05 Jun 2024
0

What to Do if your Business is Defrauded

Roger Rossmeisl, CPA
Fraud Briefs
What to do if your business is defrauded

Occupational fraud isn’t just a financial threat. It can potentially change a business’s reputation, culture and relationships. But before dealing with any larger ramifications of fraud, defrauded companies must first “clean up” the mess. This may include potentially terminating the perpetrator, taking civil action or referring the perpetrator to the police. Whatever a business chooses to do in the aftermath of a fraud incident, swift action is paramount and internal controls must be addressed. How do victims react? In its Occupational Fraud 2024: A Report to the Nations, the Association of Certified Fraud Examiners (ACFE) reveals that when organizations uncover fraud, 67% choose to terminate the individuals involved. In 57% of cases, companies refer fraud perpetrators to law enforcement. Of those, 45% result in the perpetrator pleading...

16 May 2024
0

Why Would Your Businesses Want “Know Your Customer” Policies?

Roger Rossmeisl, CPA
Fraud Briefs
Why Would Your Businesses Want "Know Your Customer" Policies?

Financial institutions, investment service companies, insurers and creditors generally are required to implement and follow know-your-customer (KYC) policies as part of a larger anti-money laundering (AML) effort. Although most other nonregulated businesses don’t have a KYC mandate, such procedures can help prevent fraud and significant financial losses from criminal activity, among other benefits. In addition, following KYC principles sends a message to customers, vendors and other stakeholders that you take trust and security seriously. Due diligence requirements As part of their KYC processes, regulated businesses have three duties to perform: customer due diligence, enhanced due diligence and continuous monitoring. In practice, this means they verify customers’ names, addresses and dates of birth and check them against lists of known criminals. In addition, they monitor transaction trends and...

28 Apr 2024
0

How Fraud Perpetrators Conceal Their Illicit Activities

Roger Rossmeisl, CPA
Fraud Briefs
How Fraud Perpetrators Conceal Their Illicit Activities

When employees commit fraud, they generally try to keep the schemes going as long as possible by concealing their activities from others. How successful thieves are at concealment depends largely on their identities, their roles within their organizations and the type of fraud they commit. To uncover potential fraud in your organization and prevent financial losses, it helps to familiarize yourself with common perpetrator characteristics and the methods occupational thieves use to conceal their crimes. Identity and fraud Every two years, the Association of Certified Fraud Examiners (ACFE) releases a comprehensive study on occupational fraud based on real-life incidents. The most recent report, Occupational Fraud 2024: A Report to the Nations finds that while most fraud is committed by employees and managers, schemes involving company leaders are...

28 Apr 2024
0

Got Fraud Losses? How Experts Put a Number on Them

Roger Rossmeisl, CPA
Fraud Briefs
Got Fraud Losses? How Experts Put a Number on Them

If your company suffers significant losses due to a fraud incident, you may decide to pursue the perpetrator in court, possibly to obtain compensatory damages. Assuming you win your case, you should know that estimating fraud damages is challenging. It generally requires the assistance of a financial expert, who will consider the facts of the case and the harm suffered by your business. Let’s take a look at calculation methods. Benefit-of-the-bargain vs. out-of-pocket Damages experts typically use either the benefit-of-the-bargain or out-of-pocket approach to make estimates. The appropriate method depends to some degree on the location and nature of the fraud. But in most cases, the benefit-of-the-bargain method results in greater restitution for victims. Take, for example, a real estate developer who buys a parcel of land that...

17 Apr 2024
0

Charity Scams: A Small Business Perspective

Roger Rossmeisl, CPA
Fraud Briefs
Charity Scams: A Small Business Perspective

Many businesses support their communities by donating to local charities. Although there are plenty of non-profits that deserve your support, some exist solely to facilitate fraud. How can you avoid the latter? Familiarize yourself with the deceptive tactics scammers use and carefully screen charities for legitimacy — before you write a check. Branding tricks Fraud perpetrators employ many tried-and-tested approaches to trick businesses into donating to fake charities. One of the most effective ways that they secure donations is by creating entities that resemble established non-profits. They use familiar-sounding names and familiar-looking logos. They also make their websites and marketing materials appear like those of the charities they’re impersonating. These scammers often use their fake branding in emails and on social media platforms. Not only do they hope...

