November 2009- Chris Duggan, Sian Siak


Published on

International Markets & Global Markets - Risks in Today's Environment - RBC

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • Internal controls - lessons learned with hindsight The internal controls we feel are the most important in the prevention of cheque fraud. Detecting cheque fraud – Clarification on different types Hints and tips on red flags. Immediate actions on suspicion of fraud. These are the most important.
  • Banking is changing too. In the past, all processes and transactions were paper based. Now electronic options are available to save time and streamline work effort, as well as provide timely information. Businesses and consumers alike appreciate the advantages of electronic funds transfer – faster, more accurate, less risk of fraud. Suppliers and employees are likely to request electronic payment because it’s faster and ensures certainty of payment. Paper-based records take up space, are difficult to sort and are can be lost or stolen.
  • Options for banking online have changed too. At one time, small businesses in the Canadian marketplace had the same, limited, online options as personal clients. Only large corporate clients had access to sophisticated cash management services. In the past decade or so, these cash management services have become available to small and medium-sized businesses, to meet their needs to delegate safely, streamline their operations and to mitigate the risks associated with ordinary online banking, and with paper-based cheques. Real time information is available for improved forecasting, as well as enhanced use of available funds in order to reduce borrowing or to optimize cash with short-term investments.
  • Wire fraud – many banks are no longer accepting fax wire instructions due to ease of recreating cover page and submitting fraudulent instructions Theft of Cash & Inventory – so very common, cash must have strict controls as many of the frauds we hear of are not just fraudulent cheques, once investigations begin cash has not been included in deposits for some time. Billing and Procurement – segregation and reviews of these are vital to ensure manipulation is not happening. Grant Thornton suggest a 20-60-20 percent breakdown of likelihood to commit fraud 20% never will 60% will if given the opportunity 20% definitely will
  • The true cost of issuing cheques is more than you might think. Ask the audience what they feel a cheque costs. Once you factor in the time spent to create and print the cheque, find the person who needs to sign it, put it in the envelope, address it, and attach postage, you’re probably looking at $15 to $25. When you factor in additional potential costs, like tracking down lost cheques and issuing stop payments – not to mention late fees – the price tag can easily go higher. Electronic payment eliminates many of these costs. And not only is it less expensive, it’s faster and more secure.
  • Range of cheque fraud losses is significant. Hundreds of thousands of dollars and sometimes cheques in the millions of dollars The trend in incidents of cheque fraud has been declining since 1985 according to Statistics Canada data for cheque fraud. We believe the decline is due to the decline in cheque volumes, not in the dollar amount
  • Some companies feel they do not need to be as diligent because they have fraud insurance. There are many outside costs to fraud which are not covered, mostly the time required to investigate and avoidance in the future.
  • Stealing or Converting Blank Cheque Stock: Employees and other individuals steal blank cheques from storage locations and cash them with forged signatures Stolen Cheques: Cheques are stolen and then negotiated by the thief or sold to others. Forged Cheques: Cheques are made payable to an entity, but are endorsed by another party (fraudster). The entity is usually listed first, followed by the individual’s signature. This is reportedly a common fraud attempt in the United States Counterfeit Cheques: Counterfeiting cheque is becoming more prevalent and the up and coming way to commit cheque fraud. Typically, the perpetrator illegally acquires a blank cheque from a business and fabricates it. Through today’s printing and copying technology, counterfeit cheques can be produced successfully. Counterfeiting the business’ payroll cheque is common and creates little suspicion when presented to the teller. Altered Cheques: This is an authentic cheque with unauthorized changes. Often, the payee or the amount is changed. Cheque Washing: Involves using acid-based chemicals to erase amount and payee information on a cheque. A new payee and dollar amount are inscribed.
  • Daily reconciliation will help identify these items your accounting software may be capable of picking up on the anomalies.
  • Daily reconciliation will help identify these items your accounting software may be capable of picking up on the anomalies.
  • eStatements remove cheque images with account numbers and sample signatures from the mail.
