New fraud prevention routine to detect false suppliers

Using data mining routines to detect fraud in corporate accounts payable data is a great way for organisations to protect themselves against fraud.

At Rushmore Forensic we have hundreds of data mining routines that can be implemented and we commonly run around 20 to 25 routines for each client.

Recently we added a new routine, which identifies all vendors that have been incorporated by ASIC for less than 2 years. Yes it’s that simple. The idea being that most companies our clients trade with would have been in existence for many years even if they had not been trading with our client directly.

A company that has only been recently created presents a much higher risk profile that the vendor is false. The forensic data mining routine uses the vendors name and ABN number from the Vendor Master File and compares this with the incorporation date from the ASIC website.  Whilst this data mining routine hasn’t detected a clear cut case of fraud to date it has raised some potential conflict of interest and process issues.

Most of Rushmore Forensic’s engagements use custom developed databases, programming and other techniques to analyse corporate data. We have a suite of over 200 data mining and analysis routines. These routines can scan 100% of accounts payable, payroll, exployee expense reimbursement and other applicable data sources.  This type of analysis commonly detects fraud, breaches of company policy and other anomalies. The reviews are regularly conducted for some of Australia’s largest companies.

About Rushmore Forensic

Andrew Firth is a Director of Rushmore Forensic. Andrew Firth specialises at using advanced data mining to detect fraudulent transactions and other improvements in an organisations processes.  He is a forensic accountant based in Sydney.

Employee steals $1.5m to fund betting addiction

employe-fraudA lonely finance employee misappropriated $1.5 million from his employers, a major Australian charity organisation, to fund his pathological addiction to sports betting, a court heard.

The District Court in Brisbane was told while Dinesh Enoka Abeysuriya stole $1.5 million from the Uniting Church’s Blue Care organisation, the value of shortfall was about $900,000.

Blue Care is one of Australia’s largest non-profit organisations for health and care for the elderly.

A second charge arose because Abeysuriya would regularly use his on line account with sports betting organisation Centrebet where $1.88 million in bets was shown on his Commonwealth Bank credit card.

When Abeysuriya finally stopped gambling his credit card was overdrawn a further $223,409, the court heard,.

Abeysuriya, 29, pleaded guilty to aggravated fraud as an employee with a financial advantage of $1,534,967 between March 25, 2009, and April 9 this year.

He further pleaded guilty to fraudulently obtaining $223,404 from the Commonwealth Bank between March 5 and April 9 this year.

Prosecutor Jacob Robson told the court Sri Lankan-born Abeysuriya came to Australia from New Zealand in 2008 to work at Blue Care, where he was responsible for credit payments.

He said in virtually a 12-month period Abeysuriya misappropriated the money which he used to gamble online.

Mr Robson said Abeysuriya used three methods to misappropriate the money – inflating invoices and paying the extra to himself, paying invoices twice to legitimate creditors and himself, paying invoices to himself.

He said the frauds were uncovered when a Commonwealth Bank employee became suspicious of large amounts of money going through Abeysuriya’s account.

Eventually Blue Care called in auditors who uncovered the frauds, and after being confronted Abeysuriya fled to Sri Lanka.

Mr Robson said Abeysuriya returned to Australia and was remanded in custody in July.

He said Blue Care expected the outstanding money would be covered by insurance.

Barrister Steve Zillman, for Abeysuriya, said his client had been lonely when he came to Australia to work and took up gambling.

He was young and lonely. He felt isolated and suffered from anxiety and depression” Mr Zillman said.

He said a psychiatrist’s report showed Abeysuriya had a pathological addiction to sports betting.

It was backed up by statements from his Blue Care workmates who often saw Abeysuriya’s computer open at sports betting sites.

Mr Zillman said Abeysuriya, who had returned to Brisbane of his own free will, was keen to be deported back to Sri Lanka once he had served his sentence.

(Source: Mark Oberhardt, The Courier-Mail, November 24, 2010)

About Rushmore Forensic

Andrew Firth is a Director of Rushmore Forensic. He has worked on a number of investigations relating to employee fraud.  He has also given evidence in civil actions relating to employee misappropriation and money tracing.

