• «All those activities involving dishonesty and deception that can drain value from a business, directly or indirectly, whether or not there is personal benefit to the fraudster.» Rationalisation Motive Opportunity From a theoretical point of view there are three important drivers for committing fraud.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 6International.
  8. 8. The Elements of the Fraud Triangle Motive Opportunity Rationalization The mindset of the fraudster The offender„s impulse to The situation that enables that justifies them to commit commit fraud. fraud to occur. fraud.  Financial pressure  Weaknesses in the  The fraudsters convince resulting from excessive internal controls, themselves that they are lifestyle;  Trust / confidence in owed extra remuneration by  Gap between the financial certain employees, the employer; remuneration earned and the Dominate position.  Not enough appreciation, responsability held by regarding the person, or the individual; professional activity.  Pressure to meet financial targets.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 7International.
  9. 9. Who is the typical Fraudster?Individual Profile• Age: The typical fraudster is aged between 36 and 45 (70%), as per 2011 survey, which is similar to the 2007 results.• Gender: Men were found to be more likely perpetrators. Women in the Americas and Asia pacific are almost three times more likely to be involved in fraud than in EMA. This might be due to fewer women in senior positions in «old Europe» and Africa.• Function/ Position: Finance function or in a finance-related role, in a senior management position• Time: Employed by the company for more than ten years• Collusion: Works in collusion with another perpetrator© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 8International.
  10. 10. Who is the typical Fraudster?Where the fraudster works 35% Senior Management 49% 29% Management 26% 2011 Survey 2007 Survey 18% Staff 14% 18% Board Member 11% Senior Management remain the most likely fraudster. Most people involved in committing fraud work in the finance function.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 9International.
  11. 11. Where the fraudster works 32% Finance 36% 26% CEO 11% 25% Operations / Sales 32% 8% Procurement 9% 2011 Survey 7% 2007 Survey Board Level 2% 1% Research and development 3% 1% Back Office 5% 0% Legal 2%© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 10International.
  12. 12. Who is the typical Fraudster?Time at the organization 33% More than 10 years 22% 27% 6 - 10 years 29% 29% 2011 Survey 3 - 5 year 36% 2007 Survey 10% 1 -2 year 9% 1% Less than 1 year 4% The survey shows an increase in the detection of fraud among longer-term employees. 60% of the fraudster worked at the company for more than five years.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 11International.
  13. 13. Who is the typical Fraudster?Internal Control Weak internal controls exploited 74% 49% Reckless dishonesty regardless of 15% 2011 Survey controls 36% 2007 Survey Collusion to circumvent good 11% controls 15% Weak internal controls have become more important compared to 2007.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 12International.
  14. 14. The Swiss Fraudster17 out of the 348 cases were from the Swiss Firm.As the global average the typical swiss fraudster is: • Male, aged between 36 and 55, • working in the finance function or in a finance-related role, • in a senior management position, • employed by the company for more than five years.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 13International.
  15. 15. The Swiss FraudsterCollusion• Acted alone in 60% of the cases, exploiting in 70% of the cases the weak internal controls. 60% 66% 58% 59% Americas 34% 42% 41% 40% AsiaPac EMA Swiss Alone With others© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 14International.
  16. 16. The Swiss FraudsterMotivation• Misappropriation of assets is the most important fraud in Switzerland (59%), above the global average of 43%.• Globally, fraudulent financial reporting, raises concerns about the pressures placed on management to achieve targets, while in Switzerland personal gain was the most common fraud motivation. Fraudulent reporting 65% Meet targets / hide losses Misappropriation of assets 59% Personal Financial Gain Revenue/assets gain due to Greed fraudulent acts Expenses/Liabilities incured unknow for fraudulent act Other 17% 12% 12% 11% 12% 6% 6% Type of Fraud Motivation© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 15International.