  • November 2009- Chris Duggan, Sian Siak

    1. 1. Risks in Today’s Environment Fraser Valley CA Association Nov. 5, 2009 Presenters: Chris Duggan & Shawn Siak
    2. 2. Overview <ul><li>World in Turmoil – Abundance of Risks </li></ul><ul><li>World’s Safest Banks </li></ul><ul><li>How Banking is Changing </li></ul><ul><li>Types of Internal Fraud </li></ul><ul><li>Cost of Writing Cheques </li></ul><ul><li>Cost of Cheque Fraud in Canada & to Corporations </li></ul><ul><li>Cheque Fraud </li></ul><ul><li>Detecting Cheque Fraud </li></ul><ul><ul><li>What to watch for </li></ul></ul><ul><li>Banking Solutions to Minimize Losses </li></ul>
    3. 3. The World in Turmoil <ul><li>Country risks </li></ul><ul><li>Commodity risks </li></ul><ul><li>Systemic and Financial Institution risks </li></ul><ul><li>Insurance risks </li></ul><ul><li>Currency risks </li></ul><ul><li>Social Unrest and even Pirates! </li></ul>
    4. 4. WORLD'S 50 SAFEST BANKS 2009 Moody’s, Standard & Poor’s and Fitch <ul><li>KfW(Germany) </li></ul><ul><li>Caisse des Depots et Consignations(FR) </li></ul><ul><li>Bank Nederlands Gemeenten (BNG)(NED) </li></ul><ul><li>Landwirtschaftliche Rentenbank(Germany) </li></ul><ul><li>Zuercher Kantonalbank (Switzerland) </li></ul><ul><li>Rabobank Group (Netherlands) </li></ul><ul><li>Landeskreditbank BWF (Germany) </li></ul><ul><li>NRW. Bank (Germany) </li></ul><ul><li>BNP Paribas (France) </li></ul><ul><li>Royal Bank of Canada (Canada) </li></ul><ul><li>National Australia Bank (AUS) </li></ul><ul><li>Commonwealth Bank of Australia </li></ul><ul><li>Banco Santander (Spain) </li></ul><ul><li>Toronto-Dominion Bank </li></ul><ul><li>Australia & New Zealand Bank </li></ul><ul><li>Westpac Banking (AUS) </li></ul><ul><li>ASB Bank Limited (NZ) </li></ul><ul><li>HSBC Holdings plc (UK) </li></ul><ul><li>Credit Agricole S.A. (France) </li></ul><ul><li>Banco Bilbao Vizcaya Argentaria (Spain) </li></ul>
    5. 5. Banking is changing… <ul><ul><li>Then: Paper-based </li></ul></ul>Now: Electronic options <ul><li>In-branch banking only </li></ul><ul><li>Cash and cheques </li></ul><ul><li>Paper-based records </li></ul><ul><li>Internet banking, mobile </li></ul><ul><li>banking and telephone banking </li></ul><ul><li>Electronic payments and deposits </li></ul><ul><li>Non-cash payment options </li></ul><ul><li>Fewer cheques </li></ul>
    6. 6. Online banking is changing… Then: Online banking Now: Online cash management <ul><li>Limited options </li></ul><ul><li>Single authorization </li></ul><ul><li>All information and </li></ul><ul><li>functions available to any </li></ul><ul><li>user, without restriction </li></ul><ul><li>Customizable services </li></ul><ul><li>Online authorization can be </li></ul><ul><li>tailored and responsibilities </li></ul><ul><li>delegated to staff </li></ul><ul><li>Streamlined processes, lower </li></ul><ul><li>costs, accurate audit trail </li></ul><ul><li>Comprehensive information and </li></ul><ul><li>reporting improve cash flow and </li></ul><ul><li>reduce borrowing costs </li></ul>
    7. 7. Types of Internal Fraud <ul><li>Cheque and wire fraud (controllers, accountants, staff) </li></ul><ul><li>Asset misappropriation (theft of cash, inventory) </li></ul><ul><li>Billing </li></ul><ul><li>Expense reimbursement (need we say more) </li></ul><ul><li>Conflicts of interest (CEO, Procurement, Executives, CFO) </li></ul><ul><li>Data theft (IP, sale to criminals, sale for personal gain) </li></ul><ul><li>Technology (logic bombs, worms, interception of emails) </li></ul><ul><li>Senior management (earnings manipulation) </li></ul>
    8. 8. How much does it really cost to issue a cheque? TOTAL $ ? $ Opportunity cost (late/missed payments) $ Bank charge ITEM AMOUNT HARD COSTS Cheque $ Envelope $ Postage/courier $ Storage $ CLERICAL COSTS Preparing/printing/signing cheques $ Stuffing envelopes $ Delivery to post office $
    9. 9. AFP Survey, 2009 – Cheque Fraud Analysis <ul><li>Impact of Cheque Fraud in Canada </li></ul><ul><li>Estimated 50,000 cheque frauds annually - exceeding $600 million </li></ul><ul><li>10 times as many unsuccessful attempts detected </li></ul><ul><li>Business cheques are a favourite target – due to their acceptability </li></ul>82% 50% 34% <ul><ul><li>Positive pay/reverse positive pay </li></ul></ul><ul><ul><li>Payee Positive Pay </li></ul></ul><ul><ul><li>“ Post no cheques” restriction on </li></ul></ul><ul><ul><li>deposit account. </li></ul></ul>Due to 68% 50% <ul><li>No Financial Loss incurred </li></ul>88% 94% Experienced Cheque Fraud during 2008 <US$1Bn Revenue >US$1Bn Revenue Association for Financial Professionals (AFP) 2009 Payments Fraud and Control Survey – 629 North American Respondents
