Occupational Fraud Mitigation

Commercial Investigations is a New York State licensed
About private investigative agency

Us CI provides the Proactive Truth regarding applicants,
reducing turnover and limiting exposure to civil liabilities

Services include:
 Employee background investigations

 Medical Staff Background Investigations
 Volunteer screening
 Tenant screening
 Merger and acquisition investigative research
 Full due diligence investigation reports
 Opposition/political investigative research

Occupational Fraud Mitigation through Background Investigations
Commercial Investigations LLC
www.commercialinvestigationsllc.com

Michelle Pyan is the owner
Our of CI and has been a licensed
private investigator in the
President states of Wisconsin, New
York, and Florida since 1991.
She has experience in human
resources since 1993.

Michelle is passionate about
background investigations
and has been examining the
Fair Credit Reporting Act
and other applicable state and
federal laws since 1998.


 Occupational fraud starts when you permit the wrong
person into your organization
 Effective background investigations provide a means to
minimize the risk of occupational fraud by vetting
prospective employees, independent contractors, and
potential partners
 Fraudsters who have victimized organizations before,
possess an inclination to strike again at another
unsuspecting employer
 Make sure it is not within your organization. Learn
how the anti-fraud control of utilizing background
investigations can save your organization from financial
loss and embarrassing press.


The Pope's butler, Paolo Gabriele, bottom left, arrives
with Pope Benedict XVI at St. Peter's Square in the
Vatican in a file photo from May 23, 2012.


What does the Victim Look Like?

 Privately held (42.1%)
 Public companies (32.1%)
 Government (16.3%)
 Not-for-profit (9.6%)
 Less than 100 employees (30.8%)
 100 to 999 employees (22.8%)
 1,000 to 9,999 (25.9%)
 10,000+ (20.6%)
 Banking/Financial (16.6% of cases)
 Government and Public Admin (9.8% of cases)
 Health Care (5.9% of cases)
 Manufacturing (10.7% of cases)
 Retail (6.6% of cases)
 Education (5.0% of cases)


What does the Perpetrator Look Like?
 Male (59%)

 Age 36 to 50 (65%)
 Bachelors or postgraduate degree (45%)
 Never charged or convicted for a previous crime (87%)
 Never previously punished or terminated for fraud
conduct (83%)
 Employees (46.2%) - Median loss $50,000
 Managers (36.7%) – Median loss $150,000
 Owners/Executives (17.1%) – Median loss $485,000


 Be proactive, not just reactive
 Best defense is a good offense, which is why many
companies choose to bring in an outside firm to
conduct a thorough assessment
 Re-screen not just new hires, but new vendors,
suppliers and business partners. It takes time, but it will
pay off the first time you spot a red flag


 Origin

 SSN & Address Information

 Multijurisdictional Criminal

 Multistate Sex Offender Registry


ACFE Report to the Nations on
Occupational Fraud and Abuse


 In 860 of the cases in study, the respondent was able to
provide information about the fraudster’s criminal
history.
 In only 6% of those cases had the fraudster been
convicted of a fraud-related offense prior to the
scheme in question.
 This is consistent with findings from previous studies.


©2012 Association of Certified Fraud Examiners, Inc.
Association of Certified Fraud Examiners, ACFE, the ACFE Logo, the ACFE Seal, Certified Fraud Examiner, CFE, CFE Exam
Prep Course®, Fraud Magazine® and EthicsLine® are trademarks owned by the Association of Certified Fraud Examiners, Inc.


In more than two-thirds of the cases reviewed:

 Victim organization referred the case to law
enforcement authorities for criminal prosecution.

 The median loss in these cases was $200,000

 Compared to a median loss of $76,000 for cases that
were not referred


For the cases that were referred to law enforcement,
survey participants were asked about the outcome of the
criminal case. A large number of those cases were still
pending at the time of our research.

In the 390 cases for which an outcome was known:

 Approximately 16% of the perpetrators were
convicted at trial,
 56% pleaded guilty or no contest to their crimes.
 There were only six cases in which the perpetrator
was acquitted.


 County

 Statewide

 Federal

 International

 Multistate

 Cursory Indicator New York


For the 454 cases in which the victim organization did not
refer the case to law enforcement, survey participants
were asked to identify the reasons for this decision.

The most commonly cited factors:

 Fear of bad publicity

 Followed by a determination that the organization’s
internal sanctions were sufficient punishment for the
misconduct


 Research shows that victim organizations are more
likely to pursue criminal action against a perpetrator
than they are to file a civil lawsuit

 Civil suits were filed in less than one-quarter of cases
in our current study

 These cases tended to involve the most costly frauds;
the median loss for cases resulting in a civil suit was
$400,000


 There were 695 cases in which the CFE provided
information on the fraudster’s employment history

 Responses show that the vast majority (84%) of
occupational fraudsters had never been punished or
terminated by an employer for a fraud-related offense
before the frauds in question

 Only about 7% of fraudsters had previously been
terminated by another employer for fraud


 Dates, position, eligibility for rehire

 Reason for leaving

 Supervisor

 Character, relationships, communication style, team
work, problem solving ability

 Acceptance of criticism


 Degree type

 Field of study

 GPA

 Start date

 Stop date

 Graduation date

 Reason for leaving


 Comprehensive interview

 Former supervisors

 Former co-workers

 Friends

 Gives information beyond the facts of employment

 Attitude and interpersonal skills

 Character traits and/or habits


Recommended for employers in all industries which
require employees to be certified and licensed

 Health care

 Education

 Security

 Construction contracting


In 81% of all cases reported to us, the perpetrator had
displayed at least one behavioral red flag, and, within
these cases, multiple red flags were frequently observed:
 The fraudster living beyond his or her means (36%)

 Experiencing financial difficulties (27%)
 Having an unusually close association with vendors or
customers (19%)
 Displaying excessive control issues (18%)
Consistency of the distribution of red flags from year to
year is particularly remarkable


 Background checks are a must for accounting
workers, and division of labor is also a good idea
 Never want one person to have sole access or control
over the financial system
 Make sure each worker takes vacations
 Employees who are involved in fraud will be hesitant
to take time off, they won’t want others looking over
their work, and potentially noticing irregularities in
their absence


 Access to company or customer cash, assets, credit
cards, valuables or confidential information

 Can demonstrate responsibility and reliability levels

 Reveals if subject may be tempted to commit
larcenous action

 Should only be used with established company
policies and procedures


 Motor Vehicle Search

 Reveal’s suspended/revoked license

 Patterns of reckless behavior

 Insurance risks

 Substance abuse


 Reduce turnover

 Increase productivity and employee morale

 Pre-Employment

 Pre-Promotion

 Annual Physical

 Random

 Post Accident


 Level 1
 Level 2


 Skimming
 Billing
 Fictitious Refunds
 Cash Larceny
 Check Schemes
 Expense Reimbursement Schemes
 Payroll Fraud
 Inventory Fraud
 Corruption
 Fraudulent Statements


Presented by Michelle Pyan
President
Licensed Private Investigator
(800) 284-0906

info@commercialinvestigationsllc.com

facebook.com/commercialinvestigationsllc

twitter.com/CI_LLC

linkedin.com/company/commercial-investigations-llc

The information provided in this presentation does
not constitute legal or accounting advise. It is for
information and discussion purposes only.

This presentation may not be reproduced without
the written consent of the author.


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