Transcript ASSOCIATION OF CERTIFIED FRAUD EXAMINERS (ACFE) GHANA

“HOW FRAUD HURTS YOU AND YOUR COMPANY”
AT THE BRITISH COUNCIL
PROF. OMANE-ANTW
DISCUSSION ON
Monday, July 20, 2015
ASSOCIATION OF CERTIFIED FRAUD
EXAMINERS (ACFE) GHANA CHAPTER FRAUD
WEEK PROGRAMME
BY:
KWAME BOASIAKO OMANE-ANTWI; CFE (RTD).
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NOVEMBER 15, 2012
PROF. OMANE-ANTW
1. The colour of Fraud & Fraud Definition
2. Impact of Fraud
3. Root causes of Fraud
4. Price Paid for Fraud
5. Perpetrators of Fraud
6. ACFE 2012 Annual Global Report
7. WHO PAYS FOR FRAUD
8. WHAT SHOULD BE DONE ABOUT FRAUD
9. TAKE AWAYS
10. EPILOGUE
Monday, July 20, 2015
GLIMPSE OF THE DISCUSSION
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 Individual victims of fraud come from all walks of life,
and are usually “someone just like you or me”
 Fraud happens in all organisations
 Prevention is the best way to stop fraud when you find
PROF. OMANE-ANTW
 Fraud is everyone’s problem
Monday, July 20, 2015
THE COLOUR OF FRAUD???
or suspect it, report it!
 Punishment for fraud and recovery of stolen funds are
so rare, prevention is the only viable course of action!
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SOURCE: JOINT DEFINITION:IIA, AICPA and ACFE, 2010
PROF. OMANE-ANTW
“Fraud is any intentional act or omission
designed to deceive others, resulting in the
victim suffering a loss and/ or the
perpetrator achieving a gain”
Monday, July 20, 2015
FRAUD DEFINED
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Direct – The individual or organisations
which has been the victim of the fraud
Indirect – Secondary targets of the
fraudsters, or those who feel the wider
effects of the fraud, such as the families of
victims, organisations and/society
PROF. OMANE-ANTW
 Fraud can have direct and indirect victims
Monday, July 20, 2015
IMPACT OF FRAUD
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PROF. OMANE-ANTW
 Families may be emotionally devastated
 Lives disrupted – emotionally, physically,
psychologically or financially
 Business may be unable to recover:
Collapse of businesses
Employees lose jobs
Creditors lose money
Organisations lose reputation
Loss of goodwill and customers relations
Financial debts increase
Cost of doing business becomes high
Monday, July 20, 2015
IMPACT OF FRAUD CONT’D
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PROF. OMANE-ANTW
 Rooted in the Fraud Triangle: Perceived
Pressure; Perceived Opportunity and
Person’s Rationalisation or Integrity
 Exacerbated in Economic Downturn or any
hash environment
 Increased discovery with softening economy
 Increase in employee financial pressures
 Increased pressure to show good financial
results (pressure for unachievable?)
Monday, July 20, 2015
ROOT CAUSES OF FRAUD
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distract
 Less effective internal controls during
downsizing (or less emphasis on them)
 Diminished morale
PROF. OMANE-ANTW
 Increase
financial
pressure
attention from risk management
Monday, July 20, 2015
ROOT CAUSES OF FRAUD CONT’D
 Greater Pressure = Easier Rationalisation!!!
