Kpmg the Ultimate Fraudster Audits Ffb, Financial Statements Fy2010
Sketching the mental framework and physical appearance of a fraudster
description
Transcript of Sketching the mental framework and physical appearance of a fraudster
![Page 1: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/1.jpg)
1http://totallyunrelatedrandomanddebatable.blogspot.com/
DELVING IN THE DEVIL’S MINDSketching the mental framework and physical appearance of a fraudster.
Kenny Ong
![Page 2: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/2.jpg)
2http://totallyunrelatedrandomanddebatable.blogspot.com/
Business today…
13th April 2009
•Two Domino’s employees
•YouTube
•Apology from Domino’s after 48 hours
•1 million hits
•Twitter: questions on silence
•LinkedIn: suggestions by users in forum
BusinessWeek, May 4, 2009
![Page 3: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/3.jpg)
3http://totallyunrelatedrandomanddebatable.blogspot.com/
€50 BillionWorldwide sales in
2011
2 billion peopleUse Unilever’s products
Each day worldwide
400 BrandsSold in 180 countries
167,000 employeesWork for Unilever
130 YEARS & STILL GROWING
![Page 4: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/4.jpg)
4http://totallyunrelatedrandomanddebatable.blogspot.com/
![Page 5: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/5.jpg)
5http://totallyunrelatedrandomanddebatable.blogspot.com/
Contents:
A. The Criminal Mind
B. Triggers
C. Minimizing Incidents
D. Future Fraud
![Page 6: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/6.jpg)
When and how do you decide?
![Page 7: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/7.jpg)
7http://totallyunrelatedrandomanddebatable.blogspot.com/
How many of us drive with the ultimate intention of breaking the
speed limit?
![Page 8: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/8.jpg)
8http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud
1. Character
Good
Bad
2. Intelligence
Smart
Not Smart
3. Situation
Open Closed
4. Catchability
Easy Hard
![Page 9: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/9.jpg)
9http://totallyunrelatedrandomanddebatable.blogspot.com/
The Criminal Mind
Profile of Potential Fraudster
![Page 10: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/10.jpg)
10http://totallyunrelatedrandomanddebatable.blogspot.com/
“Everyone has a price”
![Page 11: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/11.jpg)
11http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud
1. Character
2. Intelligence
Good
Bad
Smart
Not Smart
![Page 12: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/12.jpg)
12http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud
1. Character
Good
Bad
1. Family2. Education3. Social4. Movies5. Books6. Religion7. Record8. Attribution
![Page 13: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/13.jpg)
13http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud
2. Intelligence
Smart
Not Smart
1. Education level
2. Talent3. Analytical4. Systems5. Ask
questions6. Years of
Service
![Page 14: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/14.jpg)
14http://totallyunrelatedrandomanddebatable.blogspot.com/
How would you profile him?
![Page 15: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/15.jpg)
15http://totallyunrelatedrandomanddebatable.blogspot.com/
How would you have profiled him?
![Page 16: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/16.jpg)
16http://totallyunrelatedrandomanddebatable.blogspot.com/
GENERAL FRAUDSTER PROFILE
• Profile: 68.6% – no prior criminal record, – Aged 26-40 years old, – Annual income between RM15k-RM30k, – 2-5 yrs of service
• Struggling financially or large purchases – difficult time in their lives– gets out of hand
• Merger and acquisition or reorganization activity. – ‘I don’t have a career here’ attitude.
![Page 17: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/17.jpg)
17http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. "Everyone does it."
2. "It was small potatoes."
3. "They had it coming." – the revenge syndrome
4. "I had it coming." – the equity syndrome
![Page 18: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/18.jpg)
18http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. "Everyone does it.“1. Indiscipline employees commonly organize
themselves in cliques or clusters - the inner circle
2. Rarely does a repeat offender not involve an accomplice or at least a confidant.
3. “If my superior can come to work late and still be promoted, it means I can steal RM10. Both are indiscipline cases anyway.”
![Page 19: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/19.jpg)
19http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. “It was small potatoes.“1. “What's a RM30 stolen calculator to a company that
makes millions each year or to a boss who drives a Mercedes?
2. “Zero Tolerance Policy” for identified disciplinary cases in any form or for any amount?
![Page 20: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/20.jpg)
20http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. "They had it coming." – the revenge syndrome1. “The accounts department cuts down my lead time
to submit my claims yet take 60 days to compensate my claims. So I purposely come late to work to compensate.”
2. “The company keeps cutting down our benefits and allowances but keep asking us to produce more. So I compensate by being calculative with the company even for one sen.”