    10. 10. Cost to Corporations <ul><li>Time is money </li></ul><ul><ul><li>Investigation, police report, tracing documents </li></ul></ul><ul><li>Relationship issues </li></ul><ul><ul><li>Original payee is upset by delays </li></ul></ul><ul><ul><li>questions and suspicion of complicity </li></ul></ul><ul><ul><li>bank may resist claims </li></ul></ul><ul><ul><li>suggest weak processes </li></ul></ul><ul><li>Aggravation </li></ul><ul><ul><li>Affidavits, new accounts required, new cheques to be printed, automatic payments to be changed, etc. </li></ul></ul>
    11. 11. Cheque Fraud <ul><li>Fraudulent Cheque Evolution </li></ul><ul><ul><li>Stolen cheque stock with forged signatures </li></ul></ul><ul><ul><li>Counterfeit cheques </li></ul></ul><ul><ul><li>Altered amounts </li></ul></ul><ul><ul><li>Altered payees </li></ul></ul><ul><ul><li>Forged and improper endorsements </li></ul></ul><ul><li>Losses resulting from fraudulent cheques drawn against Corporate client accounts: </li></ul><ul><ul><li>Relatively small percentage of overall losses </li></ul></ul><ul><ul><li>Relatively stable year over year </li></ul></ul><ul><li>Deposits of worthless cheques continue to result in large losses to the banks (e.g. NSF and cheque kites) </li></ul>
    12. 12. Detecting Cheque Fraud – What to Watch For <ul><li>Frequent cheques in the same amount </li></ul><ul><li>Frequent cheques in round numbers </li></ul><ul><li>Many cheques made payable to other banks </li></ul><ul><li>Deposit not made daily or intact </li></ul><ul><li>Supporting documentation for cheques is not available or has been prematurely destroyed </li></ul><ul><ul><li>Destroying documentation is one of the first steps to hide the fraud </li></ul></ul>
    13. 13. Detecting Cheque Fraud – What to Watch For <ul><li>Irregular cheque endorsements </li></ul><ul><li>Cheque numbers, payee, date and amount don’t’ agree with entries in cheque register </li></ul><ul><li>Voided cheques are not retained </li></ul><ul><li>Cheques are issued to individuals for large, even dollar amounts </li></ul><ul><li>Cheques clear the bank statement significantly out of order </li></ul><ul><li>Slight variations on the name of the payee </li></ul>
    14. 14. RBC Can Help – Various Solutions <ul><li>Daily Reconciliation </li></ul><ul><ul><li>RBC provides cleared cheque information 7:00 a.m. daily (RBC Express download) </li></ul></ul><ul><ul><li>Client performs verification and issues “no pay” instructions </li></ul></ul><ul><ul><li>No additional bank charges </li></ul></ul><ul><li>eStatements </li></ul><ul><ul><li>Statement & cheque images delivered in PDF, eliminating mail loss or fraud </li></ul></ul><ul><ul><li>Faster access to statements & statements are archived for 7 years </li></ul></ul><ul><li>RBC Express Account Images </li></ul><ul><ul><li>Web access to cheque images to view discrepancies </li></ul></ul><ul><li>Positive Pay (Disbursement Auditor) </li></ul><ul><ul><li>Electronic matching of MICR-line to Issued Cheque file provided by company </li></ul></ul><ul><ul><li>Exception reports can be decisioned on line </li></ul></ul><ul><li>Payee Match </li></ul><ul><ul><li>Payee name and address is matched to Issued Cheque file provided by company </li></ul></ul><ul><ul><li>Can be added to Positive Pay or enhancement to daily reconciliation </li></ul></ul>
    15. 15. Partners for Cheque Fraud Detection <ul><li>Partner with Corporate Clients : </li></ul><ul><ul><li>RBC offers verification services </li></ul></ul><ul><ul><li>RBC recommends daily reconciliation process </li></ul></ul><ul><ul><li>Business Client accepts responsibility for daily reconciliation </li></ul></ul><ul><ul><li>Business Client accepts responsibility to implement prevention aspects outlined. </li></ul></ul><ul><li>Partner with RBC </li></ul><ul><ul><li>Shawn Siak, Treasury Management Specialist </li></ul></ul><ul><ul><li>604-533-6822 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>
    16. 16. <ul><li>Today’s session will be a success if we can avoid even one cheque fraud </li></ul><ul><li>Handouts: </li></ul><ul><li>How to Protect Your Company </li></ul><ul><ul><li>Internal Controls - The most important aspect of prevention </li></ul></ul><ul><li>Protecting your business against Fraud </li></ul><ul><li>A consolidated, simple & dependable way to manage payments </li></ul><ul><li>Your complete online cash management solutions </li></ul><ul><li>Tips Card for Safe Computing & Safeguarding your Assets </li></ul>Thank you for your Attention & Questions