1. Protecting Your Business: Who’s
Profit is it Anyway?
Fraud Prevention for Business
Owners
“Providing businesses the prescription for enhanced profit”
2. Alan Greggo CPP, CFE
• Consultant
• Author
• Senior Loss Prevention Leadership
4. “It’s Not My Problem!”
• Did you know the typical organization loses 5%
of its revenues to fraud each year?
• Applied to the 2011 Gross World Product, this
figure translates to a potential projected annual
fraud loss of more than $3.5 trillion.
5. “It’s Not My Problem…Is It?”
• The median loss caused by occupation fraud
cases in the ACFE study titled the “Report to the
Nations”, was $140,000 and 1/5th of reported
cases caused losses of at least $1 million!
7. Behavioral Red Flags of Perpetrators
Living beyond means- 35.6%
Financial
Difficulties- 27.1%
Unusually close association with
vendor/customers- 19.2%
8. Behavioral Red Flags of Perpetrators
Control Issues, Unwillingness to
share duties- 18.2%
Divorce/family problems-
14.8%
Wheeler-Dealer
Attitude- 14.8%
9. Behavioral Red Flags of Perpetrators
Irritability, suspiciousness
or defensiveness- 12.6%
Addiction problems- 8.4%
Past Employment- related problems- 8.1%
10. Behavioral Red Flags of Perpetrators
Complained about inadequate pay-7.9%
Refusal to take vacations- 6.5%
Excessive pressure within the organization-
6.5%
11. Oh-My!! I’ve seen these!
• Red flags by themselves don’t mean an employee
is making a bad choice about your business.
• When you start to see patterns forming or
multiple red flags, ensure your fraud controls
are being adhered to and watch for unusual
behavior.
• Don’t confront an employee head on without
evidence of wrong doing; get help from an expert
investigator.
12. Most employees want to do well
• Be aware of Goal Incongruence
• Which is: Management setting lofty targets and
goals and expect the employee to achieve them
at all cost. The employee feels their future, their
job is on the line.
• Employees want to succeed and please their
manager and the company.
• If the outcome looks hopeless, the employee
starts to rationalize (see fraud triangle).
14. CFE/ Investigator Wisdom: For FREE
• Trust is not and internal control!
The indictment seeks $53 million and numerous
assets, many of which were seized from Crundwell
when she was arrested by FBI agents on April 17.
Here's a laundry list of what the government wants:
Two residences and the horse farm in Dixon
A home in Englewood, Fla.
A $2.1 million luxury motor home
More than a dozen trucks, trailers and other motorized
farm vehicles
A 2005 Ford Thunderbird convertible
A 1967 Chevrolet Corvette roadster
A pontoon boat
Approximately $224,898 in cash from two bank
accounts
15. CFE/ Investigator Wisdom: For FREE
• Anytime you change a system, people will always
change their behavior; What’s possible?
• If you want people to do the right
thing you have to make it
personal.
16. Protecting Your Business- Physical
Controls
• Pre-employment background checks
• Policies on dishonest and unethical behavior
• Supported from top management?
• Business Abuse Hotline; anonymous way to
report suspected violations of the ethics and
anti-fraud policies
• Restricted access to areas containing sensitive
documents
• Maintain a system for providing an audit trail
17. Protecting Your Business-Physical
Controls
• Restricted access to computer systems
(accounting software, inventory, and payroll)
• Restrict access to areas with high value assets
(shipping, receiving, storerooms, and cash)
• CCTV and recording equipment to monitor
physical building and sensitive areas
18. Protecting Your Business-Physical
Controls
• Conduct random, unannounced audits of
inventory, cash, expense, purchasing, billing, etc.
by internal or external auditors
• Prompt investigations of reported incidents of
fraud
• Educate employees about the importance of
ethics and anti-fraud programs
19. Active social networkers
• As a group, more likely to experience pressure to
compromise ethics by 32%.
• 56% of social networkers experience retaliation
versus only 18% of less active or non‐active
networkers.
20. Top 5 IT Security Best Practices for
Small Merchants
• Understand sensitive data, where it is and who is
responsible for its protection.
• Avoid storing sensitive data; if required to do so, secure
it.
• Protect perimeters with firewalls.
• Fortify interiors with people, procedures and technology.
• Get to know service providers and their level of PCI
compliance.
*From a white paper published by payment security and compliance solutions provider ControlScan
21. The tools of Business Ethics
• Ethics programs.
• Foreign Corrupt Practices Act.
• Federal Sentencing Guidelines.
• Sarbanes‐Oxley.
• Industry Specific Regulations.
• Dodd‐Frank.
“Asset protection is more than just stopping
shoplifters, it sets the stage for an ethical
corporate culture.“-Stephen Sadove, chairman and CEO of
Saks Inc.
22. 7 Principles of Business Ethics
• Be Trustful.
• Keep an open mind.
• Meet obligations.
• Have clear documents.
• Become community involved.
• Maintain accounting control.
• Be respectful.
23. Questions?
Alan Greggo
Easy Risk Assessment- 11 questions to consider
about your business:
http://profitrxllc.com/pages/RiskAssessment
Phone: (513) 236-2642
Editor's Notes
Do you conduct pre-employment background checks?Are there policies that address dishonest and unethical behavior?Are they supported by top management?Does the organization provide an anonymous way to report suspected violations of the ethics and anti-fraud policies?Does the organization restrict access to areas containing sensitive documents (such as invoices, receipts, journals, ledgers, and checks) and maintain a system for providing an audit trail of access?