![Page 21: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/21.jpg)
21http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. "I had it coming." – the equity syndrome1. Under-compensated or unrecognized -> self-
devised "bonus" plan.
2. Employee has been turned down for a raise or promotion; after a company-wide salary freeze has been established; during periods of company turmoil (restructuring, takeover, new management, etc.).
![Page 22: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/22.jpg)
22http://totallyunrelatedrandomanddebatable.blogspot.com/
Reminder: Very few people join an organization with the objective to
commit fraud.
![Page 23: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/23.jpg)
23http://totallyunrelatedrandomanddebatable.blogspot.com/
Triggers
Conditions for Fraud
![Page 24: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/24.jpg)
24http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud3. Situation4. Catchability
Open ClosedEasy Hard
![Page 25: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/25.jpg)
25http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud3. Situation
Open Closed
1. Self/Family2. Straight road3. Conflicts4. Bad Bosses5. M&A6. Org Character7. Controls8. No changes9. Power
Imbalance10.Amount, $$11.Org Systems
![Page 26: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/26.jpg)
26http://totallyunrelatedrandomanddebatable.blogspot.com/
Fraud-O-Scope™
Fraud4. Catchability
Easy Hard
1. Check & Balance
2. Oversight3. Automation4. Burden of
Proof5. Line of Sight
![Page 27: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/27.jpg)
27http://totallyunrelatedrandomanddebatable.blogspot.com/
Who is most likely to commit Fraud?
Excellent
Very Good
Average
Not Good
Commit Suicide
![Page 28: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/28.jpg)
28http://totallyunrelatedrandomanddebatable.blogspot.com/
The Four Desperates
1. Desperate Competition
2. Desperate Consumer
3. Desperate Achievers
4. Desperate Changes
![Page 29: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/29.jpg)
29http://totallyunrelatedrandomanddebatable.blogspot.com/
Dangers of Direct Incentives
1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment contract, 9. rebellion from non-incentivised staff, 10. end up incentivising everyone for everything?,
![Page 30: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/30.jpg)
30http://totallyunrelatedrandomanddebatable.blogspot.com/
Curse of the Bell Curve
‘A’ Staff
‘B’ Staff
‘D’ Staff
‘E’ Staff
‘C’ Staff
![Page 31: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/31.jpg)
31http://totallyunrelatedrandomanddebatable.blogspot.com/
Biggest Issue in Financial Product Innovation?
![Page 32: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/32.jpg)
32http://totallyunrelatedrandomanddebatable.blogspot.com/
Power Imbalance
1. Propose
2. Approve
3. Execute
4. Monitor
![Page 33: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/33.jpg)
33http://totallyunrelatedrandomanddebatable.blogspot.com/
Possible General Root Causes for Fraud Mindset
1. "Everyone does it."
2. "It was small potatoes."
3. "They had it coming." – the revenge syndrome
4. "I had it coming." – the equity syndrome
![Page 34: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/34.jpg)
34http://totallyunrelatedrandomanddebatable.blogspot.com/
Minimizing Incidents
Prevent. Deter. Kill.
![Page 35: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/35.jpg)
35http://totallyunrelatedrandomanddebatable.blogspot.com/
"Fear not the 10,000 moves practiced once. Fear the one move
practiced 10,000 times"Chandni Chow to China
![Page 36: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/36.jpg)
36http://totallyunrelatedrandomanddebatable.blogspot.com/
GENERAL STRATEGIES AND POLICIES
• B1. Classification of Behaviors– B1.1 Disrespectful Workplace Behavior
– B1.2 Progressive Discipline
– B1.3 Zero Tolerance
![Page 37: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/37.jpg)
37http://totallyunrelatedrandomanddebatable.blogspot.com/
GENERAL STRATEGIES AND POLICIES
• B2. Recruitment and Selection• B3. Exit• B4. Employee Assistance Program• B5. Anonymous Hotline• B6. Communication and Feedback• B7. Training and Education• B8. Formal Complaint and Grievance
![Page 38: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/38.jpg)
38http://totallyunrelatedrandomanddebatable.blogspot.com/
GENERAL STRATEGIES AND POLICIES
• B9 Leadership– 1. Leaders act as role models whether
consciously or unconsciously
– 2. Leaders determine the working environment
![Page 39: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/39.jpg)
39http://totallyunrelatedrandomanddebatable.blogspot.com/
GENERAL STRATEGIES AND POLICIES
• B9 Leadership– 1. Educate– 2. Involve– 3. Teach – 4. Eliminate
![Page 40: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/40.jpg)
40http://totallyunrelatedrandomanddebatable.blogspot.com/
SPECIFIC STRATEGIES AND POLICIES
• C1. Theft and Fraud – Root Causes– Profile: 68.6% - no prior criminal record,
Aged 26-40 years old, Annual income between RM15k-RM30k, 2-5 yrs of service
– Struggling financially or large purchases • difficult time in their lives• gets out of hand
– Merger and acquisition or reorganization activity.
