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Profile of a Fraudster

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Media Conference slides of 7 June 2016

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Profile of a Fraudster

  1. 1. Technology enables and weak controls fuel the fraud Media Conference 7 June 2016 Profileofa fraudster
  2. 2. Background
  3. 3. 3© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm AbouttheGlobalProfilesofafraudster Forensic Library 2010 348 cases in 69 countries 2013 596 cases in 78 countries 2016 750 cases in 81 countries
  4. 4. 4© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Methodology 2016 — 750 fraudsters from 81 countries. — Frauds investigated from March 2013 to August 2015. — Survey expanded to explore certain topics more deeply — New in 2016 — delved into technology (enabler and detector) and added a series of questions around the characteristics of the cyber- fraudsters.
  5. 5. Characteristicsof afraudster
  6. 6. 6© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Fundamentalcharacteristicsofafraudster Autocratic, 3x more likely to be regarded as friendly as not Well respected (38%), nearly 4x more likely than someone with a low reputation Has a sense of superiority 79% male CH: 82% Has unlimited authority 44% 36-55 years of age Switzerland (CH): 46-55 Holdsan executive or management level position (66%) CH: 55% 65% of fraud lasted between 1 and 5 years Type of Fraud: Misappropriation of Assets (47%) Financial reporting fraud (22%) Cost of Fraud: Cost to company exceeding $1M (27%) Source: Global Profiles of the Fraudster, KPMG International, 2016
  7. 7. 7© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Age 36–45 Years old 18–25 Years old 46–55 Years old Older than 55 Years Source: Global Profiles of the Fraudster, KPMG International, 2016 26–35 Years old 8% 31% 37% 14% 1% 9% 92% 69% 63% 86% 99% 91% unknown
  8. 8. 8© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Gender Source: Global Profiles of the Fraudster, KPMG International, 2016 Gender of fraudster 17% 79%
  9. 9. 9© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Gender Primary Function Finance Level of Seniority Staff member Alone or in Collaboration Alone Has debt 20% Primary Function Varied Level of Seniority Executive Alone or in Collaboration Collaboration Has debt 8% Source: Global Profiles of the Fraudster, KPMG International, 2016
  10. 10. 10© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Yearsofservice Source: Global Profiles of the Fraudster, KPMG International, 2016 2% 19% 14% 38% Less than 1 year 1 to 4 years 4 to 6 years More than 6 years CH: 36%
  11. 11. 11© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Levelofseniority Source: Global Profiles of the Fraudster, KPMG International, 2016 Management (no executive capacity) Executive — Director 32% 26% 20% 5% 3% 3% 2% Staff member Executive — Corporate Officer Non-Executive Director Other Owner/Shareholder
  12. 12. 12© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Whatwastheoverridingmotivation? Source: Global Profiles of the Fraudster, KPMG International, 2016 66% 27% 13% 12% For personal financial gain and greed Eager/”Because I can” Organizational culture driven Desire to meet targets/hide losses to receive bonus 12% 11% 10% 5% Desire to meet budgets/hide losses to retain job Desire to meet targets /hide losses to protect the company Other not listed above Other motives (less than 5%) include: Loss of confidence, avoidance of regulatory compliance, ratings driven, publicity driven, disruption of operations
  13. 13. Methodsof detection
  14. 14. 14© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Methodsofdetection Other*Tips offs and complaints, other than formal hotline Management review Formal whistle blowing report/hotline Accidental Internal audit Suspicious superior Other internal control External audit Self-reported/ admitted Proactive fraud-focused data analytics How the Frauds were detected? 27%24% 22% 20% 14% 14% 10% 7% 6% 3% 3% *Social media, analyst relations, other external control, other Source: Global Profiles of the Fraudster, KPMG International, 2016
