fraud the venus fly trap of - cdn.ymaws.com

3/10/2014

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Fraud: The Venus Fly

Trap of Unclaimed

Property

Marion Acord – Ryan, LLC

Sara Withrow– WVSTO

© 2014 All Rights Reserved

UPPO Presentation DisclaimerUse of the Unclaimed Property Professionals Organization,

Inc., (UPPO) name or copyrighted materials in this

presentation does not constitute an endorsement by UPPO of

a member, vendor, product or service. The content

represents the opinions of the author and not necessarily

those of UPPO. This information is not intended as legal

advice and should not be used to replace the advice of legal

counsel.


UPPO AntitrustUPPO has a policy of strict compliance with federal antitrust laws.

UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or activities that in any way tend to raise, lower or stabilize prices or fees. Members and/or attendees can discuss pricing models, methods, systems, and applications, as well as certain cost matters that do not lead to an agreement or consensus on prices or fees to be charged. However, there can be no discussion as to what constitutes a reasonable, fair or appropriate price or fee to charge for any service or product.

Information may be presented with regard to historical pricing activities so long as such information is general in nature and does not include data on current prices or fees being charged in any trade area. Any discussion of current or future prices, fees, discounting, and other terms and conditions of sale, which may lead to an agreement or consensus on prices or fees to be charged, is strictly prohibited.


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CPE CreditCPE credit is available at this conference.

However, NASBA rules require proof you attended the

sessions. For UPPO to provide verification of

attendance, you MUST be scanned in AND out of

each session to be eligible to receive credit(s).

Please see the room monitor(s) at the back of room to

have your name badge scanned.


What is fraud?

• Intentional act or omission designed to deceive,

resulting in gain to the fraudster and loss to the

victim.


Sarbanes-Oxley Section 406The SEC describes a “code of ethics” as written standards that are

reasonably designed to deter wrongdoing and to promote:

• Honest and ethical conduct, including the ethical handling

of actual or apparent conflicts of interest between personal and

professional relationships

• Full, fair, accurate, timely, and understandable disclosure in reports

and documents filed with the SEC and in other public

communications

• Compliance with applicable governmental laws, rules and

regulations

• Prompt internal reporting of code violations to appropriate

persons identified in the code

• Accountability for adherence to the code.


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The Fraud Triangle

Rationalization

Need/Pressure Opportunity(Motivation)


Most Effective Strategies

for Preventing Fraud:1. Segregation of Duties

2. Forced Vacation

3. Tone at the top

4. Employee training

5. Management training

6. Anonymous reporting


Most Effective Strategies

for Preventing Fraud:7. Random external audits

8. Cultivate relationships

9. Watch for red flags

10. Open Communications

11. No retaliation policy

12. Zero tolerance culture


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Top Ten Organizational

Characteristics:1. Placing too much trust in key employees

2. Lack of proper procedures for authorization of

transactions

3. Inadequate disclosures of personal investments and

income

4. No separation of authorization of transactions from

the custody of related assets

5. Lack of independent checks on performance


Top Ten Organizational

Characteristics:6. Inadequate attention to detail

7. No separation of custody of assets from the account

of assets

8. No separation of duties between accounting

functions

9. Lack of clear lines of authority and responsibility

10. Lack of frequent review by internal audit


Principal Categories of Fraud (white-collar crime)

• Misrepresentation of material facts

• Concealment of material facts

• Bribery

• Extortion

• Conflict of interest

• Forgery

• Theft of money or property

• Theft of trade secrets

• Breach of fiduciary duty


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Fraud Awareness


Common Fraud Schemes• Telemarketing

• Impersonation/Identify thief

• Advance fee scheme

• Health insurance fraud

• Letter of credit fraud

• Prime bank note fraud

• Mortgage loan fraud

• Ponzi scheme


Common Fraud Schemes

• Internet fraud

• Internet auction fraud

• Non-delivery fraud

• Credit card fraud

• Investment fraud

• Business fraud

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Examples of Unclaimed Fraud Scams

• Two former New Jersey state clerks created and

approved payment of fraudulent claims for

Unclaimed Property

• Oklahoma internal auditor forges documents to

obtain unclaimed property

• Wisconsin Lawyer pretends to represent foreclosed

homeowners who had never claimed surplus funds


Examples of Unclaimed Fraud Scams

• Manager at Bank of New York funnels unclaimed

funds to a Hindu temple in Schenectady

• Houston woman steals identities and unclaimed

funds associated with them

• Florida man falsely claims almost a million dollars in

unclaimed property

• Unclaimed Property email scams


Causes of Fraud

• Fraud is a social phenomenon, not an account

problem. No matter how vigilant, no

company/business is 100 safe from fraud.

• Erosion of character; often society emphasizes the

ends (making money) over the means (ethics)


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Safeguard Against Fraud

• The best defense for any organization is knowledge

– Understanding organization’s structure and

culture.

– Understanding internal controls and internal audit

function


Internal Audit Updates• Create a team and a plan.

• Use a building-block approach

• Build off what you’re currently doing

• Pay attention to the points of focus

• Focus on the role of IT

• Look for added value

• Make the switch to updated standards

• Use Illustrative Tools & Internal Control Over External Financial Reporting: A Compendium of Approaches and Example documents that accompany the framework


Function of Internal Controls

• Internal controls developed to prevent fraud:

– Physical control over vulnerable assets

– Segregation of duties

– Proper execution of transactions

– Appropriate documentation of transactions

– Access restrictions


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Code of conduct

• Management sets the tone.

• Treasurer’s UP office demonstrates exceptional

enforcement of code of conduct.

• IT requires that employees agree to abide by code of

conduct.

• Further reinforced by IT safeguards.


Risk Assessment Team

• Create a committee composed of individuals

throughout the organization

• Senior Management

• Business Unit Leaders

• Financial/Accounting personnel

• Legal & compliance officers

• Internal audit staff


Preventing External Fraud

• Verifying information

– Investigative database search

– Industry groups

– Partner with other government agencies


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Fraud and Identity theftTwo distinct disadvantages a business that thrives on-line has in detecting fraud:

• Limited visible contact with claimants. Body language is key to detecting a person’s psychology and state of mind.

• Communications are made up of

5-7 % verbal

30-35% vocal (tone inflection and other sounds)

55-65% nonverbal


Managing the Business Risk of Fraud:

A Practical Guide • Strong senior management support for enterprise

risk management

• Candid conversations about risk among senior

managers and board members

• Simplicity at the outset – initially use qualitative

measures, not complex quantitative measures

• Start by creating risk awareness and probing for

emerging risks.

• www.aicpa.org/© 2014 All Rights Reserved

• Build on tools that are already in place

• Value can be created and cost minimized when you connect existing

• “Silos” of risk management (for example, health and safety, insurance, and compliance functions) to leverage current efforts and build an enterprise-wide view of risks and approach to risk management

• Plan for your ERM process to evolve over time

• ERM is not a project or a fad, but will evolve over time as your organization buys into the process and becomes more sophisticated in its approach to managing risks.


Managing the Business Risk of Fraud:

A Practical Guide

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Questions

V. Marion Acord

Director, Abandoned and

Unclaimed Property

Ryan, LLC

404.365.0922 Office

404.849.1800 Mobile

404.365.0129 Facsimile

[email protected]

Sara E. Withrow

Receipts Manager Unclaimed

Property

WV State Treasurer's Office

304.340.1574 Office

304.340.1502 Facsimile

[email protected]


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