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THE BALANCE BETWEEN FAITH AND VIGILANCE
Church Fraud
Distributed by www.churchfraudprevention.com
THE BALANCE BETWEEN FAITH AND VIGILANCE
Church Fraud
www.churchfraudprevention.com Mission Statement- To equip church leadership with fraud prevention tools to maintain reputation and financial security.
Church Fraud Related Scriptures
“Watch out for False prophets. They Come to you in Sheep’s Clothing, But Inwardly They are Ferocious Wolves.”
-Matthew 7:15, NIV
Biblical Fraud
Though he established a great legacy and became the father of the nation of Israel, Jacob (Israel) was also known for being conniving. By today’s standards, he could be considered guilty of identity theft and elder abuse
Overview
This presentation will equip church leaders to recognize and confront fraud by addressing the following areas The Reality of Fraud Internal Church Fraud Account Takeover Church Scams Congregational Concerns
The Reality of Fraud
Fraud is an ever changing crime that has continued to develop and thrive as technology progresses
With numerous ways to obtain and use information, individuals, businesses, and organizations are all at risk to be victims of fraud
The Reality of Fraud
As those who commit fraud remain one step ahead on the offensive, it is important that we develop a good defense to deter activity
In addition, it is crucial that we have a game plan for when fraud occurs
The Reality of Fraud
How can the church be effected by fraud? Loss of sense of security Loss of faith Reputational loss Financial loss Congregational loss
How is a fraudster effected by church fraud? Financial gain Positive reinforcement Knowledge to commit fraud again
Internal Church Fraud
From an usher taking a five dollar bill from the offering plate to a church leader embezzling millions, internal church fraud occurs when a thief gains the trust of the church and uses their standing to help perpetuate the act
Types of Internal Church Fraud
Three Basic Types of Internal Church Fraud Asset Misappropriation (71%)
Skimming (stealing before funds are recorded) Larceny (petty cash theft of deposit theft) Fraudulent disbursements (fictitious expenses)
Fraudulent Reporting (16%) Financial (assets, revenues, expenses, disclosures) Non-Financial (personnel data, internal reports
Corruption (13%) Conflicts of Interest (corruption by multiple interests) Vendor Kickbacks (commission paid to individual to use
vendor) Bribery (paying off others to remain undetected)
*Information from “Financial Fraud In Heartland Churches: A 2012 Survey Report by CPA Firm Keller & Owens LLC
Internal Church Fraud Stats
A recent study from The Center for The Study of Global Christianity (2015) estimated: 4.3 million church congregations worldwide 2.4 billion Christians worldwide $45 billion income of global missions $50 billion lost per year to Ecclesiastical crimes
Based on these estimates: The average church losses $11,627.91 per year The average Christian losses $20.83 per year
Keep in mind, not all Christians attend or go to church
*Information found at gordonconwell.edu, Gordon-Conwell Theological Seminary
Internal Church Fraud Stats
Let’s think about $50 Billion for a moment 2015 Porsche 911 Turbo
Price starts around $150K Fraudsters could buy 333,333 cars
Cup of porridge, rice or beans Price starts around $.25 The church could buy 200,000,000,000 cups of food
As a church, we have the obligation to insure that the money donated is spent on moral endeavors rather than what a criminal wants
Internal Church Fraud Stats
The 2015 “Status of Global Christianity” also estimated Ecclesiastical Crime hitting the $100 billion mark by 2025”
Internal Church Fraud Stats
In addition, it is estimated that up to 95% of fraud in churches goes unreported In comparison, up to 66% of corporate fraud goes
unreported The church has got a step up to this dilemma
Internal Church Fraud
As a place of openness and acceptance, it may seem unjustified to put systems in place to combat this type of activity By implementing a system of checks and balances you
are securing both the present and the future of your church
Even if your leaders are to be trusted, the future may be at risk if you put it off
Internal Church Fraud Best Practices
Ways to protect against internal church fraud include: Setting up checks and balances within the church Utilizing outside auditors and book keepers Conducting background checks on those held in
positions with finances Review church insurance to insure appropriate
amount of crime coverage Limit payment methods only to those who are
essential
Internal Church Fraud Best Practices
In addition, if and/or when fraud is discovered, it is the churches responsibility to report the activity Some churches do not report because of public
embarrassment Other churches believe turning the other cheek is the
way to go By not holding the perpetrator accountable they may
end up allowing the fraudster to go free, and on to the next target with better fraud knowledge
Contact the local authorities and press charges
Account Takeover Fraud
Account Takeover is when a fraudster gains control over a victim’s bank account to carry out unauthorized transactions
Transactions typically occur by Debit/credit card Wires ACHs Checks
Account Takeover Fraud Best Practices
There are a number of ways to prevent and/or limit account takeover fraud Shred unneeded financial documents Secure needed financial documents Install anti-malware software when using online
banking Review account activity as often as possible Limit payment methods only to those who are
essential
Church Scams
There are number of scams directed specifically at churches The Affinity Church Scam
Fraud targeted towards church usually associated with investing to receive extraordinary returns
The Sob-Story Church Scam Con artists will target churches with heart wrenching stories
