By CA. Gopal Singh Negi - CIT Portal, ICAIisa.icai.org/ForensicMaterial/Fraud Prevention.pdf · By...

Fraud Prevention

By CA. Gopal Singh Negi

Email: [email protected]

11/05/2015 CA. Gopal Singh Negi 1

11/05/2015 CA. Gopal Singh Negi

Lets talk a little more on fraud…….

2

Correct parking

slip

Let’s check –


Let’s check –

1.Details :address

2.Authorized By

3

Forge slip

Missing elements


Lets discuss : How to prevent it

Its not matter of parking Fee, Rs 20/40/50

its your car : worth X Amt

Use in Anti national Activity

With this………

lets start the session………

Hope fraud is clear to all with live example : Car

Parking.

Q1. In this class , How many of us recognize fraud exist ? Lets have


Q1. In this class , How many of us recognize fraud exist ? Lets have

poll.

•Yes

•No

•May be

5

If opinion of House is :: Yes then let examine

How People React :

Q. 1. Our people would not commit fraud

Ans: you cannot vouch for all of your employees

Q. 2. Fraud could not happen to us – we are a stable organization.

Ans: - fraud risks are everywhere


Q3 . We would know if fraud occurred – we watch vulnerable areas.”

Ans: fraud prevention activities often are not aligned with risks that matter

Q4. If fraud occurred, it would be discovered quickly.”

Ans : individual fraud detection mechanisms have limitations

Q2. How many of us are aware about different type of fraud ?

Lets have poll !!

•Yes

•No

•May be


For Fraud Prevention , We must Aware about different types of

Frauds

Take away of Session : (ROI ): ----- Save Guard Against Frauds &

Pre vention

Let’s divide fraud cases

Corporate / Bank etc Normal people 125 Cores of Indian

* Data generally not available

Reason :-

*Data provided by ACFE: 7% of

Industry Turnover (ACFE 2008

Report)

* Publically reveal cases


Less or no FIR

Court procedure : How long it

takes :

What about small and

Unrevealed case ??

•Prestige /Goodwill issues

•Legal Formalities

•Time Consuming

8

Reason of Fraud ?

Human behavior : Victim Side

Greed Fear

These emotions are not new in human

history

Check Ramayana !! Mahabharata !!

Over

Trust


fraud Triangle Hope this Covered earlier !

Check Ramayana !! Mahabharata !!

•Greed

•Fear

•Over Trust

9

Fraudster

Now Question Comes in Mind How to save !!

Step 1 – Awareness: What happening in our Society

Modus operndi (Way of doing)

Step -2 – Prevention from Such Fraud in

case of Company / Public

1st : Cases in

Public domain

2nd: How


case of Company / Public

Public Corporate / Big Houses

1. Code of Conduct for Employee

2. Expert to help

3. Case law

4. Governing Body

5. Whistle blower Policy

1. Rules /Act

2. Govt Body

Lets see, How effective are

??

10

2 : How

to Prevent

3rd : Examine -

current Process

1st Case : Lets discuss Insurance : Car / Home / Office /Life


PRIVATE CAR PACKAGE POLICY PREMIUM CALCULATOR

Date: 09-May-15

Insured Name: Mr. Gopal

Vehicle & Coverage Details

COVERAGE Vehicle Details

IDV for Vehicle 573300 Car Make & Model Corolla

IDV for Non - Electrical Accessories

IDV for Electrical/Electronic Accessories Engine Cubic Capacity

Total IDV 573300.00

Vehicle fitted with Anti Theft Device Yes PA Cover to Paid Driver Yes

TPPD cover above 6,000/- Limit Yes

Wider Legal Liability to Driver Yes

Voluntary Deductible (in Rupees) No

Premium Computation Table

Own Damage Premium Rupees Liability Premium Rupees

- Vehicle Basic Premium 19721.52 - Liability Premium 2500.00

- Non Electrical Accessories Premium - Extended TPPD Premium

0.00

How we Take

insurance

for ourselves

and

Company

How many of us


- Non Electrical Accessories Premium - Extended TPPD Premium

- Electrical Accessories Premium 0.00 - Bi-Fuel Unit Liability Premium

- Bi-Fuel Unit Premium 0.00

- Agent Discount (60%) 11832.91

- Anti Theft Discount

0.00

- Inbuilt PA Cover to Owner-Driver

100.00

- Voluntary Deductible Discount - LL to Employees

- AAI Discount-0.00

- PA Premium to Paid Driver 25.00

- No Claim Bonus(0%)

0.00

- PA Premium to Unnamed Occupants

Gross OD Premium 7,888.61 Total Liability Premium (B)

2,625.00

Total OD Premium (A) 7,888.61 Total Premium (C) = (A+B) 10,514

Service Tax @ 12.36% (incl Edu. Cess)

1,299

Total Amount Payable 11,813

12

How many of us

examine Quote

/

Cover Note ?