  17. 17. Detection of the Fraudster Many frauds continue to be exposed by formal or informal whistleblowing mechanisms, One in seven frauds are discovered by chance. This puts question marks over the effectiveness of controls and management review at detecting and preventing fraud. (In 2007, 8% of frauds were discovered by accident, rising to 13% in 2011), Companies seem to depend increasingly on the good consciences of staff / third parties, or on accidental discovery, to identify fraud. Globally, there are moves to create more formal frameworks to promote whistleblowing In the US the Dodd-Frank Act (2010), in the UK the Public Interest Disclosure Act. In Switzerland there is legislation scheduled to be debated in parlament to protect whistleblowers.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 16International.
  18. 18. Warning signsRed Flags – What do we understand by the term Red Flag?• «A red flag is an event or set of circumstances that ought to alert an entity to the possible presence of fraud risk» Red Flag identified and resulting actions taken 44% No prior red flag 55% Prior red flag not acted on 50% 21% 2011 Survey Prior red flag acted on 6% 2007 Survey 24% Companies are failing to read and to act quickly on the warning signs. Ignored red flags are a license for perpetrators to carry on operating and a missed opportunity for the business to detect or prevent fraud and to possibly reduce losses and associated costs.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 17International.
  19. 19. Emerging trends ISwitzerland• Family office in Switzerland are becoming targets for fraudster. perpetrators tend to be employees and outside agents such as investment advisers rather than family members.Asia pacific• To overcome cultural and language barriers, there is, a tendency to staff subsidiaries with local people rather than with trusted and experienced employees from the home markets. This allows for gaps in controls and means that fraud can go undetected for prolonged periods, leading to high losses.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 18International.
  20. 20. Emerging trends IIIndia• Companies are too focused on the front end [growing the business] rather than the back end [the support functions] so red flags get ignored or treated as one-offs. When frauds blow up, its typically several years down the line, when the value of the deception has multiplied and all the warning signs have been missed.Central and Eastern Europe (CEE)• Many multinational companies have tended to transfer trusted expatriate employees from the parent company into key financial positions at their subsidiaries in the region, to provide not only the necessary experience, but also to «police» the subsidiary from within the finance function. They act as whistleblowers.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 19International.
  21. 21. Emerging trends IIIUS• Detection of fraud involving collusion with outside parties has increased significantly, this can by attributes to anti bribery and corruption initiatives as the Foreign Corrupt Practices Act (FCPA) and other task forces designed to clamp down on misconduct.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 20International.
  22. 22. Zürich, 15. Juni 2011Forschungsgespräche mit rechtskräftig verurteilten Wirtschaftsdelinquenten Prof. Dr. Peter Leibfried, MBA, CPA Mag. Alexander Schuchter, CINA UNIVERSITÄT ST. GALLEN (HSG) Institut für Accounting, Controlling und Auditing Rosenbergstrasse 52, 9000 St. Gallen Tel +41 71 224 74 10, Fax +41 71 224 74 23 peter.leibfried@unisg.ch alexander.schuchter@unisg.ch Seite 21
