Presented at BerryDunn\'s Bank Taxation & Risk Management Forums - November 16 & 17, 2010

1. Bank Fraud & Data ForensicsBank Taxation & Risk Management ForumsNovember 16, 2010 – South Portland, MaineNovember 17, 2010 – Concord, New HampshirePresented By:Bill Brown, CPA, CFFA, CFE Eigen Heald, MsIA, CISSP, GCFATodd Desjardins, CPA, CFE

2. Overview Introduction Fraud Considerations for Banks Computer Fraud and Data Forensics Questions and Discussion

3. Terms and Definitions Fraud Fraud investigation Forensics Forensic accounting Digital forensics

4. Reference Statistics in this presentation, unless otherwise noted, are from: The Report to the Nations - 2010 Global Fraud Study Study of 1,843 cases of occupational fraud published by the Association of Certified Fraud Examiners

5. Small Businesses are Vulnerable 42.1% $231,000 30.8% $155,000 28.7% 26.1%

6. Banks Have More than their Fair Share

7. Other Disturbing Statistics Median Losses Tenure of perpetrator Less than one year – $47,000 10 years of more – $289,000 Education of perpetrator High School Graduate – $100,000 Postgraduate Degree - $300,000

8. Other Disturbing Statistics Percentage of Cases Reported Department of Perpetrator Accounting – highest – 22.0% Internal Audit – lowest - 0.2% Median Duration of Fraud Schemes Overall – 18 months Check tampering – 24 months Expense reimbursements – 24 months

9. Risk Factors Financial Misstatement Fraud Complexity Perverse Incentives Highly Subjective Valuation Asset Misappropriation Complexity Inherent Lack of Accountability Personal Trust

12. Mortgage fraud (material misrepresentation or omission)

14. Financial Statement Fraud Asset/Revenue overstatement Improper asset valuations Timing differences Concealed liabilities and expenses Improper disclosures

15. Asset Misappropriation Unauthorized transfers/disbursements Payroll schemes Ghost employees Expense reimbursement schemes Theft of portable fixed assets Others…

16. Fraud Triangle

18. Preventing and Deterring Fraud (Continued) The list continues… Robust review of suspense/clearing account activity – be certain the reconciliation makes sense and items are clearing timely and properly Implement a fraud reporting mechanism that is anonymous Maintain professional skepticism Attitude and rationalization can be improved within companies by strong “tone at the top” and employee appreciation efforts

20. Identify significant risk areas (multiple locations, business segments, etc.)

21. How is the importance of ethical behavior and appropriate business practices communicated?

23. Common Sources for Accounting & Digital Forensics Corporate investigations • Civil litigation • Attorneys • State Courts • Private Investigations • Individuals

24. Similar Procedures: Discovery • Timelines • Parties involved • Evidence gathering • Reporting/testimony Consider: Most fraud is committed with a computer!

27. Cell phones

28. GPS devices

29. Personal Media (iPods)

30. CD/DVDs

32. Internet activity

33. Transfer of files to storage devices

34. Links to documents on the networkExamining user profiles Malware identification

35. How Did Digital Discovery Help? Identifying network activities Email Review Internet activities Identifying collaborators Ruling out other avenues of fraud Identifying motivations for fraud

36. Contact Information Bill Brown bbrown@bdmp.com Eigen Heald eheald@bdmp.com Todd Desjardins tdesjardins@bdmp.com