  15. 15. 15© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Methodsofdetection Source: Global Profiles of the Fraudster, KPMG International, 2016 Split between acting alone and in collaboration with others Tips offs and complaints, other than formal hotline Management review Formal whistle blowing report/hotline Accidental Internal audit Suspicious superior Other internal control External audit Self-reported/admitted Proactive fraud-focused data analytics Total Fraudsters acting alone Fraudsters acting in collaboration with others 2% 2% 7% 6% 9% 13% 11% 22% 21% 31% 3% 4% 6% 8% 11% 18% 20% 16% 25% 16% 3% 3% 6% 7% 10% 14% 14% 20% 22% 24%
  16. 16. Typesoffraud
  17. 17. 17© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Typesoffraud:Collusion North America 41% — Mixed 31% — All internal 21% — All external Latin America & Caribbean 55% — Mixed 31% — All internal 13% — All external Africa & Middle East 49% — Mixed 26% — All internal 24% — All external Oceania 44% — Mixed 44% — All internal 11% — All external Asia 42% — Mixed 35% — All internal 13% — All external Europe 40% — Mixed 38% — All internal 17% — All external Source: Global Profiles of the Fraudster, KPMG International, 2016
  18. 18. 18© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm $5M+ $1M–$5M $200K–$1M < $200K $5M+ $1M–$5M $200K–$1M <$200K Cost of fraud Colluders Solo Typesoffraud:Collusion Source: Global Profiles of the Fraudster, KPMG International, 2016
  19. 19. 19© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Typesoffraud:Collusion 6.8 44.5 Colluders Solo 6–10 years 3-5 years <2 years 6–10 years 3-5 years <2 years 10+ years 10+ years Term of service at company Source: Global Profiles of the Fraudster, KPMG International, 2016
  20. 20. 20© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Typesoffraud:Collusion Whistle blowers and tip-offs have the highest incidence of uncovering groups of five or more colluders. Other forms of detections may be ineffective in detecting sizeable collusion schemes. Weak internal controls are a bigger factor for solo fraudsters than colluders (66 percent versus 58 percent for colluders). More solo fraudsters are caught by accident (19 percent versus 10 percent for colluders).
  21. 21. 21© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Typesoffraud:Cyber Characteristics Tend to be younger Less years of service More likely to act alone More likely to have a sophisticated Modus operandi More likely to have conducted the fraud over shorter span (83% less than one year) Source: Global Profiles of the Fraudster, KPMG International, 2016
  22. 22. Enablers
  23. 23. 23© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Enablers-Technology Source: Global Profiles of the Fraudster, KPMG International, 2016 16% 26% 47% 8% Yes, the fraud could not have been perpetrated without using technology Somewhat, but the fraud could likely have occurred without technology Technology was not used to perpetrate the fraud Yes, to a large degree technology was used to enable the fraud Was technology used as an enabler to perpetrate the fraud?
  24. 24. 24© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Enablers-Technology Created false or misleading information in accounting records Abused permissible access to organization’s computer systems Provided false or misleading information via email or other messaging platform Obtained access to organization’s computer systems without permission 20% 8% 3% 13% CH: 9% 24% CH: 27% Other Source: Global Profiles of the Fraudster, KPMG International, 2016
  25. 25. 25© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Enablers—weakcontrols Collusion circumventing good controls Reckless dishonesty regardless of controls Other Weak internal controls 5% 61% CH: 64% 11% CH: 16% 21% CH: 20% Source: Global Profiles of the Fraudster, KPMG International, 2016
  26. 26. Anti-fraud measures
  27. 27. 27© 2016 KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm Anti-fraudmeasures Be vigilant with internal threats — Investigations — Forensic D&A — Whistleblowing programs/outsourcing Know your business partners & third parties — 3rd Party Risk Management — Corporate intelligence/Astrus Perform risk assessments — Fraud Risk Management — Regulatory positioning services Fight back with technology — Forensic technology — Cyber security — D&A Source: Global Profiles of the Fraudster, KPMG International, 2016
  28. 28. kpmg.com/socialmedia kpmg.com/app © 2016 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. The KPMG name, logo are registered trademarks or trademarks of KPMG International.

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