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Understanding Fraud Through Real-Life Investigations 2014 ACFE Canadian Fraud Conference September 2014
Understanding Fraud Through Real-Life Investigations 2014 ACFE Canadian Fraud Conference
September 2014
Overview
► EY’s 13th Global Fraud Survey—findings for Canada
► Overview of an anti-fraud program
► Key elements
► Investigations
► Vice-president human resources
► Chief ethics officer
► Construction manager
Page 1
Number of Canada Interviews: Role, Sector, Revenue
Sector
Automotive 1
Consumer products, retail, wholesale 7
Financial services 7
Government and public sector 8
Life sciences 3
Manufacturing and chemicals 3
Oil, gas, and mining 6
Power and utilities --
Professional firms and services 2
Real estate 4
Technology, communications, and
entertainment 4
Other transportation 1
Other sectors 4
Job function
Finance 15
Internal audit and risk 19
Legal --
Compliance 2
Other executives 14
Base: all respondents in Canada (50)
Note: Revenue figures exclude respondents who said “don’t know” or refused.
Revenue
More than $1 billion 21
$500 million to $1 billion 13
Less than $500 million 16
Page 2
Fraud—A Challenge for All Economies
Q. Has your organization experienced a significant fraud in the last two years? Base: Canada 2014 (50); North America 2014 (100); developed markets 2014 (1103); emerging markets 2014 (1616); all respondents 2014 (2719)
12
14
12
11
12
% Yes
Canada
North
America
Developed
markets
Emerging
markets
All
respondents
Has your organization experienced a significant fraud in the last two years?
Page 3
North
America
Developed
markets
Emerging
markets
All
respondents
33 30 28 29
5 11 17 14
1 7 16 13
3 4 8 6
35 38 45 42
Unethical Behavior Persists
Q. Which, if any, of the following do you feel can be justified if they help a business survive an economic downturn? Base: Canada 2014 (50); North America 2014 (100); developed markets 2014 (1103); emerging markets 2014 (1616); all respondents 2014 (2719)
% don't know and none of the above have been omitted to allow better comparison between responses given
38
6
2
4
40
Offering entertainmentto win/retain business
Personal gifts towin/retain business
Cash payments towin/retain business
Misstating company’s financial performance
At least one of thesecan be justified
% Agree
% Agree
Canada
Page 4
Anti-Fraud Programs
Page 6
Tone at the top Proactive Reactive
Fraud strategy
Risk appetite set
Authority
delegation
Roles and
responsibilities
Disciplinary code
Ethical guidance
Background
checks
Vendor due
diligence
Policies
Tone
communication
program
Management
performance
agreements
aligned
Code compliance
procedures
Whistleblower
channels
Fraud awareness
training
Priority fraud risks
► Scheme- and
scenario-based
► By industry
► By geography
Transaction-level
controls
Peer
benchmarking
Incident reporting
Entity level
controls
IT detection tools
Data analytics
Escalation and
investigation
protocol
Discipline and
compliance
enforcement
Control remediation
Financial recovery
Anti-Fraud Program Overview
Fraud prevention
policies
Communication
and training
Fraud risk
assessment
Fraud controls
monitoring
Fraud
response plan
Investigations—VP Human Resources
Discovering the Fraud
► How the fraud was found
► Result of actions taken after a training presentation
► Conducting the investigation
► Corporate searches
► Background investigation
► Document review
► Anton Piller order
► Imaged phones and computers seized
Page 8
Findings
► What we found
► Vendor payments
► Ghost employees
► Expense reports
► Duplicate expenses
► Non-business-related trips and meals
► Reimbursement for conference not attended
► Credit card purchases
► Items purchased for personal use
► Gift cards and other employee gifts
► Excess salary payments
Page 9
Page 10
Tone at the top Proactive Reactive
Fraud strategy
Risk appetite set
Authority
delegation
Roles and
responsibilities
Disciplinary code
Ethical guidance
Background
checks
Vendor due
diligence
Policies
Tone
communication
program
Management
performance
agreements
aligned
Code compliance
procedures
Whistleblower
channels
Fraud awareness
training
Priority fraud risks
► Scheme and
scenario based
► By industry
► By geography
Transaction level
controls
Peer
benchmarking
Incident reporting
Entity level
controls