  23. 23. Untersuchungsrahmen  Dissertation an der Universität St. Gallen (HSG) Referent Prof. Dr. Peter Leibfried, MBA, CPA: Geschäftsführender Direktor Institut für Accounting, Controlling und Auditing (ACA-HSG) Korreferent Prof. Dr. Urs Jäger: Ehem. geschäftsführender Direktor am Center for Leadership and Values in Society (CLVS-HSG); nun Visiting Professor an der INCAE Business School in Costa Rica Doktorand Mag. Alexander Schuchter, CINA: Übungsleiter und Mittelbau-Repräsentant der School of Management (SoM-HSG) Wer könnte zu den tatauslösenden Faktoren und tatverhindernden Massnahmen eine wirklichkeitsnähere Antwort liefern als die Wirtschaftsstraftäter selbst?  Zeitlicher Horizont: Seit 2006 Recherchearbeiten, seit Ende 2009 Erhebungsphase, seit Sommer 2010 Abschluss der persönlichen (12) und telefonischen (1) Interviews mit rechtskräftig verurteilten Wirtschaftsstraftätern in der Schweiz (9) und in Österreich (4)  Untersuchung beschränkt sich auf die Bereiche: Falschbilanzierung, Korruption & Bestechung, Unterschlagung, Veruntreuung & Betrug, vorwiegend qualitativpeter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 22
  24. 24. Forschungsdesign Erhebung  Zugang zum Forschungsfeld hat sich als Herausforderung bestätigt (Daten- gewinnung durch Interviews mit verurteilten Wirtschaftsstraftätern mit Deliktsummen im Millionenbereich; strenger Datenschutz, Themenernsthaftigkeit etc.)  Befragte: Vom ehemaligen Geschäftsführer, CEO, Accountant in den oberen Führungsebenen und Aufsichtsorgan zum Verurteilten und Insasse einer Haftanstalt  Erwähnenswert: Überraschend offene Haltung während der Gespräche, überaus sympathische und freundliche Personen Aufbereitung  12 der 13 Interviews sind zu verwenden und wurden nach der Tonbandaufnahme (mit Einverständnis der Befragten) in die hochdeutsche Sprache transkribiert  Gesamtgesprächs- (Ø 81; 1„060 Min.) vs. Aufnahmedauer (Ø 31; 405 Min.) Auswertung und Interpretation 1. Verfahren: Manifestes: Qualitative Inhaltsanalyse (computergestütztes GABEK®) 2. Verfahren: Latentes: Feinstrukturanalyse (hermeneutische Interpretation) Methoden- und Forschertriangulation  Validität  Quelle: Vgl. Zelger/Oberprantacher (2002), Art. 27.peter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 23
  25. 25. Schlussfolgerungen im Vorfeld I/III Der typische Wirtschaftsstraftäter ist  unauffällig ?  zumeist männlich  eher extravertiert  noch unbescholten  überdurchschnittlich gebildet  risiko- und entscheidungsfreudig  stark karriere-, erfolgs- und publicityorientiert  sozial hervorragend in das Unternehmen eingebettet  gesellschaftlich hoch angesehen, geschätzt  seit ungefähr einem Jahrzehnt im Unternehmen (!) Quellen: Vgl. Ragatz/Fremouw (2010), S. 379 ff.; Schuchter (2010), S. 80; Bussmann/Salvenmoser (2006), S. 206 f.; Blickle et al. (2006), S. 220 ff.; Löw (2002), S. 58 ff.; Weisburd/Waring/Chayet (2001), S. 73 ff.; Wheeler (1992), S. 113; Cressey (1953), S. 145 f. …aus welcher Branche?peter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 24
  26. 26. Schlussfolgerungen im Vorfeld II/III Tab. 1: Persönlichkeit im Vergleich Quellen: Vgl. Blickle et al. (2006), S. 220 ff.; Collins/Schmidt (1993), S. 295 ff.; Ones/Viswesvaran (2001), S. 31 ff. 1. Häufig kongruente Persönlichkeitsmerkmale 2. Persönlichkeitseigenschaften entwickeln und verändern sich mit der Zeit 3. „Machiavellistische Intelligenz“ erschwert Untersuchung tatsächlicher Persönlichkeit 4. Auch wenn es gelingen sollte, alle Ausprägungen der Persönlichkeit eines Täters bei lang- jährigen Unternehmensangestellten oder auch bei Bewerbern für eine offene Stelle nachzu- weisen, ist es dennoch kein Beweis für ein zukünftiges, deliktisches Handeln Quelle: Vgl. Schuchter (2010), S. 80.peter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 25
