2010 Legal and Finance Series: Employee Dishonesty in Times of Recession: Safeguards and Proper Handling Tuesday, March

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Representative Dishonesty in Times of Recession: Safeguards and Proper Handling. Introduced By:Chris Fereday, CRMTechnology Practice LeaderTelephone: (319) 234-8888E-Mail: cfereday@midwesttechinsure.com www.midwesttechinsure.com. The Cost of Fraud. The U.S. Assembly of Commerce gauges that organizations lose 1-2% of incomes yearly because of extortion

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2010 Legal and Finance Series: Employee Dishonesty in Times of Recession: Safeguards and Proper Handling Tuesday, March 16, 2010

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Employee Dishonesty in Times of Recession: Safeguards and Proper Handling Presented By: Chris Fereday, CRM Technology Practice Leader Telephone: (319) 234-8888 E-Mail: cfereday@midwesttechinsure.com www.midwesttechinsure.com

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The Cost of Fraud The U.S. Council of Commerce gauges that organizations lose 1-2% of incomes yearly due to fraud–mainly by workers The Association of Certified Fraud Examiners appraise organizations lose up to 6% of incomes every year through misrepresentation The cost of extortion comes straight off the primary concern –What is your net revenue?

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Estimates of Losses Due to Fraud in 2009 37% of respondents assessed misfortunes over $500,000 According to Association of Certified Fraud Examiners "Misrepresentation Focus Poll" 2009

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Vendor Fraud 39% of advantage misappropriations are the aftereffect of charging plans, which are frequently merchant extortion

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Why are Losses Increasing? A decrease in representative devotion Existing fakes being revealed as frameworks are incorporated Increased open door for extortion when frameworks are not legitimately broke down for the sufficient isolation of controls Management concentrating on development, edges, and new markets, not satisfactory control capacities

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Why are Losses Increasing? Cutting back and Restructuring Uncovers extortion when culprits can no longer conceal their activities Can bring about a lacking isolation of obligations Increases the ethical danger and declines steadfastness Rapid Expansion and Globalization Maintaining solid inner controls in remote operations has ended up being troublesome, best case scenario Auditing of worldwide operations happens at a lower recurrence permitting misfortunes to develop where controls are the most hard to actualize and screen

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The Impact of Computers on Fraud The extension of PCs has: Drastically changed the speed with which money related exchanges and misrepresentation can happen Increased dependence on PCs, consequently decreasing headcount and possibly affecting the isolation of obligations Made it hard to distinguish extortion and manhandle because of dependence on PCs Led numerous specialists to connect expanded dependence on PCs with extra extortion cost According to AMSEC International

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What Do the Surveys Say? 80% of respondents felt that a noteworthy occurrence of extortion could happen at their organization* 87% of respondents thought the rate of misrepresentation would increment or, best case scenario stay static throughout the following five years* 67% of Certified Fraud Examiner (CFE) respondents think extortion is more awful today than five years ago** According to Ernst & Young Fraud Survey* and The Association of Certified Fraud Examiners**

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The Reality of Fraud In the most recent 12 months more than 66% of respondents had endured an extortion 82% of all cheats were conferred by representatives, about 25% had been with the association for more than 10 years Fraud is not constrained by nation or industry. 23 out of the 30 ventures studied experienced misfortunes in overabundance of $1,000,000 According to Ernst & Young Fraud Survey

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Examples of Crime Losses Milwaukee Journal Sentinal , 12/21/2009 Controller Embezzles $21 Million more than 3 Years from Technology Firm Des Moines Register , 10/21/2009: Clive man captured for misrepresentation after claimed $1M misappropriation ComputerWorld , 4/18/00: HSBC: Data burglary occurrence more extensive than first suspected

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Examples of Crime Losses Wall Street Journal, 9/20/00 Starbucks Accuses Employee, Husband Of Embezzling $3.7 Million From Firm The Courier-Journal, 5/20/00: University of Kentucky Employee Admits to Embezzling More Than $1.5 Million

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Examples of Crime Losses The Associated Press, 6/1200 Executive Pleads Guilty to $6.9 Million Wire Transfer Fraud The Associated Press , 6/8/00: Consolidation of Payroll Reveals $7 Million Fraud at Prominent Large Manhattan Law Firm

