Sketching the mental framework and physical appearance of a fraudster

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http://totallyunrelatedrandomanddebatable.blogspot.com/
DELVING IN THE DEVIL’S MIND
Sketching the mental framework and
physical appearance of a fraudster.
Kenny Ong

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Business today…
13th
April 2009
•Two Domino’s employees
•YouTube
•Apology from Domino’s after
48 hours
•1 million hits
•Twitter: questions on silence
•LinkedIn: suggestions by users
in forum
BusinessWeek, May 4, 2009

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€50 Billion
Worldwide sales in
2011
2 billion people
Use Unilever’s products
Each day worldwide
400 Brands
Sold in 180 countries
167,000 employees
Work for Unilever
130YEARS & STILL GROWING

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Contents:
A. The Criminal Mind
B. Triggers
C. Minimizing Incidents
D. Future Fraud

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How many of us drive with the
ultimate intention of breaking the
speed limit?

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Fraud-O-Scope™
Fraud
1. Character
Good
Bad
2. Intelligence
Smart
Not
Smart
3. Situation
Open Closed
4. Catchability
Easy Hard

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The Criminal Mind
Profile of Potential Fraudster

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“Everyone has a price”

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Fraud-O-Scope™
Fraud
1. Character
2. Intelligence
Good
Bad
Smart
Not
Smart

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Fraud-O-Scope™
Fraud
1. Character
Good
Bad
1. Family
2. Education
3. Social
4. Movies
5. Books
6. Religion
7. Record
8. Attribution

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Fraud-O-Scope™
Fraud
2. Intelligence
Smart
Not
Smart
1. Education
level
2. Talent
3. Analytical
4. Systems
5. Ask
questions
6. Years of
Service

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How would you profile him?

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How would you have profiled him?

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GENERAL FRAUDSTER PROFILE
• Profile: 68.6%
– no prior criminal record,
– Aged 26-40 years old,
– Annual income between RM15k-RM30k,
– 2-5 yrs of service
• Struggling financially or large purchases
– difficult time in their lives
– gets out of hand
• Merger and acquisition or reorganization activity.
– ‘I don’t have a career here’ attitude.

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Possible General Root Causes
for Fraud Mindset
1. "Everyone does it."
2. "It was small potatoes."
3. "They had it coming." – the revenge syndrome
4. "I had it coming." – the equity syndrome

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for Fraud Mindset
1. "Everyone does it.“
1. Indiscipline employees commonly organize
themselves in cliques or clusters - the inner circle
2. Rarely does a repeat offender not involve an
accomplice or at least a confidant.
3. “If my superior can come to work late and still be
promoted, it means I can steal RM10. Both are
indiscipline cases anyway.”

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for Fraud Mindset
1. “It was small potatoes.“
1. “What's a RM30 stolen calculator to a company that
makes millions each year or to a boss who drives a
Mercedes?
2. “Zero Tolerance Policy” for identified disciplinary
cases in any form or for any amount?

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for Fraud Mindset
1. “The accounts department cuts down my lead time
to submit my claims yet take 60 days to
compensate my claims. So I purposely come late to
work to compensate.”
2. “The company keeps cutting down our benefits and
allowances but keep asking us to produce more. So
I compensate by being calculative with the company
even for one sen.”

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for Fraud Mindset
1. Under-compensated or unrecognized -> self-
devised "bonus" plan.
2. Employee has been turned down for a raise or
promotion; after a company-wide salary freeze has
been established; during periods of company
turmoil (restructuring, takeover, new management,
etc.).

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Reminder: Very few people join an
organization with the objective to
commit fraud.

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Triggers
Conditions for Fraud

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Fraud-O-Scope™
Fraud
3. Situation4. Catchability
Open ClosedEasy Hard

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Fraud-O-Scope™
Fraud
3. Situation
Open Closed
1. Self/Family
2. Straight road
3. Conflicts
4. Bad Bosses
5. M&A
6. Org Character
7. Controls
8. No changes
9. Power
Imbalance
10.Amount, $$
11.Org Systems

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Fraud-O-Scope™
Fraud
4. Catchability
Easy Hard
1. Check &
Balance
2. Oversight
3. Automation
4. Burden of
Proof
5. Line of Sight

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Who is most likely to commit Fraud?
Excellent
Very Good
Average
Not Good
Commit Suicide

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The Four Desperates
1. Desperate
Competition
2. Desperate
Consumer
3. Desperate
Achievers
4. Desperate
Changes

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Dangers of Direct Incentives
1. lessen internal motivation,
2. switch to mercenary mode,
3. do something and do not do something else,
4. bribe and fraud culture,
5. easier for competitors to recruit,
6. lessen teamwork & helpful culture,
7. less and less impact for same value,
8. mockery of base salary and employment contract,
9. rebellion from non-incentivised staff,
10. end up incentivising everyone for everything?,

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Curse of the Bell Curve
‘A’
Staff
‘B’
Staff
‘D’
Staff
‘E’
Staff
‘C’
Staff

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Biggest Issue in Financial
Product Innovation?