  27. 27. Schlussfolgerungen im Vorfeld III/III  Viele Unternehmen verletzen Gesetze in bestimmten Gebieten, jedoch nicht in anderen Gebieten, obwohl das Personal dasselbe ist (wenn also allein Persönlichkeitsmerkmale für das Auftreten von dolosen Handlungen in Unternehmen eine Rolle spielten, dann wäre nicht zu erwarten, dass Personen in unterschiedlichen Situationen bestimmte Gesetze unterschiedlich häufig verletzen) und  Viele Unternehmen verletzten über Jahrzehnte Gesetze, obwohl das Personal bereits vollständig gewechselt hat (wenn die Persönlichkeit von Individuen das Auftreten von dolosen Handlungen erklären könnte, dann wäre zu erwarten, dass bei Änderung des Personals die Häufigkeit oder Art der Wirtschaftskriminalität wechselt) Quellen: Vgl. Sutherland (1949), S. 259 ff.; Sutherland/Cressey (1960), S. 135; Opp (1975), S. 111. Die These, dass Individuen mit bestimmten Persönlichkeitsmerkmalen eher Wirtschaftsdelikte begehen, wird im Rahmen der Doktorarbeit abgelehnt  ANNAHME: Weniger Wirksamkeit: Prävention durch Personalrekrutierung Mehr Wirksamkeit: Profunde Ursachenanalyse, um Prävention zu entwickelnpeter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 26
  28. 28. Theoretischer Bezugsrahmen Abb. 1: Vom „Fraud Triangle” zum „Fraud Diamond” Die Untersuchung stützt sich auf einen der wohl bekanntesten wissenschaftlichen Erklärungsansätze der Entstehungsgründe doloser Handlungen von Donald Ray Cressey (Ursprung), einem Pionier der Wirtschaftskriminologie Benötigt es immer alle „Fraud Triangle“- bzw. „Fraud Diamond“- Elemente? Quellen: Vgl. Cressey (1950), S. 738 ff.; Cressey (1953) S. 90 f.; Wolfe/Hermanson (2004), S. 38 ff.peter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 27
  29. 29. „Boundless-Manager“ ohne Motiv “He [the offender] did not consider, even while in prison, that his behavior was criminal.” Quelle: „Independent Businessmen“ vgl. Cressey (1953), S. 102. Abb. 2: Kausalnetzgrafik „unbewusst” „Transkribierter Interviewtext“ Anreiz_keinen „Nein, es gab keinen Druck und nein, Ombudsstelle_extern Auslöser eine innere Stimme hat es auch nicht gegeben, weil ich mir eigentlich eines wirklichen Unrechts in der Zeitspanne nicht bewusst war.“ unbewusst „Der Anreiz des Vorfalls war nicht ge- geben, da gab es keinen. Es war nie Innere_Stimme_keine Druck_keinen beabsichtigt, dass wir die Leute be- trügen […]. Die Absicht einer Tat war nicht da, deshalb waren es keine der Quelle: Auswertung der Gew issen_rein eigenen Untersuchung. genannten Auslöser.“  FAZIT: Einzig die „Gelegenheit“ ist eine conditio sine qua nonpeter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 28
  30. 30. Tatauslösende Faktoren Sogwirkung der „Motivation“, aus welchem eine selbständige Befreiung aus Sicht der Respondenten kaum mehr möglich scheint  Sog des Drucks „Die Angst, dass das jemand entdeckt.“ „Ich wollte die Sache wieder regeln. Das war ein enormer Druck.“ „Wenn man dann in so einem Kreis drinnen ist, dann ist es auch noch schwierig auszubrechen. Dann haben Sie pro Jahr zwei Wochen Herzklopfen, starkes, wenn die Revisionsgesellschaft da ist und dann geht es wieder weiter, das ist schon so.“ „Ich setzte mir hohe Ziele […] Ein enormer Druck wird ausgeübt. Es geht nur um Zahlen und Zielerreichung. Wie man sie macht, spielt keine Rolle.“ „Es war nur aus einer Drucksituation entstanden, weil das damalige Arbeitsklima wirklich sehr gehässig war […].“  Anreiz als Fahrwasser „Es ist immer getrieben von einer gewissen Gier. […] Der Anreiz ist immer materiell, also in meinem Fall war es materialistisch. Ich habe dann auch ein bisschen die Relation verloren.“ „Anreiz, ja, über dem zu leben, wie man eigentlich leben konnte in meiner Stellung als solches. Dann wurde es zu einem sportlichen Ereignis. Gelingt es mir, oder kommen die jetzt drauf oder nicht.“peter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 29
  31. 31. Buch (erscheint voraussichtlich Anfang 2012): Titel: „Perspektiven verurteilter Wirtschaftsstraftäter – Erklärungsansatz der Entstehungs- gründe von Wirtschaftskriminalität und deren Prävention in Unternehmen“ Bitte um Fragen und Anmerkungen Prof. Dr. Peter Leibfried, MBA, CPA Mag. Alexander Schuchter, CINA UNIVERSITÄT ST. GALLEN (HSG) Institut für Accounting, Controlling und Auditing Rosenbergstrasse 52, 9000 St. Gallen Tel +41 71 224 74 10, Fax +41 71 224 74 23 peter.leibfried@unisg.ch alexander.schuchter@unisg.chpeter.leibfried@unisg.chalexander.schuchter@unisg.ch Seite 30
  32. 32. Fraud Risk ManagementPrevention is betterthan a cure!John EdererHead Corporate Clients, Forensic ServicesKPMG Switzerland