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 $ 3.5 trillion estimated loss worldwide in 2011
 Corruption and billing schemes pose the
greatest
risk
to
organisational
fraud
PROF. OMANE-ANTW
 5% Companies Revenues lost to fraud
Monday, July 20, 2015
PRICE PAID FOR FRAUD: ACFE 2012
REPORT
worldwide
 Occupational fraud is a significant threat to
small businesses
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 College Educated
 Intelligent
 Married
PROF. OMANE-ANTW
 Males
Monday, July 20, 2015
WHO COMMITS FRAUD – TYPICAL
PERPETRATORS
 Most loyal employee
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PERCENT OF
CASES
MEDIAN LOSS (IN
U. S . DOLLARS)
United States
57.2%
$ 120, 000
Asia
15.0%
$ 195, 000
Europe
9.9%
$ 250, 000
Africa
8.2%
$ 134, 000
Canada
4.3%
$ 87, 000
Latin America and Caribbean
2.8%
$ 325, 000
Oceania
2.6%
$ 300, 000
SOURCE: ACFE ANNUAL GLOBAL REPORT 2012
PROF. OMANE-ANTW
REGION
Monday, July 20, 2015
PERPETRATORS OPERATE WORLDWIDE
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$50,000
$165,000
Manager (38.1%)
Median Loss
(percentage of cases)
Owner/Executiv
e (12.4%)
$750,000
Other (2.9%)
PROF. OMANE-ANTW
Employee
(46.7%)
Monday, July 20, 2015
POSITION OF PERPETRATORS IN AFRICA
– 105 CASES
$50,000
12
$0
$200,000
$400,000
SOURCE: ACFE ANNUAL GLOBAL REPORT 2012
$600,000
$800,000
PERPETRATORS DEPARTMENTS: A CASE
STUDY OF AFRICA
22.4%
20.6%
8.4%
7.5%
7.5%
6.5%
6.5%
3.7%
3.7%
2.8%
2.8%
2.8%
1.9%
1.9%
0.9%
0.0%
0.0%
PROF. OMANE-ANTW
Accounting
Operations
Purchasing
Executive/Upper Management
Sales
Finance
Other
Information Technology
Warehousing/Inventory
Customer Service
Manufacturing and Production
Marketing/Public Relations
Human Resources
Internal Audit
Board of Directors
Legal
Research and Development
Monday, July 20, 2015
AFRICA 107 CASES
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FRAUD CASES IDENTIFIED IN AFRICA
39.30%
Billing
31.30%
Cash on hand
19.60%
Cash Larceny
17.90%
Non-Cash
15.20%
Expense…
14.30%
Check…
12.50%
Skimming
12.50%
Payroll
Register…
Financial…
0.00%
Percentage
of Cases
PROF. OMANE-ANTW
Corruption
Monday, July 20, 2015
African Cases (2012- 112 cases)
9.80%
7.10%
4.50%
10.00%
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20.00%
30.00%
SOURCE: ACFE ANNUAL GLOBAL REPORT 2012
40.00%
50.00%
PROF. OMANE-ANTW
TIP
Management
Internal Audit
By Accident
Account Reconciliation
Document Examination
External Audit
Notified by Police
Surveillance/Monitoring
Confession
IT Controls
Others
%
43.3
14.6
14.3
7.0
4.8
4.1
3.3
3.0
1.9
1.5
1.1
1.1
Monday, July 20, 2015
DETECTION OF FRAUD SCHEMES
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Source: ACFE Annual Global Report 2012
PERCENTAGE OF CASES
INVOLVING CURRUPTION
Mining
77.8%
Utilities
58.3%
Oil and Gas
50.0%
Technology
47.4%
Real Estate
42.9%
Agriculture, Forestry, Fishing and Hunting
40.0%
Wholesale Trade
37.0%
Banking and Financial Services
36.2%
Transportation and Warehousing
36.1%
Government and Public Administration
35.5%
Construction
34.0%
Manufacturing
33.8%
SOURCE: ACFE ANNUAL GLOBAL REPORT 2012
PROF. OMANE-ANTW
INDUSTRY
Monday, July 20, 2015
CURRUPTION CASES BY INDUSTRY
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PERCENTAGE OF CASES
INVOLVING CORRUPTION
Services (Other)
33.3%
Health Care
30.4%
Telecommunications
30.2%
Services (Professional)
27.3%
Insurance
26.9%
Arts, Entertainment and Recreation
25.0%
Education
23.9%
Retail
22.9%
Religious, Charitable or Social
Services
22.2%
Communications and Publishing
11.1%
PROF. OMANE-ANTW
INDUSTRY
Monday, July 20, 2015
CURRUPTION CASES BY INDUSTRY
CONT’D
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SOURCE: New York State Department of Transportation 2010
PROF. OMANE-ANTW
 Project Manager
 Sub-contractors
 Materials Suppliers
 Contractors
 Clerk of the Works
 Estimators
 Engineer
 Architect
 Add more???
