Occupational Fraud Mitigation

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Occupation fraud starts when you permit the wrong person into your organization. Effective background investigations provide a means to minimize the risk of occupational fraud by vetting prospective employees, independent contractors, and potential partners. Fraudsters who have victimized organizations before possess an inclination to strike again at another unsuspecting employer. Make sure it is not within your organization. Learn how the anti-fraud control of utilizing background investigations can save your organization from financial loss and embarrassing press.

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Occupational Fraud Mitigation

  1. 1. Commercial Investigations is a New York State licensedAbout private investigative agencyUs CI provides the Proactive Truth regarding applicants, reducing turnover and limiting exposure to civil liabilities Services include:  Employee background investigations  Medical Staff Background Investigations  Volunteer screening  Tenant screening  Merger and acquisition investigative research  Full due diligence investigation reports  Opposition/political investigative research Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  2. 2. Michelle Pyan is the ownerOur of CI and has been a licensed private investigator in thePresident states of Wisconsin, New York, and Florida since 1991. She has experience in human resources since 1993. Michelle is passionate about background investigations and has been examining the Fair Credit Reporting Act and other applicable state and federal laws since 1998. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  3. 3.  Occupational fraud starts when you permit the wrong person into your organization Effective background investigations provide a means to minimize the risk of occupational fraud by vetting prospective employees, independent contractors, and potential partners Fraudsters who have victimized organizations before, possess an inclination to strike again at another unsuspecting employer Make sure it is not within your organization. Learn how the anti-fraud control of utilizing background investigations can save your organization from financial loss and embarrassing press. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  4. 4. The Popes butler, Paolo Gabriele, bottom left, arriveswith Pope Benedict XVI at St. Peters Square in theVatican in a file photo from May 23, 2012. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  5. 5. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  6. 6. What does the Victim Look Like? Privately held (42.1%) Public companies (32.1%) Government (16.3%) Not-for-profit (9.6%) Less than 100 employees (30.8%) 100 to 999 employees (22.8%) 1,000 to 9,999 (25.9%) 10,000+ (20.6%) Banking/Financial (16.6% of cases) Government and Public Admin (9.8% of cases) Health Care (5.9% of cases) Manufacturing (10.7% of cases) Retail (6.6% of cases) Education (5.0% of cases) Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  7. 7. What does the Perpetrator Look Like? Male (59%) Age 36 to 50 (65%) Bachelors or postgraduate degree (45%) Never charged or convicted for a previous crime (87%) Never previously punished or terminated for fraud conduct (83%) Employees (46.2%) - Median loss $50,000 Managers (36.7%) – Median loss $150,000 Owners/Executives (17.1%) – Median loss $485,000 Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  8. 8.  Be proactive, not just reactive Best defense is a good offense, which is why many companies choose to bring in an outside firm to conduct a thorough assessment Re-screen not just new hires, but new vendors, suppliers and business partners. It takes time, but it will pay off the first time you spot a red flag Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  9. 9.  Origin SSN & Address Information Multijurisdictional Criminal Multistate Sex Offender Registry Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  10. 10. ACFE Report to the Nations on Occupational Fraud and AbuseOccupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  11. 11.  In 860 of the cases in study, the respondent was able to provide information about the fraudster’s criminal history. In only 6% of those cases had the fraudster been convicted of a fraud-related offense prior to the scheme in question. This is consistent with findings from previous studies. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  12. 12. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  13. 13. In more than two-thirds of the cases reviewed: Victim organization referred the case to law enforcement authorities for criminal prosecution. The median loss in these cases was $200,000 Compared to a median loss of $76,000 for cases that were not referred Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  14. 14. For the cases that were referred to law enforcement,survey participants were asked about the outcome of thecriminal case. A large number of those cases were stillpending at the time of our research.In the 390 cases for which an outcome was known: Approximately 16% of the perpetrators were convicted at trial, 56% pleaded guilty or no contest to their crimes. There were only six cases in which the perpetrator was acquitted. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  15. 15. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  16. 16.  County Statewide Federal International Multistate Cursory Indicator New York Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  17. 