  33. 33. The size of the problemWhat do we understand by the term fraud?• «All those activities involving dishonesty and deception that can drain value from a business, directly or indirectly, whether or not there is personal benefit to the fraudster.»In numbers• In Switzerland fraud losses are estimated at 2-4% of GNP – that would be at least CHF 8 billion.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 32International.
  34. 34. The guiding messageThe guiding message….  «If it seems too good to be true, it usually is!»© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 33International.
  35. 35. Rule of ThumbAccording to the «20:20:60» Rule of Thumb 20% of all employees are honest 20% • No special measures / actions necessary 20% of all employees are dishonest 20% • Pre-employment-screening • Fraud risk management (effective controls) 60% of all employees are as honest as the circumstances 80% allow fraudulent activities and misconduct or not • Fraud risk management 60% • Ethics and integrity management (code of conduct, whistle blowing hotline, management as role model, tone of the top) • Know your employees© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 34International.
  36. 36. Fraud Risk factors Misuse of merger reserves False sales and customers Manipulation of transfer pricing Advancing or delaying revenue Manipulation of joint ventures Improver valuation of other assets Manipulation of rebates and discounts Misuse of inter company and Misrepresentation of credit status suspense accounts Other Under or over provision for bad debts False cash entries Revenue Hidden pledges of cash deposits Cash Expenses Under or over accruals Teeming and Inventory Delaying or advancing expenses lading or lapping Manipulation of rebates and discounts Standard costs manipulation False Misrecording of capital items False ownership valuation status False Hidden contract quality False terms quantity This graphic contains illustrative examples and should not be considered as a complete list of fraud risk factors and not all of these examples are necessarily applicable in all circumstances. Professional judgment is required in response to the specific circumstances.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 35International.
  37. 37. Managing Fraud IEffective control starts with…..Prevention:• A Code of Conduct with a section on Fraud Risk Management must be implemented and considered effective, with regular training held by most of the company, and dedicated IT security measures ought to be implemented. Fraud risk assessments should also be conducted on an annual basis.Detection:• Management review and basic Internal control mechanisms are rated as the most effective means for detection. The role of whistle blowing is significant, but unevenly spread across different regions and cultures.Response:• The majority of large companies have incident assessment and escalation procedures, but few have a dedicated fraud response team.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 36International.
  38. 38. Managing Fraud IIEssential components• Effective anti-fraud strategy• Tasking key people to take ownership for fraud management• Open minded - on specific fraud risks: not «It won„t happen here!», rather «Why couldn„t it happen?»• Know your fraud risks• Be aware of key fraud indicators• Increase awareness on what to do and actions to take• Code of conduct, that is lived© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 37International.
  39. 39. Do‘s and don‘ts IDo’s• Immediately ask for experienced professional assistance• Keep it confidential to a small number of essential individuals• Block electronic and physical access of suspects• Withdraw powers of attorney of involved persons• Preserve evidence and put it into a safe place• Anticipate publicity and establish internal and external communication. One voice only.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 38International.