IT detection tools
Data analytics
Escalation and
investigation
protocol
Discipline and
compliance
enforcement
Control remediation
Financial recovery
Lessons Learned
Fraud prevention
policies
Communication
and training
Fraud risk
assessment
Fraud controls
monitoring
Fraud
response plan
Lessons Learned
► Hiring employees
► Internet searches
► Stronger policies
► Written declarations
► Expense reporting policies
► Fraud awareness training
► Red flags
► Roles and responsibilities
► Vendor master program
► Know your vendors
► Risk appetite considerations
Page 11
Lessons Learned
► Data analytics
► Vendor master file
► Employee master file
► Employee expense reports and credit cards
► Vendor purchases
► Controls
► Credit card purchases
► Expense reports
► Gift cards
► Fraud risk assessment
► Identification of priority risks
Page 12
Lessons Learned
► Fraud response plan
► Investigation protocol for key employees
► Preserving evidence
► Insurance considerations
Page 13
Investigations—Chief Ethics Officer
Discovering the Fraud
► How the fraud was found
► Looking for ways to reduce costs
► Conducting the investigation
► Corporate searches
► Background investigation
► Document review
► Imaging computer
► Email review
► Tracing assets
Page 15
Findings
► What we found
► Fake vendor
► Vendor providing services at inflated prices
► Family member providing services
► Expense reports
► Altered amounts
► Duplicate expenses
► Other’s receipts
► Personal expenses
Page 16
Page 17
Tone at the top Proactive Reactive
Fraud strategy
Risk appetite set
Authority
delegation
Roles and
responsibilities
Disciplinary code
Ethical guidance
Background
checks
Vendor due
diligence
Policies
Tone
communication
program
Management
performance
agreements
aligned
Code compliance
procedures
Whistleblower
channels
Fraud awareness
training
Priority fraud risks
► Scheme and
scenario based
► By industry
► By geography
Transaction level
controls
Peer
benchmarking
Incident reporting
Entity level
controls
IT detection tools
Data analytics
Escalation and
investigation
protocol
Discipline and
compliance
enforcement
Control remediation
Financial recovery
Lessons Learned
Fraud prevention
policies
Communication
and training
Fraud risk
assessment
Fraud controls
monitoring
Fraud
response plan
Lessons Learned
► Hiring employees
► Internet searches
► Background checks
► Authority delegation
► Procurement policies
► Purchase orders
► Fraud awareness training
► Vendor master program
► Data analytics
► Patterns of purchases
► Anomalies
Page 18
Investigations—Construction Manager
Discovering the Fraud
► How the fraud was found
► Allegation during exit interview
► Conducting the investigation
► Email reviews
► Interviews
► Private investigator
► Corporate searches
Page 20
Findings
► What we found
► Inappropriate relationships with multiple vendors including:
► Trips
► Entertainment
► Loan to start a business
► Pool installed
► Expense reports
► Inflated
► Unsubstantiated payments under the limit for receipts
Page 21
Page 22
Tone at the top Proactive Reactive
Fraud strategy
Risk appetite set
Authority
delegation
Roles and
responsibilities
Disciplinary code
Ethical guidance
Background
checks
Vendor due
diligence
Policies
Tone
communication
program
Management
performance
agreements
aligned
Code compliance
procedures
Whistleblower
channels
Fraud awareness
training
Priority fraud risks
► Scheme and
scenario based
► By industry
► By geography
Transaction level
controls
Peer
benchmarking
Incident reporting
Entity level
controls
IT detection tools
Data analytics
Escalation and
investigation
protocol
Discipline and
compliance
enforcement
Control remediation
Financial recovery
Lessons Learned
Fraud prevention
policies
Communication
and training
Fraud risk
assessment
Fraud controls
monitoring
Fraud
response plan
Lessons Learned
► Roles and responsibilities
► Whistleblower channel
► Targeted fraud awareness training
► Procurement policies
► Specialist procurement function
► Sealed bids
► Technical and pricing separate
► Committee approval
► Invite vendor feedback
► Data analytics
► Expense reports
► Change orders
Page 23
Contact Information
Linda Lister, Ernst & Young LLP
Fraud Investigation & Dispute Services
[email protected] or tel: 416 943 2361
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