He is a forensic accountant based in Sydney. Andrew can be contacted directly for a confidential and complimentary discussion.

Read more about how employee fraud can be detected.

Superannuation fraud syndicate in Sydney

The ACCC has reminded consumers to be careful in protecting their superannuation account statements in particular and all their personal information more generally.

The Minister for Superannuation and Corporate Law, Senator Nick Sherry, recently issued a warning for Australian workers to exercise extra care in protecting their superannuation account statements and personal details. This is in response to information from the New South Wales Police Force that a Sydney-based fraud syndicate is using stolen identities to steal from victims’ superannuation accounts.

Syndicate members have allegedly stolen superannuation statements and used other counterfeit identity documents to set up self-managed superannuation funds (SMSFs). The offenders then open bank accounts and arrange for cash to be “rolled over” from legitimate funds into the fraudulent accounts.

The minister has advised that the vast majority of Australian workers have superannuation funds that are regulated by the Australian Prudential and Regulatory Authority (APRA). These funds are protected by law against theft and fraud. However, consumers should always be vigilant and careful to protect their personal information.

Fraudsters can use personal information to steal your identity.

Identity theft works in a range of ways, from simple methods to well organised scams. Many of us have a wealth of personal information readily available—cards in our wallet, mail, public records, information saved in our computers and information posted on social networking sites.

Identity theft can happen easily and quickly. By leaving your personal information readily available, scammers will have easy access to this information. For example, fraudsters will pay people to rummage through rubbish tips and steal letters, household bills and bank statements (also referred to as “dumpster diving”) to collect personal information.

The following are some Warning signs to watch out for:

  • You notice that amounts of money go missing from your bank account without any explanation.
  • You are unable to obtain credit or a loan because of an unexplainable bad credit rating.
  • A caller pushes you to provide personal information and discourages you from checking whether it’s a genuine request.
  • You get an email or a telephone call out of the blue asking you to “validate” or “confirm” banking details.

Protect yourself

  • Regularly check your credit card, bank and superannuation statements to ensure that suspicious transactions are detected.
  • Shred all documents containing personal information, such as credit card applications and bank statements. NEVER send money or give personal details to people you don’t know and trust.
  • If you receive a call from your bank or any other organisation, don’t provide your personal details—instead ask for their name and a contact number.
  • Check with the organisation in question before calling back. Never rely on a number provided in an email or click on the provided link—instead find the contact number through an internet search or back of your automatic teller machine (ATM) card.
  • Log directly on to a website that you are interested in rather than clicking on links provided in an email.
  • Always get independent advice if you are unsure whether an offer/request is genuine.

(Source: ACCC)

Read more about what fraudulent behaviors to watch out for on the Rushmore Forensic blog.

About Rushmore Forensic

Andrew Firth is a Forensic Accountant in Sydney and Director of Rushmore Forensic.  He has over 12 years experience investigating accounting irregularities, undertaking corporate intelligence and conducting other forensic accounting assignments.  Andrew is a former investigator with the Serious Fraud Office in the UK.  He has also worked for KPMG and Deloitte during his career. Andrew is based in Sydney and provides forensic accounting services throughout Australia.  If you have a matter which requires expert advice, please don’t hesitate to contact Andrew Firth for a complimentary and confidential discussion.

Fraud – What do you do when it strikes your business?

Fraud is a fact of life and if you are in business it’s only a matter of time until you are forced to deal with it. Andrew Firth, a forensic accountant in Sydney explains what to do.

If you are dealing with employee fraud then the first step is to identify what electronic devices could contain potential evidence. The employees’ computer, laptop, phone, PDA, or Blackberry may contain information that is useful to the subsequent investigation. If the computer is turned on, most people will be tempted to go through the computer looking for information.