of misfortune to try to get donations Equipment Scams
In this scam, churches sign up to receive equipment at a reduced or free rate. In some cases churches do not read the fine print and are charged excessive rates. In other cases they are told that the initial costs will be covered by a sponsor, which never happens
Church Scams Best Practices
For a church to effectively combat scams it must Research who is does business with Research who it donates money to Stop when red flags occur
If it seems too good to be true it probably is
Congregational Concerns
Pastors and church leadership are also in key positions to be able to identify congregational concerns related to fraud
By early identification and action, church leaders can help their members steer clear of these concerns or address situations they are currently experiencing
Congregational Concerns
Congregational concerns include Sweetheart scams Work from home scams Lottery scams Soldier scams Charity/donations scams Elder abuse Youth Development
Congregational Concerns- Sweetheart Scams
Lonely hearts are being targeted by being presented with a too good to be true internet sweetheart
Once the victim trusts the scammer, they may give out their account information or assist in committing fraud, believing it to be legitimate
Congregational Concerns- Work Scams
Fraudsters will target unemployed people in work scams by recruiting them on the internet and send them a check upfront with the expectation that they send some of the funds back (usually for “taxes”)
When the check returns because it is counterfeit the unemployed individual is liable for the funds sent out
Congregational Concerns- Lottery Scams
People will receive notification that they have won a lottery they have not played
A check will come in the mail with instructions to send partial funds back, the victim will deposit the check and send the money, and a few days later the check will return counterfeit
Congregational Concerns- Soldier Scams
Related to the sweetheart scam, the soldier scam makes people think they are helping someone in the service with their finances
These supposed soldiers state that because they are overseas they are unable to conduct their banking and need the victim to receive and initiate payments for them
Congregational Concerns- Charity/Donation Scams
Scammers will play up the heartstrings of unsuspected victims to use their own money to donate to fake causes or severely limit how much goes to a real cause
In some cases this will keep occurring because the fraud is never identified and the victim doesn’t question the activity because they are not receiving a product or service in return
Congregational Concerns- Scam Best Practices
If you are able to identify a scam in conversation with a church goer before they have engaged in it, you have a good chance to stop the activity Let them know how the scam works Have them contact local police to report the activity Follow up with them to make sure they are not in
contact with the fraudsterIn some scenarios this may be difficult
because the individual may be emotionally invested Take extra time explaining the issue to them and be
sympathetic
Congregational Concerns- Scam Best Practices
If you identify the scam after it takes place, you may act as a grief counselor to those involved
In many cases the victim is invested in the scam Financially with their own money Liable for returned deposited items Emotionally broken with the reality of the situation
While the church goer still needs to follow up with the authorities on the scam, they also need someone to talk to on a personal level
Congregational Concerns- Elder Abuse
Elderly people are the targets of thieves because they are easier victims
Many elder abuse victims have: Loneliness Isolation Recent Loss Physical or mental disabilities Lack of financial understanding Family members who are unemployed or have
substance abuse problems
Congregational Concerns- Elder Abuse
2015 Truelinkfinancial.com report
Congregational Concerns- Elder Abuse
Elderly people are the targets of thieves because of their diminished mental capacities
Typically the person committing the crime is a relative or caregiver of the victim
Elder abuse has a wide range of activities Taking money or property Forging an older person’s signature Gaining the victim’s trust to have them handover
money Scams (usually telemarketing) Utilization of coercion, deception, and/or violence
Congregational Concerns- Elder Abuse
Signs of Elder Abuse include: Unpaid bills Excessive bank withdrawals New “friends” pushing victims Victims not understanding the state of their finances Victims not remember specific transactions Legitimate family members concerned
When Elder Abuse is suspected the best course of action is to contact the local authorities as well as adult protective services
Congregational Concerns- Elder Abuse Best Practices
Like internal church fraud, Elder Abuse is rarely reported In one study the National Research Council estimated
1 in 14 cases get reported Seniors rarely report the activity because a family
member is usually involvedBecause it is rarely self reported, it is up to
family members, bankers, care givers, hospitals, law enforcement, and church leadership to take charge
Youth Development
In addition to the church looking to protect its adult and elderly members from fraud, it is equally important to insure that the youth know about fraud as well Teenagers and young adults have scams directed at
them as well Their lack of financial experience and youthful naivety
make them targets It is our job as parents and church leaders to educate
our children on the threats they will face as they grow
Conclusion
As a church leader, you are responsible for the well being of the church, its finances, and its members
The balance between faith and vigilance may be challenging but the benefits strengthen the church and the community
