International Fraud Awareness Week

Fraud Awareness Week Casts Spotlight on White Collar Crime

Forensic Accounting QLD Joins Ranks of Supporters for 6-12 November 2011 Awareness Movement

Forensic Accounting QLD announced that it will be participating in International Fraud Awareness Week, Nov. 6-12, 2011 as an Official Supporter to promote anti-fraud awareness and education. Fraud Awareness Week comes during a time when organizations around the world lose an estimated five percent of their annual revenues to fraud, according to a study conducted by the Association of Certified Fraud Examiners (ACFE).

Forensic Accounting QLD joins hundreds of organizations who have partnered with the ACFE, the world's largest anti-fraud organization and premier provider of anti-fraud training and education, in a commitment to proactively fight fraud and help safeguard business and investments from this growing problem.

Steven Ponsonby – Founding Director of Forensic Accounting QLD stated that

“The absence of evidence of fraud is not evidence of the absence of fraud”

During Fraud Awareness Week, Official Supporters will engage in various activities in support of the anti-fraud movement. These initiatives include hosting fraud awareness training for employees and/or the community, conducting employee surveys to assess levels of fraud awareness within their organization, posting articles on their web site and in newsletters and teaming with local media to highlight the problem of fraud.

ACFE President James D. Ratley, CFE, said that the support of organizations around the world helps make Fraud Week an effective tool in raising anti-fraud awareness.

“Regardless of the size of an organization or its business model, fraud is a serious concern – and if undetected, it can have a measurable impact on the bottom line,” Ratley said. “Once again, we want to say ‘thank you’ to all of the Fraud Awareness Week supporters for helping to shine a spotlight on the urgent need for fraud prevention and detection,” Ratley said.

In its 2010 Report to the Nations on Occupational Fraud & Abuse, the ACFE found that:

·        Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the ACFE study was $160,000. Nearly one-quarter of the frauds involved losses of at least $1 million.

·        Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.

·        Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.

·        Small businesses are especially vulnerable to occupational fraud. These organizations are typically lacking in anti-fraud controls compared to their larger counterparts, which makes them particularly vulnerable to fraud.

·        Tips are key in detecting fraud. Occupational frauds are much more likely to be detected by tip than by any other means. This finding reinforces the need for promoting awareness to foster an informed workforce.

For more information about increasing awareness and reducing the risk of fraud during International Fraud Awareness Week, visit www.FraudWeek.com.

The 2010 Report to the Nations is available for download online at the ACFE’s web site: ACFE.com/RTTN.  The Report is in PDF format.

About the Association of Certified Fraud Examiners

The ACFE is the world's largest anti-fraud organization and premier provider of anti-fraud training and education. Together with more than 55,000 members in over 150 countries, the ACFE is reducing the incidence of fraud and providing the training and resources to fight fraud more effectively. For more information about the ACFE, visit www.ACFE.com.

With a Certified Fraud Examiner (CFE) on the team, Forensic Accounting QLD has the expertise to assist you.

For further information, contact Steven Ponsonby on:

t   +61 7 3170 3883   f +61 7 3170 3885  
p   GPO Box 5097 Brisbane Qld 4001  
e   info@faqld.com.au  w  www.faqld.com.au

Superannuation and Investment Fraud

The rise of fraud perpetrated against Australian residents in the superannuation and investment area is increasing at an alarming rate.

The “Opportunities” have always existed, but a combination of the current economic climate together with the sophistication of the technology utilised has resulted in the level of fraud increasing significantly.

What are the drivers?

• The first of the baby boomers turned 65 this year, - i.e. are transitioning from the super accumulation phase to the super de-accumulation (or moving into retirement) phase +

• Value of super nest egg has fluctuated wildly over the last few years +

• People taking increased risks to recover losses and increase returns into super +

• Value of superannuation in Australia isapproximately $1.23 trillion as at 30 June 2010 (APRA statistics) +

• First time in super’s 20 year life that Self-Managed Super Funds (SMSF’s) hold the largest proportion, i.e. 1/3 of the total Australian superfund pool

          = Increased focus on superannuation and the opportunities for fraud to be committed.

How bad is it?

• In the last six months, approximately $30 millionhas disappeared as a result of fraud both nationally and internationally, $10 million of this has been lost to fraudster’s posing as financial advisors.

• Even more has been lost to unlicensed overseas “investment” organisations or better known in the industry as “Boiler Room Frauds”

• In Australia –since 2008,based on research undertaken by one of the state authorities;

• 4,500 individual transactions were tracked out of Australia –representing approximately 2,500 victims and resulted in $82 million being lost.

• The Australian Securities and Investments Commission (ASIC) estimated in a report in 2002 that the total cost to Australia was$400 million.

These organisations appear very professional:  This is how it works:

• Initial approach generally by phone and then via phone/email.  Individual with American or British accent says he has your name from surveys you completed and he is from a major international brokerage company.

• Professional manner, and approach,

• Directs you to the company’s website, - portrays a very professional image,

• Directs you to Government regulatory web site to add further credibility,

• Google searches undertaken appear to confirm the company’s legitimacy, i.e. identifies media releases and other information promoting the company,

• Person establishes an account with the company,

• You invest money in what the representative has you believe is a “proper”, “legal”and “appropriate manner to invest superannuation funds”.