Prevention

How to Prevent

List of case of Fake Cover

Note


How to Prevent

Property Fraud : Corporate & Public Modus Operandi:

1.Hacking of Delhi

Revenue Dept

website

2.Forge Papers


Prevention :

1. Validated

copy from

Department

in written.

2. Get vetted

papers

Learning for All : GREED

Property Fraud : Corporate & Public

Again same case in different name

and Location

Modus Operandi:

1. Making duplicate website

2.Forge Papers


Prevention: Have we used

earlier learning

2.Forge Papers

GREED

Employment Frauds ….

Prevention Techniques

1. Check offer letter

2. Mail id

3. Get Validate


Victim :

1. Public

2. Company (Govt or Private)

Like Railways / Big Fortune

Face book Fraud : ----

Greed

Prevention: Please check ,

other person is genuine

How many of

us take Bank,


us take Bank,

RBI, IRDA mail

/SMS seriously

Learning from

here is:

1.MOA / AOA

2. Common Seal

3.Deed

4.Important

Documents

This can't be detected

in general


Documents

5.Letter Heads

Where and How we

KEEP !!

Lets assume its your client case :

Q1. How u will check if client doest share or

Q2 Client himself not aware about it

Even Travel is not safe …….

Greed

1. Cheap Travel

2. High inventive


Prevention :

1.No free lunch exit in this

world.

2. How any one can sell,

below actual cost

Greed : Short cut

International standard &

Rule not so easy to

influence.


Prevention : check

before action

RBI Plan ……

In Actual

Update & Revalidate

Policy faster then

criminal

Learning


This Learning can be used in

Corporate…. Against Frauds

Bank Property Frauds

Loan on Commission:

Real Fact


Dena bank : FD Scam

Q. For House

Do we really learn from

such cases ?

Charity Frauds: Do Charity But check.

Are we helping needy or fraudster ??



Then What is wrong Here ?????

Stories : let see (AAP BITI)

How it happen !!

Fraud Prevention ::-

1. Case study : Restaurant / Shopping mall Swapping

Skimming

2. Email (bank) : phishing attack

3. https// vs. http

4. Website

What about loss to Seller :: let’s discuss .. (Online Portal )

How Credit Card Fraud affect –

customer and Company


What about loss to Seller :: let’s discuss .. (Online Portal )

Kingfisher / Shoppers Stop.

high alert : Country

1. Belarus 2. Russia 3. Pakistan 4.Nigeria 5.Egypt 6.ColombiaRed Flag Analysis: Fraud Prevention method: ----

1. High Value Overseas Transaction2. Deliveries are picked up by 3rd Parties3.Next day delivery4.IP Address Profiling 5. Alters the delivery address at short notices6. Suspicious address : other customer address / guest house or hotel.

Credit Card Frauds ::

Purchase by Credit card

normal routine

Where is Problem ??

Providing payment gateway services


Providing payment gateway services

without detail checking

Loss to country, people & Bank.

TIM TARA Case Prevention:

Below Cost Selling is not possible

in general


Lets make Money in Share market ::

Greed to make

money faster Bank FD / Mutual fund /

Share Market : Rate of Return


ATM /Debit Card !

You lose money first and then lose the legal battle.

Fake ATM Fraud

Shoulder surfing

How we act in Public.


Fake pin pad

Corrupt Employee : Bank staff – Mr. Gopal

withdrew money from ICICI Atm and forget

card. Call made and collected info

Dumpster Diving :

Bank Customer warned

Open invitation for

Fraudsters…….


Bank Customer warned

not to discard mini statement

from ATM in the Bins

provided at cash machines

Social Media FB / Mobile…………

• FB Effect : sharing every thing over FB: Mood,

• Whats up :: Recent Election.

Prevention : How many

application on your mobile ??