The first thing to do is to instruct relevant people not to touch the computer and to consult a forensic accountant or forensic technology professional. If you need to shut the computer down, then close any documents whilst taking notes of what you are doing. You will need to secure the computer to prevent unauthorised access. Take the computer and lock it in a secure cabinet or office until it can be passed to a forensic professional. Always take notes of what you have done including dates and times. Also remember to secure any other corporate devices of the individual concerned e.g. PDA and Phones. Remember not to use the devices simply turn them off until professional advice can be sought.

How do you handle documents that may be relevant to the fraud investigation? The first rule is not to write, mark or otherwise handle the document. Secure the documents in a safe place until a forensic accountant can be consulted. Also take notes of what you do as these will be important in establishing the chain of evidence in potential court proceedings.

In many corporate environments there will be pressure from management to use the computer or device particularly if its needed for customer or client operational needs. If this is the case, then the computer and other devices need to be forensically imaged by a forensic technology professional and the image of the device can be provided to management. The original device is secured and should not be used until all court proceedings have been exhausted. Your forensic accountant can organise for a forensic technology professional to be engaged to perform these tasks.

Forensic accountants also find that email systems are a critical source of information when investigating employee frauds. The suspects email inbox and other folders need to be forensically captured. Email on company back up tapes can also be used to identify correspondence and documents at different points in time. A Forensic accountant or forensic technology professional will be able to advise you on capturing the emails successfully.

The next common occurrence in organisations is that people think it’s a good idea to confront the suspect and to “interrogate’ them.  Interviews with the suspect should not occur unless advised by legal counsel who is familiar with employee fraud. It’s critical that contact with the suspect is minimised until you know what you are dealing with. Again bringing in a forensic accountant to essentially project manage the investigation will ensure that potential evidence is protected and legal and other advice is obtained when appropriate.

Many organisations are reluctant to bring in forensic accountants as they are concerned that the matter may be adversely reported in the media. In our experience we find that the use of a forensic accountant can minimise the risks involved and can provide crucial advice to the organisation.  In many instances, a forensic accountant can recover funds that have been defrauded and liaise with legal counsel, the police or other law enforcement bodies if needed. Above all we find that the use of an expert forensic accountant can quickly minimise the impact of a fraud, recover the funds and really manage the issue until resolution. Fraud investigation has many commercial, legal and regulatory issues and the timing and sequence of activities can have an important effect on the outcome of the matter. Many large corporations also draft a formal corporate policy which documents how an investigation needs to be conducted. These are useful documents as they clearly delineate the responsibilities of Human Resources, Internal Audit, Legal, and the Finance departments.

About the Author

Andrew Firth is a Forensic Accountant in Sydney and Director of Rushmore Forensic.  He has over 12 years experience in financial investigations, corporate intelligence and other aspects of forensic accounting.  Andrew is a former investigator with the Serious Fraud Office in the UK.  He has also worked for KPMG and Deloitte during his career. Andrew is based in Sydney and provides forensic accounting services throughout Australia, New Zealand and South East Asia.  If you have a matter which requires expert advice, please don’t hesitate to contact Andrew Firth for a complimentary and confidential discussion.

Sick Leave Fraud – Spike in leave before and after weekends and holidays

Public servants, especially those living along the coast, take more sick leave than employees in the private sector, with a spike in days off before and after weekends and holidays, a report has found.

The NSW Auditor-General, Peter Achterstraat, has found that, despite efforts to reduce the high level of sick leave, there has been a drop of only 1.84 hours, or just one-quarter of a day, since 2004/5.

This was much less than the target of a reduction of one day over this period, which would have saved taxpayers $45 million, he said.

Abuse of sick leave needs to be addressed properly” he said.

On average, public servants take just over eight days’ sick leave annually, he said.

The highest sick leave taken was recorded by the NSW Fire Brigades at 95.3 hours, which is significantly more than the next highest group, Ambulance NSW, at 79.8 hours and Juvenile Justice at 78.6 hours.

The report also found that the more public servants are paid, the less sick leave they take and that sick leave increased with age and with length of service.

The higher the sick leave entitlement, the more sick leave was taken, the report noted.

