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by:Peter GossDirector – Forensic Services
*connectedthinking
Corruption and Fraud Trends:Including 10-steps to preventing fraud*
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Slide 2PricewaterhouseCoopers17 February 2006
Key elements
Control Environment
Fraud Risk Assessment
Control activities
Information and Communication
Investigation
Monitoring
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The trend?
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Slide 4PricewaterhouseCoopers17 February 2006
Companies reporting fraud worldwide
71
39
38
41
37
34
37
83
39
41
52
47
42
45
0 20 40 60 80 100
South Africa
Asia-Pacific
South & Central America
North America
Central & Eastern Europe
Western Europe
Global
% companies
20052003
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Slide 5PricewaterhouseCoopers17 February 2006
Key elements
1. Control Environment
• Code of Ethics and Business Conduct- Conflicts of interest- Acceptance and offering of business courtesies- Private work
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Slide 6PricewaterhouseCoopers17 February 2006
Key elements
1. Control Environment
• Anti-Fraud Policy• Whistle Blowing Policy• Fraud Response Plan
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Slide 7PricewaterhouseCoopers17 February 2006
Key elements
2. Control Environment
• Systems, Policies and Procedures (HR and Finance)• Physical and information security measures
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Slide 8PricewaterhouseCoopers17 February 2006
Focus on employees
3. Control Environment• Vetting and security clearance screening• Induction• Compulsory probationary periods• Performance management and appraisal• Screening prior to promotion• Reviews relating to employees in sensitive posts, including
security grading of sensitive posts• Disciplinary Code and Procedures• Exit procedures for employees leaving service
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Fraudsters profile?
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Slide 10PricewaterhouseCoopers17 February 2006
Fraudster profiles
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Relationship to the entity?
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Slide 12PricewaterhouseCoopers17 February 2006
Fraudster’s relation to the company
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Slide 13PricewaterhouseCoopers17 February 2006
Focus on Employees
4. Control Environment
• Management accountability
• Assessment of risks identified in manager's area
• Prompt and in-depth follow up on audit findings
• Assessment of disciplinary actions
• Corrective action against managers
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Slide 14PricewaterhouseCoopers17 February 2006
Key elements
5. Fraud Risk Assessment
• Enterprise wide• Significant BU Level• Significant Process/Account
level
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Types of fraud?
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Slide 16PricewaterhouseCoopers17 February 2006
Incidents of fraud - reported by companies that experienced fraud
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Slide 17PricewaterhouseCoopers17 February 2006
The public sector - trends
• Procurement and tender fraud• Conflicts of interest• Contracts management – allowing scope creep• Computer-aided fraud – in accounts payable and
fraudulent access to financial systems• Creditors fraud – over-invoicing, fictitious invoicing• Asset misappropriation• Various types of petty fraud – personnel claims, and
resource abuse, etc
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Slide 18PricewaterhouseCoopers17 February 2006
Key elements
6. Control activities
• Anti-fraud controls• Basic internal controls• Audits
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Slide 19PricewaterhouseCoopers17 February 2006
Key elements
7. Information and communication
• Training and education
• Code of ethics and business conduct
• Anti-Fraud Strategy, Policy and Response Plan
• Fraud risks and red flags – general and process specific
• Allegations investigated
• Publication of sanctions
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Impact on organisation?
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Slide 21PricewaterhouseCoopers17 February 2006
Types of collateral damage experienced
54
42
43
56
54
33
0 10 20 30 40 50 60
Staff morale
Business relations
Brand reputation
Figure total more than 100% as respondents were able to provide multiple answers
South AfricaGlobal
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Slide 22PricewaterhouseCoopers17 February 2006
Key elements
8. Investigation
• Investigation methodology
• Data mining
• Fraud detection reviews (high risk areas)
• Vetting procedures for suppliers and trading partners
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Detection?
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Slide 24PricewaterhouseCoopers17 February 2006
Means by which fraud was originally detected
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Slide 25PricewaterhouseCoopers17 February 2006
Key elements
9. Investigation
• Comprehensive resolution
- Disciplinary Action
- Initiating recoveries
- Criminal prosecution
- Alternative dispute resolution – e.g. prohibition/restrictions
- Improving controls
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Slide 26PricewaterhouseCoopers17 February 2006
Key elements
10. Monitoring and implementation
• Involvement of all relevant stakeholders in development and implementation
• Consolidation of fraud statistics
• Ongoing risk identification and remediation
• Documented strategy (with schedule of allocated tasks)
• Ongoing maintenance and review
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Re-action?
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Slide 28PricewaterhouseCoopers17 February 2006
Corporate reaction on detecting fraud
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Slide 29PricewaterhouseCoopers17 February 2006
Companies that have taken out insurance to cover for economic losses
South Africa: % respondents who mentioned serious offences
19
81
NoYes
Global: % respondents who mentioned serious offences
5149 NoYes
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Slide 30PricewaterhouseCoopers17 February 2006
How much of the amount lost has been recovered via insurance
9
7
84
22
22
56
0 20 40 60 80 100
61 up to 100%
Up to 60%
None
% respondents to the serious offences
South AfricaGlobal
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Recovery of losses?
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Slide 32PricewaterhouseCoopers17 February 2006
How much of the amount lost has been recovered from perpetrator
12
16
72
13
22
66
0 20 40 60 80
61 up to 100%
Up to 60%
None
% respondents to the serious offences
South AfricaGlobal
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Sentencing?
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Slide 34PricewaterhouseCoopers17 February 2006
Was the perpetrator sentenced
South Africa Global
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An idea on implementing your prevention programme?
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Slide 36PricewaterhouseCoopers17 February 2006
Approach to implementation
Implementation Including: Creating
awareness, training and communication
Enforcement
Focus on other stakeholders
Focus on the employee including management
Organisational focus
Implementation Including: Creating
awareness, training and communication
Enforcement
Focus on other stakeholders
Focus on the employee including management
Organisational focus
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Slide 37PricewaterhouseCoopers17 February 2006
CONTACT DETAILS
PETER GOSS
DIRECTOR
FORENSIC SERVICES
PRICEWATERHOUSECOOPERS
TEL: 012 429 0331
CELL: 082 652 0024
E-MAIL: [email protected]
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Slide 38PricewaterhouseCoopers17 February 2006
Questions?