17. For the 454 cases in which the victim organization did notrefer the case to law enforcement, survey participantswere asked to identify the reasons for this decision.The most commonly cited factors: Fear of bad publicity Followed by a determination that the organization’s internal sanctions were sufficient punishment for the misconduct Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  18. 18. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  19. 19.  Research shows that victim organizations are more likely to pursue criminal action against a perpetrator than they are to file a civil lawsuit Civil suits were filed in less than one-quarter of cases in our current study These cases tended to involve the most costly frauds; the median loss for cases resulting in a civil suit was $400,000 Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  20. 20. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  21. 21. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  22. 22.  There were 695 cases in which the CFE provided information on the fraudster’s employment history Responses show that the vast majority (84%) of occupational fraudsters had never been punished or terminated by an employer for a fraud-related offense before the frauds in question Only about 7% of fraudsters had previously been terminated by another employer for fraud Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  23. 23. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  24. 24.  Dates, position, eligibility for rehire Reason for leaving Supervisor Character, relationships, communication style, team work, problem solving ability Acceptance of criticism Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  25. 25.  Degree type  Field of study  GPA  Start date  Stop date  Graduation date  Reason for leavingOccupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  26. 26.  Comprehensive interview Former supervisors Former co-workers Friends Gives information beyond the facts of employment Attitude and interpersonal skills Character traits and/or habits Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  27. 27. Recommended for employers in all industries whichrequire employees to be certified and licensed Health care Education Security Construction contracting Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  28. 28. In 81% of all cases reported to us, the perpetrator haddisplayed at least one behavioral red flag, and, withinthese cases, multiple red flags were frequently observed: The fraudster living beyond his or her means (36%) Experiencing financial difficulties (27%) Having an unusually close association with vendors or customers (19%) Displaying excessive control issues (18%)Consistency of the distribution of red flags from year toyear is particularly remarkable Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  29. 29. ©2012 Association of Certified Fraud Examiners, Inc.Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE ExamPrep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  30. 30.  Background checks are a must for accounting workers, and division of labor is also a good idea Never want one person to have sole access or control over the financial system Make sure each worker takes vacations Employees who are involved in fraud will be hesitant to take time off, they won’t want others looking over their work, and potentially noticing irregularities in their absence Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  31. 31.  Access to company or customer cash, assets, credit cards, valuables or confidential information Can demonstrate responsibility and reliability levels Reveals if subject may be tempted to commit larcenous action Should only be used with established company policies and procedures Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  32. 32. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  33. 33.  Motor Vehicle Search Reveal’s suspended/revoked license Patterns of reckless behavior Insurance risks Substance abuse Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  34. 34. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  35. 35.  Reduce turnover Increase productivity and employee morale Pre-Employment Pre-Promotion Annual Physical Random Post Accident Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com
  36. 36.  Level 1  Level 2Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  37. 37.  Skimming  Billing  Fictitious Refunds  Cash Larceny  Check Schemes  Expense Reimbursement Schemes  Payroll Fraud  Inventory Fraud  Corruption  Fraudulent StatementsOccupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  38. 38. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  39. 39. Occupational Fraud Mitigation through Background InvestigationsCommercial Investigations LLCwww.commercialinvestigationsllc.com
  40. 40. Presented by Michelle PyanPresidentLicensed Private Investigator(800) 284-0906www.commercialinvestigationsllc.com info@commercialinvestigationsllc.com facebook.com/commercialinvestigationsllc twitter.com/CI_LLC linkedin.com/company/commercial-investigations-llc
  41. 41. The information provided in this presentation doesnot constitute legal or accounting advise. It is forinformation and discussion purposes only.This presentation may not be reproduced withoutthe written consent of the author. Occupational Fraud Mitigation through Background Investigations Commercial Investigations LLC www.commercialinvestigationsllc.com

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