Detect And Forestall Fraud

PREAMBLES

• The greatest problem facing the banking industry globally as we speak is fraud.

• The banking business loses billions of dollars yearly to fraudulent activities.

• Among the frauds are executed successfully by outsiders while a reasonable number is successfully perpetuated with the connivance of an insider/staff.

• Anybody can perpetuate a fraud.

FALSE ASSUMPTION ABOUT FRAUD

Beneath are some false assumptions about fraud:

1. Most people will not commit fraud.

Response: A vast mainity of people, under certain circumstances, will commit fraud especially if they are convinced that it will go undetected. Due to this fact everybody needs to be assumed to have a tendency to commit fraud.

2. Fraud is not material.

Response: Fraud may be very materials and it is capable of eroding the working capital of any group which consequently outcomes to illiquidity and insolvency.

3. Most fraud goes undetected.

Response: Most frauds are detected over time particularly if due process and procedure is followed.

4. Fraud could be well hid and the auditor cannot detect it.

Response: There’s normally a loop hole that will finally come to the open. With a sound internal control procedure, such fraud will ultimately be detected.

A well trained auditor can easily detect a fraud following properly designed audit program.

5. Those who are caught and prosecuted are usually not wise.

Response: The employees with fraudulent intentions think that those caught are usually not smart and the mindset of a first-time fraudster is either: I am just going to do it once or, I’m too smart to get caught.

COMMON TYPES OF FRAUD

Common types of fraud in banking embrace the following:

1. Cheque substitution

2. Cheque Suppression

3. Cheque cloning

4. Cheque kitting

5. Cheque alteration

6. Teeming and lading

7. Claiming unearned additional time allowance

8. Dry posting

9. Accumulating charges due from unauthorized and unofficial long duration phone calls

10. Overstating claims for reimbursement

11. Deposit suppression

12. Adding fictitious names to the payroll

13. Overcharging clients

14. Removing cash directly from vault, till box, petty money etc

15. Acquiring payments for false invoices either self-prepared or obtained provider or vendor (e.g. Hotel, air ticket and so on).

FACTORS CONTRIBUTING TO FRAUD

• Growing advancedity within the structure of a company

• Growing speed of transaction dynamics

• Improved technological advancement which aid the convenience with which transactions are concluded

• History of inattention of supervisors

• Understaffing which might cause a breakdown of twin management

• Acceptance of some level of fraud as ‘value of doing enterprise’.

• Outdated and ineffective management measures that do not meet acceptable international standard.

• Enhance in workers turnover which technically might lead to understaffing

• Aggressive accounting entries all in the bid to put up profit.

FRAUD SIGNS

The following are characteristics of a fraudulent workers which ought to put supervisors and associates on guard:

1. An worker who repeatedly borrows small amounts of cash from other colleagues

2. An worker who asks to “hold” his or her personal cheque earlier than negotiating it

3. A employees who often closes late and doesn’t go on vacation.

4. Low or inadequate salary ranges workers

5. Staff who show resentment at not being treated fairly or being taken advantage of

6. Superiors who lack respect and appreciation for employees

7. Highly domineering senior management

8. Staff who look like living, and spending above their means

9. Split purchases

10. Bid process irregularities

11. Same bidders time and time again

12. Payment of invoices from a copy moderately than an original

13. Uncommon sequence of numbers on vendor invoices

EFFECTS OF FRAUD

Fraud has far reaching effect on the organization and the society at large.

• Fraud can deplete the working capital of any organization which will culminate in the end to distress.

• Disengagement of staff and the related social hazards to the employees and his dependant.

• Loss of confidence of consumers, suppliers, creditors, contractors and shareholders on the organization and the industry.

FRAUD ALERT AND PREVENTION TIPS

1. Assume everybody can commit fraud under the precise circumstances.

2. Use your knowledge of inside management to “think soiled” after which check out your suspicions.

3. Do not forget that good documentation doesn’t mean something happened; only that somebody said it happened.

4. Take note of paperwork themselves and the supporting paperwork, observing the consistency of numbers, dates amount.

5. Consider the reasonableness of account balances and accounting entries, especially adjustments

6. Develop relationships and pay attention to hints or rumors of wrongdoing. Follow up. Remember that people are usually torn between their ethical standards and their reluctance to get involved. They seldom tell all they know in the first interview.

7. Check out hunches; first impressions are sometimes right.

8. Be inquisitive; don’t simply accept explanations, particularly if you don’t understand them.

9. Use statistical sampling to pressure you to look at items you wouldn’t generally otherwise examine

10. Look for patterns of bizarre transactions. (In the event you’re shocked, it’s unusual!)

CONCLUSION

Because of the rising refrain for prosperity, huge mainity are usually not prepared to sweat it out there in making wealth. This has given rise to numerous sharp practises (fraud) leading to many being caught and jailed. Honesty, diligence, hard-work is the only route to enduring wealth with lengthy-life. Don’t involve in any kind of fraud!

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