Due to public demand and their quest for free advice on fraud matters, I am now inclined to continue my weekly column on the most talked about economic ill – FRAUD. In the past two years alone I have investigated over 150 fraud cases involving over 2 Billion Kwacha. Simply put I can comfortably say that I have handled more frauds cases than any other single person in Malawi. I have practiced as a Certified Fraud Examiner since 1999.
At the same time I have read fraud cases uncovered in almost all parts of the world in addition to being involved in fraud investigations in other African countries. Although my examples will be real case studies they will have no reference to any organisation I may have consulted for.
The methods used by Fraudsters in most parts of the world have substantially advanced and yet the methods used to fight fraud have not kept pace with the advancement of Fraudsters. Research has shown that there are over three thousand methods used by fraudsters to defraud organisations. Fraud is the biggest cost to any organisation and yet when organisations talk about “cost cutting” no body talks about “fraud Defence” as a budget item. In fact out of every 100 fraud cases I have handled, about 5% involve fraud prevention exercises while 95% involve fraud investigations. This means that most companies are not proactive but rather reactive to fraud occurrences.
A decade ago it was postulated that “….fraud will be the crime of choice for the 21st century.” Now, the new millennium is upon us. There is no data to indicate that fraud and white-collar crime have abated. Indeed, it seems just the opposite – the more we look for fraud, the more we find. According to estimates by the Association of Certified Fraud Examiners, occupational fraud and abuse in United States alone may exceed four hundred billion dollars annually. If we add together the various fraud schemes, cheque and credit card frauds etc, the total may run as much as ten percent of global economic output.
In other words fraud is capable of bankrupting a country like Malawi. One difficult aspect of fraud and white-collar crime is that it is hidden – we only know about the ones that surface. Whatever the true cost of the problem in Malawi, it is a staggering social and economic sum. But there is hope! The fight against fraud is therefore every one’s responsibility.
Occupational Fraud and abuse, which is defined by the Association of Fraud Examiners as: “the use of one’s occupation for personal enrichment through the deliberate misuse or misappropriation of the employing organisation’s resources or assets” is one of the major economic and social concerns worldwide. Simply stated, occupational frauds are those in which an employee, manager, officer or owner of an organisation commits fraud to the detriment of that organisation.
The three major types of occupational fraud are:
- Corruption
- Asset misappropriation and
- Fraudulent Statements.
I will attempt to give you the whole Fraud story by using the “Fraud Tree” model developed by the Association of the Fraud Examiners. You will note from the diagram that CORRUPTION is a component of FRAUD.
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