Our fertile fraud landscapeForensic Focus - September 2008 |
The advent of electronic financial systems and the internet has undoubtedly changed the where and how we look for evidence to detect fraud but my view is that it remains just as complex as 20 years ago.
So if the complexity is comparable, then what has changed?
- Electronic v Paper – Fraudsters no longer rely on hard copy documents. Cash is now elicited electronically by manipulating internal records and bank accounts.
- Anonymity – Most frauds we investigate are now carried out remotely by staff or customers using log-on access as “verification” of identity.
- Speed – Today it takes merely minutes to execute a fraud. False emails, phoney websites, and anonymous software are all available to buy on the web.
Even with advancements in technology on both sides of the fraud fence, an investigator with a good nose for a problem still plays an important role.
Complex fraud involves deception and concealment but this is just the seed – fraudulent activity still needs a fertile environment in order to germinate.
I have reflected on investigations completed by my team over recent years and these are my Top 10 current indicators of a fertile fraud environment.
Top 10 indicators
- Organisations regularly undergoing periods of internal re-organisation. There’s no better time for a fraudster to take advantage than when a restructure is underway.
- An unusually strong alliance with a single supplier in a highly competitive business area.
- Financial information becoming more complex and more difficult to understand, and taking longer to be produced.
- Suspense accounts that are miraculously zeroed just before year-end and the auditors’ arrival.
- Employees promoted to manage senior technical areas without any sound financial/commercial experience.
- Contractors brought in to correct posting errors that the previous accountant never fixed before departing.
- Internal auditors are blocked from accessing the back-end system logs of the finance application by the IT department.
- Staff who password-protect and encrypt files on their My Documents folder.
- When the accounts payable master file has multiple entries for legitimate suppliers and everyone knows it needs “a good clean-up”.
- Executives who demand 24/7 access to the firm’s electronic financial systems, yet the system records indicate they have never used them.
For more information about this topic please contact:
Barry Jordan
Partner, Recovery and Forensics
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