Monday, July 20, 2015
WHO COMMIT FRAUD: A CASE STUDY OF THE
CONSTRUCTION INDUSTRY
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Source: Journal of Information Technology Impact Vol. 11
No. 2 pp. 85 – 100, 2011
PROF. OMANE-ANTW
 Suspects in Ghana age from 15 – 40 plus years
%
15 – 20
8
21 – 25
30
26 – 30
35
31 – 35
20
36 – 40
5
40 plus
2
Monday, July 20, 2015
SAKAWA – CYBERCRIME AND CRIMINALITY IN
GHANA (2011) – ‘WAR WITHOUT WALLS’
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 The Desperate
 The Mindless
PROF. OMANE-ANTW
 The greedy
Monday, July 20, 2015
THREE TYPES OF 21ST CENTURY FRAUDSTERS
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 The cost to government is passed onto the
public through increased taxes
 The cost to business is passed onto
consumers through increased prices of
goods and services (e.g. insurance
premiums)
PROF. OMANE-ANTW
 Everyone pays for fraud
Monday, July 20, 2015
WHO PAYS FOR FRAUD
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PROF. OMANE-ANTW
 Fiduciary duty to protect public asset
 Protect organisational reputation
 Promote transparency in operation
 Victim of fraud can lose much more than
just money:
Can lead to health problems
Suicide, depression
 Corporate victimisation can lead to public
confidence in products and reputational
damage
Monday, July 20, 2015
WHY MUST WE ADDRESS FRAUD?
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methodology to identify and address risk of
fraud:
A well-defined whistle-blowing policy
PROF. OMANE-ANTW
 Organisation needs to adopt a definite
Monday, July 20, 2015
WHAT SHOULD BE DONE ABOUT FRAUD?
Periodic fraud risk assessment
A pre – employment screening
Vendor background checks
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agenda
for
PROF. OMANE-ANTW
 Simple Fraud Prevention Measures:
Internal controls and procedures
Hiring good employees
Break the Fraud Triangle
 Financial Controls
 Non – Financial Systems
 Management Oversight and Behaviour
 Fraud to occupy higher priority
government and organisations
Consumer education
Enforcement
Commit Resources to combat fraud
Monday, July 20, 2015
WHAT SHOULD BE DONE ABOUT FRAUD
CONT’D
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Background checks
Avoid Nepotism
Employees to sign employment contracts
Non – corrupt agreements
PROF. OMANE-ANTW
 Develop over-all Fraud Deterrence Plan:
Monday, July 20, 2015
TAKE AWAYS
Confidentiality of Information Agreement
Bonding
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PROF. OMANE-ANTW
Two signatures on cheques/wire transfers/
lines of credit
Lock box
Back-up computer files
Accounting staff can not cancel debt
Have an internal audit
CEO signs numbered cheque request from
banks etc; etc
Monday, July 20, 2015
TAKE AWAYS CONT’D
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PROF. OMANE-ANTW
 A valid contract
Offer/Acceptance
Lawful objective
Capacity of parties to perform
Something of value exchanged
Appropriate form (e.g. written contract)
Entered into freely
Monday, July 20, 2015
TAKE AWAYS CONT’D
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Bible/ The Koran
 Develop core values in life
 “The wicked in his pride persecutes the
poor; Let them be caught in the plots
which they have devised – Psalm 10:2
PROF. OMANE-ANTW
 Follow the tenets of the book of life – The
Monday, July 20, 2015
EPILOGUE
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THE END
THANK YOU
Monday, July 20, 2015
Prof.
Kwame Boasiako
Omane-Antwi
PROF. OMANE-ANTW
PhD, MBA, MA, ITP (HARVARD)
AMP(OXON),FCCA, FRSA(UK),
FBI(Hon), FIOD(UK), FIOD(GH),
FCIM, MCIPD, MIMIS
Professor of Accounting &
Vice Rector
Pentecost University
College
Sowutuom
Tel 0244-32448/0202011775
E-mail:
[email protected]
[email protected]
FACILITATOR
KWAME BOASIAKO OMANE – ANTWI
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