17 Apr 2024
0

Tips for Investigating Employee Fraud Tips

Roger Rossmeisl, CPA
Fraud Briefs
Tips for Investigating Employee Fraud Tips

Occupational fraud is a crime generally committed by employees against their employers. Ironically, employees also are most likely to notice or suspect occupational fraud schemes conducted by their coworkers or managers. Whether they report through an anonymous tipline or directly to management or HR, rank-and-file workers often are the first to raise the alarm. If an employee alleges that someone has committed theft or fraud, or simply exhibits suspicious behavior, it’s your responsibility to take the charges seriously and investigate them. Here’s how. Preliminary digging If you receive a fraud tip, you’ll need to assess its validity by conducting preliminary interviews — even if you plan to eventually turn the investigation over to legal and fraud experts. To help avoid unnecessary legal complications, keep details of any allegation...

05 Mar 2024
0

Preventing Fraud Losses Across Multiple Business Locations

Roger Rossmeisl, CPA
Fraud Briefs
Preventing Fraud Losses Across Multiple Business Locations

If you operate your business in multiple locations (as with retail or restaurant chains), you face some extraordinary fraud-prevention challenges. After all, you can’t be everywhere at once. And the more locations you operate, the harder they are to monitor. Without the appropriate checks and balances in place, fraud losses in one store could threaten the health of your entire company. If you don’t already have one, consider implementing a robust antifraud program. A comprehensive strategy Whether you operate multiple locations as an independent owner or franchisee, fraud is an ever present risk. Depending on the products and services your business offers, employee, credit, returns and gift card fraud are all schemes your business potentially faces. Mitigating these risks requires a comprehensive strategy that doesn’t rely exclusively...

25 Feb 2024
0

Early Revenue Recognition: Not Just Bad Accounting, But Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Early Revenue Recognition: Not Just Bad Accounting, But Fraud

Although financial statement fraud is the least common form of occupational theft (9% of incidents), it costs organizations the most in financial losses, according to the Association of Certified Fraud Examiners. Businesses defrauded by financial statement schemes had median losses of $593,000. Early revenue recognition, which distorts profits and can artificially boost a business’s financial profile, is popular among financial statement fraud perpetrators. To comply with Generally Accepted Accounting Principles and preserve your company’s reputation, you must prevent such activities on your watch. It’s also important to be able to detect them in the financial statements of business partners, including acquisition targets and customers applying for credit. Schemes and warning signs Owners, executives and others with access to financial statements might recognize revenue improperly by delivering products early,...

18 Feb 2024
0

Keep Fraud Off Your Restaurant’s Menu

Roger Rossmeisl, CPA
Fraud Briefs
Keep Fraud Off Your Restaurant's Menu

The restaurant business is notoriously tough — even without the many fraud threats. The fact is, when you’re operating on very thin profit margins, you can’t afford to lose a cent to thieves. To protect your business from ill-intentioned employees, customers and vendors, take steps to fortify your restaurant against fraud. Gaps for exploitation Your restaurant may have high transaction volumes but lack the technology linking point-of-sale, inventory and accounting systems. This leaves gaps for fraudsters to exploit. Employees could, for example, provide food and drinks to friends without entering the sales — or ring up only a portion of their friends’ bills. They might issue voids or refunds when there was no original sale and pocket the proceeds. Or they could overcharge customers by, say, charging...

18 Feb 2024
0

Generative AI Can Help Prevent, Detect and Investigate Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Generative AI Can Help Prevent, Detect and Investigate Fraud

You may already be familiar with artificial intelligence (AI) and even use it in business applications. What about generative AI (Gen AI)? Gen AI typically is used to create new content (such as text, images, code and video) from raw data and includes such popular systems as Grok, ChatGPT and DALL-E. Gen AI can also help reduce, uncover and combat fraud. However, there may be ethical and legal implications of using these applications. Digital decisions Fraud can occur when a perpetrator finds one or more weaknesses in a company’s defenses and exploits them, creating patterns of activity. Finding these patterns quickly is critical to minimizing losses. Traditional fraud detection engines rely on rules to detect suspicious activity. Once the technology detects a transaction that fits a pattern, the...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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