This past January 18, Schneider Downs welcomed 65 guests representing various industries from corporate accounting to its Combating Fraud Seminar. Speakers at the seminar provided insights and advice with respect to fraud mitigation practices, evidence gathering techniques and security and protection of sensitive information. A key takeaway was the emphasis on the difficulty of organizations to recognize the motivations for individuals to commit frauds and how organizations can proactively remove the opportunities to perpetrate frauds through the implementation of effective controls and monitoring activities.
The seminar concluded with keynote speakers Dan Leeper and Jeff Williams, Special Agents with the FBI’s White Collar Crime Unit. The focus of their program was public corruption, corruption schemes and tips for financial auditors. An interesting fact they shared with the participants is that the top criminal priority of the FBI is combating public corruption which encompasses bribery, extortion, embezzlement, conflicts of interest, blackmail and others. Investigations of public corruption are highly sensitive, complex, have increased media attention and those targeted typically weld political power.
Agents Leeper and Williams provided real-life examples of cases they themselves have been involved with over the last several years. A particular case of notoriety was a $2-billion-dollar fraud perpetrated by National Century Financial Enterprises, a Dublin, Ohio company.
They pointed to five key principles to mitigate fraud:
- Maintain a culture of ethics within your organization.
- Provide adequate and targeted education and training to your employees.
- Listen to your employees or auditees—what are they saying that you may not be truly hearing?
- Be aware of red flags.
- Trust your instincts.
It is the first principle that catches my attention—maintain a culture of ethics. Don Owens, Director at Schneider Downs, raised a related concern during his presentation at the seminar: “Ethics and fraud are interconnected. Without a strong ethical culture, fraud risk exponentially increases.” Interrelated to the other four principles, Don noted that “in most fraud cases uncovered, indicators that a fraud was occurring were evident to others. However, human nature is to continue to trust those around us even when faced with evidence to the contrary.”
Many published reports note that on average organizations lose 5% or more of annual revenues to fraud, most of which is attributable to white-collar crime (i.e., workplace fraud). The losses are staggering. Establishing a strong fraud-mitigation culture should not be viewed as optional within any organization; it should be the rule.
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