The document outlines key aspects of fraud prevention, including identifying potential threats and fraudster profiles, as well as discussing the motivators behind fraud and sector-specific vulnerabilities. It emphasizes the importance of preventive controls, continuous monitoring, and creating awareness within organizations. Additionally, it highlights analysis of fraud cases, profiles of fraudsters and victims, and the need for established processes in recruitment and vendor selection to mitigate risks.

1. Preventing Fraud-Lesson I
CA Sailesh Cousik
The Need of the Hour
Identifying Potential Threats
Fraudster Profiles
Fraudster Motivators
Vulnerabilities by Industry
Plugging controls
Creating Awareness

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Agenda
• Keys to Fraud Prevention
• What is Fraud and understanding a Fraudster
• Concept of Red Flags and Green Flags-
• Understand Fraud Vulnerabilities
• Preventive Controls
• People
• Information Assets and Processes
• Case Study
• Organizational Risk and Governance
• Reporting and Continuous Monitoring and Reassessment

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“QUALITY IN A SERVICE OR PRODUCT IS
NOT WHAT YOU PUT INTO IT.
IT IS WHAT THE CLIENT OR CUSTOMER
GETS OUT OF IT.”
- PETER DRUCKER
QUALITY MEANS DOING IT RIGHT
WHEN NOBODY IS LOOKING
HENRY FORD

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What is Fraud• Black’s Law Dictionary
• Fraud consists of some deceitful practice or willful device, resorted to with intent to deprive
another of his right, or in some manner to do him an injury. As distinguished from negligence, it is
always positive, intentional.
• Indian Company’s Act
• Explains fraud as: “fraud” in relation to affairs of a company or any body corporate and includes:
any act, omission, concealment of any fact or abuse of position committed by any person or any
other person with the connivance in any manner, with intent to deceive to gain undue advantage
from or to injure the interests of, the company or its shareholders or its creditors or any other
person, whether or not there is any wrongful gain or wrongful loss.”

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Five Reasons -Why People commit Fraud
F – Fun
R – Revenge (an Eye for an Eye)
A – Anger (Taking it out on society)
U – Unethical Behaviour- (bad person)
D – Destiny ( Born for the profession )
1. Employees commit 42% of Frauds and take 12 median months to detect
2. Managers 36% and take 18 median months to detect
3. Owners 19% and take 24 median months to detect
The ACFE report to the nations provides an interesting sidelight is that the older the fraudster the higher the
fraud-Fraudster> 60 Value=.5 million USD
Fraudsters don’t come with a label

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Use of Flags in Fraud Prevention
Behaviour and Incidents
Trends or Outlier triggers suspicion/prevention
• Earnings downturn
• Flashy Lifestyle or change in spend patterns
Unusual Activities with a possible normal explanation
• Credit Card transactions with abnormal value or from a different location
• Sudden change in behaviour
Too Good to be true
• Unusually High Growth
• Lack of anything unusual
6

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Industry Wise Fraud Vulnerability
Industry No. Of Cases % of Cases Median Loss (USD)
Banking & Financials 244 17.8% 200,000
Government and Public Admin 141 10.3 % 64,000
Manufacturing 116 8.5% 250,000
Health Care 100 7.3% 175,000
Oil And Gas 49 3.6% 450,000
Transportation & Warehousing 48 3.5% 202,000
Construction 43 3.1% 245,000
Technology 39 2.9% 250,000
Wholesale Trade 31 2.3% 375,000
Real Estate 24 1.8% 555,000
Mining 13 1.0% 900,000
Source: ACFE Report to the Nations on Organizational Fraud-2014

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Fraudsters and their Gullible Targets
Victims, Accomplices and Fraudsters have similar characteristics

1. Looking Lost and in need of help
2. Overconfident and Arrogant
3. Life and routine are structured and predictable
4. Eagerness to make a quick buck
5. Flamboyant Lifestyle and known
Vices/Weaknesses
6. In positions of power or in financial crisis
7. Disgruntled employees/those with personal
problems
8. Dreamers who seek to escape reality
9. Aggressive style which spawns enemies
10. Financial Crisis
11. Available of personal information
1. Credit Card spend trends
2. Cab Booking
3. Social Media-Status , Updates & Blogs
4. Travel Sites
5. Casual Conversation- Social Engineering

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“Fraud Periods”
What to do when Vulnerability and Risk Increase
1. Disaster and Crisis Situations
2. Long week ends-Christmas/Diwali
3. New Government Schemes- Free Laptops/TVs
4. Charity and Religious Funds with little regulatory
control and where sources are not known
5. Corporate Pressure Situations
1. Shareholder pressure
2. Earnings pressure
3. Time to market pressure
4. Timeline pressure
5. Peer pressure- No Promotions
6. Change of key legislation and tax/duty rate
structures
7. Knowledge of Valuable proprietary, trademark
information prior to registration of
copyright/trademark or patent
8. Election Time

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Preventive Controls
Recruitment/Vendor Selection
Background Check
Education/Criminality/Employment/ Drugs/Health
Compensation to be Comparable with Industry norms
In line with authority and responsibility
Continuous Training and Performance Monitoring
Counselling and clearly defined processes and policies

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Preventive Controls
System and Application Access
Physical Security
CCTV
Access Control Card
Hardware USB Access
Network Access
Application Access
System Logs
Network Logs
Printer Logs

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Keys to
Fraud Prevention
• Understand the information you have
• Logs of access both systems and applications
• Physical access logs
• Transactional records and audit trails
• Data which can be used to discover trends
• Analytical and Monitoring Tools
• Mobile Records and CCTV Footage
• Behavioral and Cultural Patterns
• Interview Techniques
• Forensic Data and Tools for data extraction
• Types of data
• Relational databases
• XML
• Meta Data
• Big Data- Images, Videos
• Case studies
• Past experiences and learnings
• Self
• Organizational
• Know what is to be used, where and in what context

13. Phone: +91-9029026718
Email : info@saileshcousik.co.in
THANK YOU
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Monday, 17 July 2017 13