1tommyseah@gmail.com

Important Disclaimer

• A speaker’s opinions are just that – opinions

• Not offering legal advice – just discussing principles

• Any questions from audience welcome, but any replies are general comments only and should not be construed as legal advice

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What is FRAUD ?

ICFE CONSULTANCY GROUP PTE LTDInternational Cybercrime & Forensics Examiners www-icfe-cg.com

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Principles of FraudFIVE (5) ELEMENTS OF FRAUD

Mens Rea - Criminal Intent

Actus Reus - Criminal Action

Carelessness or Innocence on the part of the victim

An active participation by the victim as a result of the carelessness or innocence

The transaction is concealed to prevent detection.

The Fraud Triangle

Per

ceiv

ed

Pre

ssure

Ratio

naliza

tio

n

Perceived OpportunityAuditor’s Domain

Fraud Risk Management

Fraud Risk Management

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Fraud Classification System

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Internal Controls

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The

Trinity

of

Controls

Internal Audit Internal Audit CPA(CIA) CPA(CIA) CSI, CSI,

CISACISA

ComplianceCompliance

CPA,LLB,CPA,LLB, CSICSI

Risk Risk ManagementManagement

CPA,CFA CPA,CFA CSICSI

Financial Control

The Fraud ExaminerThe Fraud Examiner

CFECFE

The Certified System Investigator

CSI

The Existing model

Limitations of Internal Control

Errors may arise from misunderstandings of instructions, mistakes of judgment, fatigue, etc.

Controls that depend on the segregation of duties may be circumvented by collusion

Management may override the structure

Compliance may deteriorate over time

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What is Risk ?What is Risk ?

BB

EE

CC

DD

AAOperational Risk

Liquidity Risk

Credit Risk

Reputational Reputational RiskRisk

Market Risk

What happened to

Fraud Control Principle(the correct way in understanding

anything is to understand the principles involved)

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No organization is immune to fraud – the next step is to

Acknowledge the need for fraud risk management.

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Regardless of these variables, any Fraud Risk Management model should aim to achieve one, or all, of the fiveprimary objectives:

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The firstprimary objective:_ Prevention

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The secondprimary objective:_ Deterrence

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The thirdprimary objectives:_ Disruption

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The fourthprimary objective:_ Identification

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The fifthprimary objective:_ Civil action/criminal prosecution

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How to achieve the FIVE Objectives ?

We need direction……….

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Use the Compass to get the right direction

in detecting/preventing

Fraud

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The eight points on the compass are:

1. The fraud environment

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Compass for Fraud Detection

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3

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2. The types of fraud

3. The execution of the fraud

7. Accomplice identification

4. eDiscovery

5. Preliminary evidence evaluation

6. Evidence collection

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Determination by Area

Determination by Scheme

Determination by Person

The approach…….

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Collusion between employees and third parties

represents a growing number PROCUREMENT frauds in SINGAPORE.

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What type of individual commits FRAUD?

It is not limited to any one type of person.

Human element in all fraud

ICFE CONSULTANCY GROUP PTE LTDInternational Cybercrime & Forensics Examiners www-icfe-cg.com

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Conclusion: Fraud Perpetrators Look Exactly Like Us!

Optimistic High self-esteem

Achieving Family harmony

Socially conforming Self control

Kind Sympathetic

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Given the right circumstances, almost

everyone can rationalize that it is OK to commit fraud..

 

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Profile of A Person Who Commits Fraud

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“Red Flags”

Text

AlcoholAlcohol GamblingGambling

DrugsDrugs

SexSex

Profile of A Person Who Commits

Fraud

Given the “right circumstances”, almost everyone can rationalize that it is OK tocommit fraud..

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The key, in any effective anti-fraud program, is to strike the right balance between

oversight

and

trust

The

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Investigative methods

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Proving wrongdoing

Covert Investigative Methods1.Surveillance and covert operations2.Invigilation3.Seizing and searching digital evidence on computers4.Physical evidence

Concealment Investigative

Methods1.Document examination2.Digital Audits3.Electronic searches4.Physical asset count

Conversion investigative

Methods1.Searching public records2.Online resources3.The net worth methodInquiry Investigative

Methods1.Interviews/Profiling and interrogation2.Honesty testing

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The problem with proving intent is that it requires determining a person’s state of

mind.

As a result, intent usually is proven circumstantially.

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Some of the ways we can help prove intent by circumstantial evidence include:

Motive : The motive for fraud is a strong circumstantial element.

Opportunity : Management typically has the opportunity to circumvent or override controls over financial reporting.

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Some of the ways we can help prove intent by circumstantial evidence include:

Repetitive acts : Should the financial statements contain a single false journal entry, a fraudster might be able to claim it was an error.

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Some of the ways we can help prove intent by circumstantial evidence include:

Witness statements : Circumstantial evidence rarely can be sufficient without the statements of witnesses.

For those new to evidence in general, inculpatory evidence is that which

supports a charge or accusation of wrongdoing.

Inculpatory Evidence

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exculpatory evidence is that which would cast doubt or prove innocence.

Exculpatory Evidence

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Evidence used in Fraud Conviction:

“Tools and techniques to recover, preserve, and examine digital evidence on or transmitted by digital devices.”

PLUS data recovery

Sources of Digital Evidence Computers

4 Email4 Digital images4 Documents4 Spreadsheets4 Chat logs4 Illegally copied software or other

copyrighted material

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Thank youThank you

Contact Information:

Tommy Seah

CFE, CSI, FCPA,ACIB,MSID

Regent Emeritus

ACFE Board of Regents, Texas, USA

www.cfe-in-practice.com

tommyseah@rocketmail.com

Phone : + (65) 9106 9872