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What Can Companies Do? Have senior administration set the tone Implement a composed code of morals strategy Have workers sign an irreconcilable situation explanation Actively bolster the inside review prepare Create an inward hotline for detailing extortion and mishandle Monitor administration and proprietors through reviews and interior hotline leads

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What Can Companies Do? Finish reference and historical verifications Establish composed rules for: Verifying the presence of new merchants When aggressive offers are required Verification that administrations were given before installment Audit the execution of corporate strategies and rules

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Investigating Employee Theft and Fraud Becky S. Knutson Davis Brown Law Firm

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Paperwork and Procedures Initial procedures. For any treatment of assets - money, check, credit, electronic exchanges, or different types of assets - no less than two individuals ought to routinely audit and check the records. Surveys ought to be directed autonomously. Outside commentators, for example, inspectors, ought to audit and check records occasionally. Representative nonappearances and takeoffs. For some reasons, workers ought to take excursion and leave time. This is a decent time to have another worker perform stores capacities, and check for anomalies and consistence with guidelines. At the point when a representative withdraws, a check or review ought to be done of reserve taking care of matters, and additionally whatever other capacities performed. Ordinarily, issues - whether think or unplanned - are found after a worker leaves. Provoke survey, particularly while a withdrawing worker is still present, may empower a business to recognize issues. Record checks. Value-based records, reports, inward bookkeeping and comparable records ought to be given and looked into both inside and remotely. Such records ought to be given to administration routinely, for example, in month to month accounting reports, salary and cost proclamations, departmental spending reports and comparative reports. Electronic and PC records. Businesses ought to inform workers in their arrangements that anything on an organization PC, and anything getting through any electronic correspondence - PC, hand held gadget, PDA, or some other gear or record - is liable to observing. Forbid wrong substance and informing, and check for transmissions or capacity of boss data to or at another source.

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When Something Seems Wrong If something appears to be wrong - income not as anticipated, bills unpaid, griping loan bosses or customers, workers being overprotective of electronic records or PCs, strange messages out of a framework - the time has come to begin checking. Try not to stop with just a single question. Investigate the records sufficiently far to figure out whether there is just a single issue, or if something more is at issue. Make inquiries of all included. Have a man outside of the customary procedure contact clients or customers, sellers, financiers and comparative people to decide the grievances and their history. Have a man outside of the customary levels of leadership converse with workers. Know about your rivals and the prospect for workers leaving, and leaving with records or customers. Get the records. Look for records - correspondence, explanations, electronic records, solicitations, and different records that ought to have been produced or may have been created. Look in spots where you won't not hope to discover records. Approach outside hotspots for duplicates of their records. Great recordkeeping, social occasion and association is fundamental to demonstrating a chain or example of occasions, and following assets. The more that a business can locate, the more exact a definitive discoveries can be. All records may not be accessible instantly. Now and again, singular worker records, for example, bank records or Mastercard records, will be required. This may need the support of outside sources, similar to law authorization.

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Identifying the Cause of the Problem If a worker is suspected - keep that individual out of the examination and record look. Contingent upon the way of the issue, and level of verification, reassignment or suspension might be fitting. Counsel your outside hotspots for investigative offer assistance. Lawyers, bookkeepers, data innovation or other people who are free, and can help with legitimate or specialized exhortation are fundamental. Figure out if the issue is one of technique, misstep or think activity. This might be an extremely subjective assurance, and care ought to be taken to be exact in making any conclusions.

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Dealing With Employees Keep all examinations secret . Similarly as with any representative matter that may bring about train, keep data bound to those people with a need to know. Survey representative disciplinary arrangements. Most ought to regard robbery and extortion as offenses bringing about quick end. As charges of ponder deceptive nature, instead of wasteful, incapable or inept execution, are intense, be sure of the certainties before facing the representative or revealing contemptibility. Take after great examination methodology. Be clear, careful, and finish. Give a blamed representative the chance to clarify. Talk with all people who may have applicable data. Security . Verify that every single pertinent record are safeguarded. They might be required for unemployment remuneration hearings or future claims. Keep suspected and denounced representatives from access to electronic or different records that might be taken, adjusted or crushed .

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Reporting When the issue has been recognized, figure out who must be advised. For burglary issues, or fake claims, the business' protection transporter ought to be told quickly. Most protection strategies require that cases be made amid the arrangement time frame keeping in mind the end goal to be secured, so instant activity is fundamental. Contingent upon the way of the issue, law requirement experts might be informed.