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Power Imbalance
1. Propose
2. Approve
3. Execute
4. Monitor

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for Fraud Mindset
1. "Everyone does it."
2. "It was small potatoes."

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Minimizing Incidents
Prevent. Deter. Kill.

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"Fear not the 10,000 moves
practiced once. Fear the one move
practiced 10,000 times"
Chandni Chow to China

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GENERAL STRATEGIES AND
POLICIES
• B1. Classification of Behaviors
–B1.1 Disrespectful Workplace Behavior
–B1.2 Progressive Discipline
–B1.3 Zero Tolerance

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POLICIES
• B2. Recruitment and Selection
• B3. Exit
• B4. Employee Assistance Program
• B5. Anonymous Hotline
• B6. Communication and Feedback
• B7. Training and Education
• B8. Formal Complaint and Grievance

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POLICIES
• B9 Leadership
– 1. Leaders act as role models whether
consciously or unconsciously
– 2. Leaders determine the working
environment

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POLICIES
• B9 Leadership
– 1. Educate
– 2. Involve
– 3. Teach
– 4. Eliminate

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SPECIFIC STRATEGIES AND
POLICIES
• C1. Theft and Fraud – Root Causes
– Profile: 68.6% - no prior criminal record,
Aged 26-40 years old, Annual income
between RM15k-RM30k, 2-5 yrs of service
– Struggling financially or large purchases
• difficult time in their lives
• gets out of hand
– Merger and acquisition or reorganization
activity.
• ‘I don’t have a career here’ attitude.

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POLICIES
• C1. Theft and Fraud - Prevention
– Background checks
– Duties segregated
– Anonymous hotline
– Share the wealth
– Communicate successes
– Make a big noise when discovered
– Video surveillance equipment

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POLICIES
• C2. Violation of confidentiality or security
of company information - Prevention
– a. ICT Security Policies*
– b. Ownership of Intellectual Property
– c. Inside Information and Trading of company
shares

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*ICT Security and Fraud (1/3)
Biggest ICT risks
1. Security – All matters relating to the ‘coming-in’
and ‘going-out’ of all systems and information
2. Backup - including Storage of critical and non-
critical information and Disaster Recovery
3. Continuity – Availability of systems and
information at a 24x7x365 standard

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*ICT Security and Fraud (2/3)
The following are threats faced by organizations
from ‘inside’ the company:
• Current Employees,
• On-site Contractors,
• Former Employees,
• Vendors/Suppliers,
• Strategic Partners, and
• OEMs

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“Asking the people responsible
for preventing a problem if
there is a problem is like
delivering lettuce by rabbit"
Norman Augustine
CEO & Chairman, Lockheed Martin

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"He has 20 years experience:
1 year of bad experience
repeated 20 times"

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Future Fraud
We all need help

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Finance Today…
$19.90

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New Fraud Opportunities
Change in Business Models: Inexperienced
eCommerce
Partners
Franchise
Downstream/Upstream
M&A Targets

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eCommerce Frauds
Account
Takeover
Pharming
Counterfeit Advances
Phishing
Application
Lost/Stolen
Credit Cards
eCom
Frauds?

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End Points

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Mistakes and Lessons
Learned
1. Price to Pay for Fraud/Risk Mitigation =>
Business Flexibility
2. Control vs. Growth
3. Rules vs. Humanity/Motivation
4. Not tackling the root cause i.e. Motive +
Opportunity i.e. Humans
5. Focus on F&A vs. Sales/Marketing => who has
control?
6. Relationship Role vs. Enforcement Role

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In the end…
• Great Wall of China
– humans are the weakest link
– bad treatment of staff will lead to weak link i.e.
easier to bribe, easier to con, etc;
– bad treatment examples: insulting, lose face,
broken promises, no dignity, public criticism,
restructure without communication

Thank You.
soft copy of slides:
http://totallyunrelatedrandomanddebatable.
blogspot.com/

Sketching the mental framework and physical appearance of a fraudster

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