Mr Achterstraat called for supervisors to more actively monitor and manage staff suspected of abusing sick leave and to have clear rules for managing absence.

The key barriers in reducing sick leave were an ageing workforce, an industrial environment which slows workplace reform, and an entitlement culture where staff think they must ‘use it or lose it’” the report noted.

The director general of the Department of Premier and Cabinet said programs were being pursued to reduce sick leave to 45.06 hours per employee, as part of recent wages agreements.

The Auditor-General has called for a “name and shame” list to be published by the government, which is likely to occur next year.

(Source: “Sickies by the seaside: report points the finger”, SMH 8/12/10, Brian Robins)

About Rushmore Forensic

Andrew Firth is a Director of Rushmore Forensic.  He specialises at using advanced data mining routines to detect payroll fraud. He is a forensic accountant based in Sydney, and is a regular speaker on payroll and other forensic accounting issues.

Forensic Accountants? – The Who, What, Why and How

When I’m introduced to someone and they ask what I do, the most common response is “Wow, that must be really exciting!”. This is quickly followed by the question, “Well what exactly does a forensic accountant do?

The actual job of a forensic accountant has always been in existence, but only in the last 15 to 20 years has the term “Forensic Accountant” become common.

Forensic accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring. They also provide services in areas such as accounting, competition, damages, analysis, valuation, and general consulting. Forensic accountants have also been used in divorces, bankruptcy, insurance claims, personal injury claims, fraudulent claims, construction, royalty audits, and tracking terrorism by investigating financial records. Many forensic accountants work closely with law enforcement personnel and lawyers during investigations and often appear as expert witnesses during trials (Source: Wikipedia).

As you can see, forensic accounting is a broad area with many different specialties. Forensic accounting can be broadly split between corporate investigations and expert witness work (such as divorce), but as you can see there are also many other tasks that don’t fit this neat distinction.

Most forensic accounting assignments are complex matters. The complexity can arise from:

  • the number of documents (often in the thousands or even millions of documents or computer records)
  • the type of documents (these can be faded, handwritten or lengthy legal agreements). Alternatively they can be snippets of information from say a call centre database.
  • the unstructured nature of information. It’s common for a forensic accountant to extract key pieces of information from emails, letters, and other correspondence. This information can then be cross matched to other records. These records may be financial records, phone records or internet activity.
  • The number of issues. When a forensic accountant is brought into a matter, often the client has up to 20 different issues or allegations. The Forensic Accountant will review the allegations and the potential evidence which supports each allegation. If the allegation can’t be supported, the forensic accountant will often cull the number of allegations into something that can be evidenced and has a reasonable chance of success when legal action is initiated. Most forensic accountants also find that many of the allegations are based on emotion, hearsay or are breaches in the organisations policies but are not fraudulent in themselves.

Most Forensic Accountants are trained as CPA’s or Chartered Accountants. There is no legal restriction on a person calling themselves a “Forensic Accountant” unlike other professional designations.

As corporate data is increasingly held in electronic forms, forensic accountants need to be capable of working with a wide variety of computer systems and be able to analyse large volumes of information. If you have a matter that involves a large amount of information, it is beneficial that you engage a forensic accountant who has these skills.

Another important factor when you consider engaging a forensic accountant is whether they have criminal investigation and or expert witness experience.  There are many Forensic Accountants who have moved into the industry from auditing and other general accounting disciplines.  There is a danger that these individuals can compromise an investigation through their handling of the evidence or other oversight.

About the Author

Andrew Firth is a Forensic Accountant in Sydney and Director of Rushmore Forensic. He has over 12 years experience in financial investigations, commercial disputes and other aspects of forensic accounting. Andrew is a former investigator with the Serious Fraud Office, London. He has also worked for KPMG and Deloitte during his career.

Andrew is based in Sydney and provides forensic accounting services throughout Australia.  If you have a matter which requires expert advice, please don’t hesitate to contact Andrew Firth for a complimentary and confidential discussion.