• ‘I don’t have a career here’ attitude.
![Page 41: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/41.jpg)
41http://totallyunrelatedrandomanddebatable.blogspot.com/
SPECIFIC STRATEGIES AND POLICIES
• C1. Theft and Fraud - Prevention– Background checks– Duties segregated– Anonymous hotline – Share the wealth– Communicate successes– Make a big noise when discovered– Video surveillance equipment
![Page 42: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/42.jpg)
42http://totallyunrelatedrandomanddebatable.blogspot.com/
SPECIFIC STRATEGIES AND POLICIES
• C2. Violation of confidentiality or security of company information - Prevention– a. ICT Security Policies*– b. Ownership of Intellectual Property– c. Inside Information and Trading of company
shares
![Page 43: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/43.jpg)
43http://totallyunrelatedrandomanddebatable.blogspot.com/
*ICT Security and Fraud (1/3)
Biggest ICT risks
1. Security – All matters relating to the ‘coming-in’ and ‘going-out’ of all systems and information
2. Backup - including Storage of critical and non-critical information and Disaster Recovery
3. Continuity – Availability of systems and information at a 24x7x365 standard
![Page 44: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/44.jpg)
44http://totallyunrelatedrandomanddebatable.blogspot.com/
*ICT Security and Fraud (2/3)
The following are threats faced by organizations from ‘inside’ the company:
• Current Employees, • On-site Contractors, • Former Employees, • Vendors/Suppliers, • Strategic Partners, and • OEMs
![Page 45: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/45.jpg)
45http://totallyunrelatedrandomanddebatable.blogspot.com/
“Asking the people responsible for preventing a problem if there is a problem is like
delivering lettuce by rabbit"
Norman Augustine
CEO & Chairman, Lockheed Martin
![Page 46: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/46.jpg)
46http://totallyunrelatedrandomanddebatable.blogspot.com/
"He has 20 years experience: 1 year of bad experience
repeated 20 times"
![Page 47: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/47.jpg)
47http://totallyunrelatedrandomanddebatable.blogspot.com/
Future Fraud
We all need help
![Page 48: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/48.jpg)
![Page 49: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/49.jpg)
49http://totallyunrelatedrandomanddebatable.blogspot.com/
Finance Today…
$19.90
![Page 50: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/50.jpg)
50http://totallyunrelatedrandomanddebatable.blogspot.com/
New Fraud Opportunities
Change in Business Models: InexperiencedeCommercePartnersFranchiseDownstream/UpstreamM&A Targets
![Page 51: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/51.jpg)
51http://totallyunrelatedrandomanddebatable.blogspot.com/
eCommerce Frauds
AccountTakeover
Pharming
Counterfeit Advances
Phishing
Application
Lost/Stolen Credit Cards
eCom Frauds?
![Page 52: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/52.jpg)
52http://totallyunrelatedrandomanddebatable.blogspot.com/
End Points
![Page 53: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/53.jpg)
53http://totallyunrelatedrandomanddebatable.blogspot.com/
Mistakes and Lessons Learned
1. Price to Pay for Fraud/Risk Mitigation => Business Flexibility
2. Control vs. Growth
3. Rules vs. Humanity/Motivation
4. Not tackling the root cause i.e. Motive + Opportunity i.e. Humans
5. Focus on F&A vs. Sales/Marketing => who has control?
6. Relationship Role vs. Enforcement Role
![Page 54: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/54.jpg)
54http://totallyunrelatedrandomanddebatable.blogspot.com/
In the end…
• Great Wall of China– humans are the weakest link– bad treatment of staff will lead to weak link i.e.
easier to bribe, easier to con, etc; – bad treatment examples: insulting, lose face,
broken promises, no dignity, public criticism, restructure without communication
![Page 55: Sketching the mental framework and physical appearance of a fraudster](https://reader036.fdocuments.net/reader036/viewer/2022062702/554941f7b4c905194d8b5320/html5/thumbnails/55.jpg)
Thank You.
soft copy of slides: http://totallyunrelatedrandomanddebatable.
blogspot.com/