The “Opportunities”:

• Gold options,

• Overseas shares,

• Carbon credits

• Continual demands for ongoing payments e.g. to meet taxes, fees etc.,

• After 2 to 4 months, you lose contact with company, website and all information about the company disappears.

How serious is this:

Research provided by one of the state authorities has identified the following:

• There are around 1 to 2 new boiler room corporations daily,

• Each room always has 2 or more associated bank accounts,

• Each bank account has between 30-50 outgoing payments,

• Each day between 30-50 new victims of boiler room frauds are identified within Australia.

Who are the primary victims:

• Well educated elderly persons,

• Small business owners,

• Persons either on or seeking self-funded retiree status.

Conclusion:

Don’t end up becoming a statistic – When approached about an opportunity to invest or access your superannuation:

ALWAYS:

• Get independent expert advice - talk to your accountant, solicitor or afinancial advisor FIRST!

Remain vigilant and remember, if it sounds too good to be true, it probably isn’t!


Steven D Ponsonby is a Chartered Accountant CA, a Certified Fraud Examiner CFE and Insolvency Practitioner IP and is the founding Director of Forensic Accounting QLD, a specialist Forensic Accounting practice based in Queensland and can be contacted via www.faqld.com.au

A Fertile ground for fraud

Like any virus or infection, the right conditions have to exist for it to spread.  Flood, Cyclones and post GFC – the perfect breeding ground for fraud!

The spate of recent natural disasters, together with the impact of the GFC still lingering has created a very fertile breeding ground for fraud. Fraudsters are opportunists by nature and the current climate has created a plethora of opportunities.

There are 3 essential elements that must exist for a fraud to be committed as represented by theFraud Triangle:

Financial Pressure:

• Maintaining a pre GFC lifestyle,
• Redundancy,
• Gambling,
• Mounting personal debts.

Opportunity:

• Reduction in areas of internal controls,
• Change in or additional work responsibilities,
• Increased pressure to meet financial targets.

Rationalisation:

• Just a loan, will pay it back,
• I’m underpaid, I deserve it.
• Win it back with gambling,
• Unable to provide for family/survive without it.

An interesting statistic:

• 5% of people will never commit fraud,
• 10% of people will always commit fraud, they will proactively seek out opportunities,
• 85% of people will commit fraud if the circumstances exist, i.e. the elements of the fraud triangle prevail.

The alarming statistic is that the vast majority, i.e. 85% would commit a fraud if the “right” circumstances existed.

Therefore, in the current economic climate, based on the above statistics, I would consider that 85% of us are now at a higher risk of committing a fraud.

WHERE’S THE RISK?

Small to medium business will be the main target of fraud, why?

• Less internal controls and review procedures in place,
• Higher reliance (level of trust) on fewer staff to cover multiple duties,
• Cash flow pressures arising from recent disasters,

AREAS TO FOCUS ON TO MINIMISE THE RISKS:

• Segregation of duties, - ensure the same person who accounts for the accounts payable does not authorise and process payment of the account,
• Specified procedures in place to account for and authorise payments of expenses, - make sure a proper paper trail exists and payments are not made without the appropriate or original paperwork being provided,
• Restrict control over the banking functions of the business, - ensure the owner or a trusted, separate person authorises and processes payments,
• Ensure the bank accounts are reconciled on a regular basis,
• Organisations that employee multiple casuals, e.g., the hospitality industry - ensure you can account for all the employees,
• Review management accounts – identify discrepancies and investigate in a timely manner,
• Identify the opportunities within your organisation - Undertake a “walk-through” of your business” – Ask yourself, if I wanted to commit a fraud, how would you do it?
• Identify key red flags of fraud:
• Key employees not taking annual leave,
• Employees appearing to be living beyond their obvious financial means,
• Unusual entries in the financial accounts.

Conclusion:

Remember, where there is smoke, there is generally fire, therefore if you suspect that a fraud has been or is being committed within your organisation:

• Report it to a relevant senior person within the organisation, and
• Seek external professional assistance from a Certified Fraud Examiner (“CFE”).In this regard, I would recommend that you go to:http://nf.acfe.com/eweb/DynamicPage.aspx?Site=ACFE&WebCode=CFEDirectory to find a CFE to assist you.

Please note:

I would not recommend attempting to uncover and/or investigate a suspected fraud yourself as I have been involved in a number of cases over the years where this has occurred and what I generally find is that the suspect has been tipped off, evidence has been altered and/or destroyed and conviction of the suspect becomes difficult. 

Often the person leaves/is terminated without being referred to the relevant authorities and simply moves unto the next victim organisation to commence perpetrating a new fraud.

Steven D Ponsonby is a Chartered Accountant CA, a Certified Fraud Examiner CFE and Insolvency Practitioner IP and is the founding Director of Forensic Accounting QLD, a specialist Forensic Accounting practice based in Queensland.

Welcome to the first edition of Forensic Accounting Facts.

Welcome to the first edition of Forensic Accounting Facts, the official Blog for Forensic Accounting QLD.

The aim of the Blog is to provide insightful and informative information covering the various areas of forensic accounting that we specialise in.

We welcome any feedback and any suggestions for future Blog articles.