Fraud News Update 02.20.15

Fraud News

02.20.15 – This week’s edition of the Fraud News Update features: Women! (Corporate Fraud Reduction), The Do Nothing Mentality (No Deterrence), The Do Something Mentality (Fraud Prevention), Fraud Frustration (Welcome To The Party) and Uncle Sam Wants YOU! (Increasing Employee Liability).

As leaders in the fraud consulting arena, read on for more topical information and our insights, observations and unique commentary on the weekly fraud news.

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Women! Corporate Fraud Reduction

There have been a lot of studies regarding fraud, fraud causation and the methodologies to prevent it. However, there really hasn’t been as much focus on gender as there should be.

Does the gender of C-level executives, or the gender makeup of a company’s board, encourage fraudulent behavior or effectively eradicate it?

While that probably depends on who you ask, this fraud news story immediately caught my eye. Why? According to the story, and the research it’s citing, men are more “driven by the pursuit of money and power” while women tend to be “more driven by desire for growth and development.”

The takeaway from the research: Women are generally more ethical when it comes to financial reporting and that directly correlates to female CFO’s being less likely to commit fraud.

Of course, that’s only part of the equation. Consider a scenario where a company’s board is almost entirely made up of men, the gender makeup of the board may overshadow individual, gender based ethics leading to corporate fraud.

This suggests that board makeup should be equally split between men and women to negate dominance associated with one gender’s psychological makeup.

We’ve been talking about innovative ways to fight fraud, gender equality in management certainly warrants more in-depth hiring consideration from companies across the globe.

Do Nothing = No Deterrence

Arresting people and putting them in jail sends a message. Let’s face it, there’s deterrence value in taking away people’s freedom.

However, for those states that are confused, and apparently quite a few are, doing absolutely nothing to stem unemployment fraud is NOT a deterrent!

In fact, not only does it serve no deterrent value but the opposite may be true.

Doing nothing may actually encourage people to commit the crime absent real consequence for bad behavior.

This fraud news story takes a look at state’s responses to the crime and how “doing no time” seems to be the rule and not the exception.

The exception, more organized criminal activity seems to be the differentiator in doing time behind bars.

Do Something = Fraud Prevention

We know that doing nothing provides no deterrent value.

On the other hand, technology provides an opportunity for financial services companies to be proactive. Getting out in front of criminal activity is key to preventing large-scale losses which are damaging to the bottom line.

As indicated in this fraud news story, location-based services are thought to be beneficial in preventing fraud and there’s some truth to that.

If a consumer’s phone, isn’t in the place where the IP suggests the financial transaction is originating, why authorize it?

Will this prevent all transactional fraud? No, especially if a phone and credit cards are stolen simultaneously. In that situation, the technology wouldn’t generate a location mismatch (red flag) because the phone, the crook and the cards are in the same place.

Fraud Is Frustrating

Don’t believe me? Just ask the Interactive Advertising Bureau (IAB).

We’ve covered the advertising fraud conundrum in past issues of the Fraud News Update. In our continued coverage of the industry’s battle against fraud, our focus in this fraud news story is on the town hall meeting that IAB hosted last week.

The Meeting Title: “Confronting Fraud: It’s Time to Clean Up the Industry.”

The session painfully highlighted the conflicts that exist between advertisers, publishers and the advertising industry’s challenges in coming up with solutions to address a very complex technological problem.

Fraud is not only frustrating but difficult to detect, investigate and prevent as the advertising industry has now discovered.

Solutions to complex, global fraud problems don’t happen overnight and certainly not during a limited town hall meeting. “Rome wasn’t built in a day,” as they say!

Welcome to the frustrating fraud fray, IAB!

Uncle Sam Wants YOU!

Lastly, we’ve talked in past blogs about the increasing number of cases where the government’s gone after individual compliance employees for their role, or their failure to perform fiduciary duties, in fraud related cases.

This fraud news story suggests that the approach is gaining steam and the SEC’s looking for ways to broaden their use of the tool as a fraud fighting tactic. Specifically, they’re targeting Directors and Officers.

Will they be successful in their endeavor to do so? While the jury’s still out on whether they have the horsepower to expand their efforts in holding individual employee’s, officers or directors responsible, if I were a betting man I wouldn’t count them out at this point.

It’s employee beware here!

Fraud News – The Bottom Line

Fraud – empowering people to break the law. It’s a way of life for some and every fraud has a story. At Fraud Solutions, fraud is our world and we’re passionate about prevention. Being proactive is key, so, follow us each week as we cover the fraud beat with added insights, information and unique commentary on stories making the fraud news.

Those are our insights. What are yours?

For more information on how we can help your businesses prevent risk, reduce major fraud losses and improve operational ROI, contact us to schedule an initial consultation. No obligations…just unique insights from an industry leader.