  40. 40. Do‘s and don‘ts IIDon’ts• Do not touch, save, back up nor shut down any PC/Laptop that may contain evidence.• Do not alert the suspect• Do not let involved «targeted» employees touch the PC/Laptop anymore, not even for «just shutting it down properly»• Do not search for evidence yourself• Do not fire the suspect before taking legal and tactical advice.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 39International.
  41. 41. Quick WinsCheck the fundamentals• reconciliations are carried out independently & appropriately• signatures are completed• limits are applied• segregation of duties is obeyed• assets are appropriately valued & controlTrust and check … but also have a healthy measure of mistrust!© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 40International.
  42. 42. Red FlagsExamples of Red Flags• Refusing to take a holiday (especially more than a few days )• Persistent anomalies in behavior or attitude, e.g. a dominating style, not tolerating questions• Excessive generosity towards other staff / auditors• Taking particular interest in certain elements of the organizations business• Habitual gambling / expensive life style• Conflicts of interest• Missing files or incomplete documentation• Complaints from suppliers, customers, staff or auditors© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 41International.
  43. 43. And the Future? IWill fraudulent actions increase?• 66% of the questioned companies assumed that they will not fall victim to white collar crime• But: 73% informed us that they had already suffered from white-collar-crime in the last three years!The number of the cases may be constant, but more and more are coming tolight due to• Increased consciousness• Increased willingness to report fraud and misconduct• More rigorous laws and guidelines• Control & fraud risk systems© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 42International.
  44. 44. And the Future? IIBased on the Survey results….• There seems to be an increased failure to respond to Red Flags• Due to the recession & consequent cost cutting there appears to be a reduction in the effectiveness of internal controls (despite tightening legislation)• In developing growth economies the front office sales are growing faster than the back office infrastructure and this probably effects Swiss international companies just as much as others• We may be facing a growth in fraud discoveries in 2011/ 2012 if the Survey‟s three year delay in ties back to the recession of 2008© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 43International.
  45. 45. Q&As
  46. 46. Additional Information
  47. 47. Red Flags I Some Red Flags to look for: Does this describe an area of your business? Yes No There are difficult relationships and a possible lack of trust between the business and the internal/external auditor. Excessive secrecy about a function, its operations and its financial results. When questions are asked, answers and supporting information are often stalled or withheld. Some practices within a function do not appear straight-forward, and may even be illegal or unethical. Senior managers receive large bonuses linked to meeting targets. There is excessive pressure on employees to tamper with results to meet analysts high expectations for the business. Elsewhere in the industry, companies are struggling and sales and/or profits are declining. Your business appears to buck the trend. Complex/unusual payment methods; agreements between the business and certain suppliers/customers. These may be set up in a deliberately opaque manner to hide their true nature.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 46International.
  48. 48. Red Flags II Some Red Flags to look for (cont.): Does this describe an area of your business? Yes No There are multiple banking arrangements rather than one clear provider ― a possible attempt to reduce transparency over the business‟s finances. High staff turnover within a function. Employees may be more likely to commit fraud in a business with low morale and inconsistent oversight. Where matters of financial judgment/accounting treatment are involved, the business consistently pushes the limits/boundaries. A division or department of the business is perceived as complex or unusually profitable, thereby diverts the attention of management and the audit functions. Increases in profitability fail to lead to increased cash flows. A remote operation not effectively monitored by the head office.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 47International.
  49. 49. Size of the crime Sub Region Average total losses per fraud US$m Asia and 1.5  In some fast growing economies where Middle East there is a culture of not loosing face North 1.2 America or speaking up they tend to have higher Australia and 1.1 average losses, New Zeland  Increased commercial pressures to Europe 1.0 recover funds, Africa 0.9  Direct correlation between the size of the South 0.8 America crime and attempts to recover the India 0.7 loss.© 2011 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMGInternational Cooperative («KPMG International»), a Swiss legal entity. All rights reserved. The KPMG name, logo and «cutting through complexity» are registered trademarks or trademarks of KPMG 48International.

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