Applies to Public & Company as well


• Mobile Banking : A Pune based

CA firm duped for 79 lakhs. Someone hacked their

online banking account through hacking Mobile

of its partner. Take care while using your banking

via mobileThis can be happen with us also

Reason of current state

Awareness

Staff

Money


Light for Future


Theories to fight frauds against the Companies : -

1. Broken Window Theory

If some loophole is the system is kept

unrepaired.

* Non Broken window acts as the

deterrent factor

•Don’t let the employees know of the misdeeds of the management

Let’s Prevent Fraud at Industry

level


2. Video Game Theory : Step by step

•Don’t let the employees know of the misdeeds of the management

•Ethical tone of Management

• modus operandi is spread in other employees

•When some employee is caught – he reacts “Why me” ??

Take action at early stage : otherwise small will turn

big

Lays Potato chips Theory

-Bet you can’t eat just once

-Fraudsters can’t stop by doing single Fraud.

-Additional income that generate out of frauds

Increase their needs and greed's.

-Greed forces them to become perpetual fraudsters

-Employees committing the frauds do not view themselves

as criminals.


Characteristics Theory

Trust but check : Trusted person do more frauds

Trusted employee but not satisfied

1. Person living beyond means

2. Emotionally disturbed /unstable

3. Poor self control

4. Secretive about his personal affairs

Fight Frauds :: Prevention

1.Education to staff

2. Setting Tone of Management

- Creating Anti Fraud Environment

- Zero Tolerance level

-Bribery

-Assets misappropriations


- Zero Tolerance level

3. Pro active preventive technique

-Internal control

-Risk assessment

-Fraud prevention policy

-Ethical policy

-Whistle blowing Policy

-Fraud Response Plan

How to make Fraud Prevention effective: -

1. Anti-Fraud and Corruption Hotline

2. Protection of Whistle-blowers :: imp case of Ranbaxy

3. Ongoing Maintenance and Review of policy and process

Standard Process.


Standard Process.

11/05/2015CA. Gopal Singh Negi

38

Fraud Prevention Policies ::

Check :

1. Does the policy set out the company's tones towards client entertaining and

gifts and what action needs to be undertaken on receipts of these ?

2. Does the policy Quantify what constitutes fraud or dishonesty ? For Example ,

an overstatement of expenses by Rs. 5 might not be considered to be fraud

but continuously over claiming expenses by Rs 5 might be considered as Fraud.

3. Does the policy distinguish between the seriousness of different frauds and


3. Does the policy distinguish between the seriousness of different frauds and

the reaction of managements according to the seriousness of frauds ?

Low Warning , if repeat action

Medium Refer to Committee

High Immediate action

Question:

What

Value

4. Does the policy include a statement in respect to conflicts of interest ?

Preventing Fraud:

1. Management Philosophy : In Actual or over net

Boss action repeat by Juniors

2. Follow rule /Policy in actual

a). Superior Accounting System : - login id / Password

in actual :

(Bank- Password sharing is crime)

•Own office

How we

implement

and follow


•Own office

•Company / Industry.

b) Proper documentation :

Case : Bill process of advertisement for X no of Copy, copy of ad is

attached.

c) Safeguard of Assets : coding for Big items : Fixed Assets Register

Once in year : Counting & verification

5. What polices are in place to inform customer / suppliers / employees that a code

of Conduct is in operation?

Lets check Use of Policy in below : Q.

1. Overstatement of Expenses in daily life by staff…

Peon – office expenses / Travel Allowance / Daily Allowance

2. Personal Expense in Business

Satyam is

Fraud but

here??

Practically


2. Personal Expense in Business

Owner ?

Staff ?

3. Usage of Office Stationery / Equipment: like : Car/ System /Phone

Owner ?

Staff ?

4. Expenses paid through cheques and receipts in cash

Practically

we daily

face

Telecom Industry :

Pre Paid & Post paid Card

How verification in actual done Post Paid card issued to person

not capable of paying bills.

Either refuse to pay or sell to

anti national

Collection Agency % increase in case of Old case

How it

implement

in actual,

that matter


Banking & Financial : KYC norms, publish still Penalty by RBI in recent month

In Actual : Plans / procedure like safety belt :-

Mgt

review:

14.6%

Internal

Audit :

14.4%


14.4%

Open Session….

[email protected]


By CA. Gopal Singh Negi - CIT Portal, ICAIisa.icai.org/ForensicMaterial/Fraud Prevention.pdf · By...

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