29 Oct 2023
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Keep Money Laundering from Threatening your Small Business

Roger Rossmeisl, CPA
Fraud Briefs
Keep Money Laundering from Threatening your Small Business

When criminals profit from illicit activities, they usually need to “clean” or disguise the proceeds of their crimes. Money laundering disconnects illegally acquired funds from sources that include theft, drug trafficking and terrorism. This makes it harder for law enforcement to connect the dots, arrest the perpetrators and seize their money. Unfortunately, money launderers often use innocent small businesses to clean their dirty money. In some cases, businesses might be pressured to participate in money laundering. How can you keep your business safe from these criminal activities? 3 stages Money laundering generally involves three stages: Placement. Here, criminals introduce their illegally obtained funds into the economy, making them appear legitimate. Strategies could include separating large amounts into smaller ones and depositing them in multiple accounts, including offshore accounts. ...

19 Oct 2023
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Fresh Fraud Schemes for Small Businesses to Watch Out For

Roger Rossmeisl, CPA
Fraud Briefs
Fresh Fraud Schemes for Small Businesses to Watch Out For

When it comes to fraud, it may seem there’s nothing new under the sun. Unfortunately, fraud perpetrators are always finding novel ways to swindle businesses. Here are some recent scams — and how your business can protect against them. Influencer shakedowns Scam: So-called social media influencers ask restaurants and bars for complimentary meals and drinks in exchange for “free” publicity on platforms such as TikTok and Instagram. Some less-ethical influencers rack up big bills and fail to post anything about the businesses. Others accept money for “exposure packages” (to place a certain number of posts on various platforms) and then never deliver. Solution: If an influencer approaches you for a comp meal (or other free products or services), verify that the influencer has the number of followers claimed...

04 Sep 2023
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Protecting Your Business While Using AI

Roger Rossmeisl, CPA
Fraud Briefs
Protecting Your Business While Using AI

Have you ever wondered whether the photo or video you’re viewing, the audio you’re listening to or the article you’re reading is real? Artificial intelligence (AI) can make the line between authentic and inauthentic hard to determine. For fraud perpetrators, the ability to create deepfakes, voice clones or machine-generated communications can make their scams far more compelling — and effective. Although using AI for criminal purposes is a clear-cut abuse of the technology, it’s possible for well-intentioned businesses to violate the Federal Trade Commission (FTC) Act. Sec. 5 of the FTC Act, “Unfair or Deceptive Acts or Practices” prohibits any material representation, omission or practice that’s likely to mislead consumers under ordinary circumstances. Here’s how to reduce the risk of violations. Limiting the technology’s risk Using AI can...

06 Aug 2023
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How Secure is Your Accounts Receivable Department?

Roger Rossmeisl, CPA
Fraud Briefs
How Secure is Your Accounts Receivable Department?

Asset misappropriation schemes make up more than half of all occupational fraud schemes, according to the Association of Certified Fraud Examiners. It’s a broad category that includes everything from skimming cash to stealing inventory to paying “ghost” employees. One hotspot for asset misappropriation is the accounts receivables department, where dishonest staffers could potentially divert customer payments for their own use. If you don’t have strong internal controls for receivables, what are you waiting for? Lapping leads The most common form of receivables fraud is lapping, where perpetrators apply receipts from one account to cover misappropriations from another. For example, rather than credit Customer A’s account for its payment, a thief may pocket the funds and later post a payment from Customer B to A’s account, Customer C’s payment...

06 Aug 2023
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How “Phoenix” Companies Abuse Bankruptcy Protection and Defraud Investors

Roger Rossmeisl, CPA
Fraud Briefs
How Phoenix Companies Abuse Bankruptcy Protection and Defraud Investors

According to S&P Global, there have been at least 230 corporate bankruptcy filings thus far in 2023 (through early June). That’s more than twice the number of filings over the same period in 2022. Such growing numbers represent bad news for the companies involved, obviously, but also potentially for their vendors, customers and other business partners. Although bankruptcy can be a valid business tool, it can also enable dishonest business owners to cheat their creditors and then launch a new business. Do whatever you can to steer your business clear of these “phoenix” companies. Driven into the ground Phoenix companies earn their name because they rise from the ashes of failed companies, often trading on the goodwill of the original businesses. Here’s how a phoenix company scheme might...

04 Aug 2023
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Minimizing Fraud Risk When Operating Abroad

Roger Rossmeisl, CPA
Fraud Briefs
Minimize Fraud Risk When Operating Abroad

Expanding operations into foreign countries can help U.S. businesses reduce labor and operating costs. It can also provide them with access to new markets and potentially higher profits. You may be attracted to a country by a plentiful labor supply, significant tax benefits or government incentives. But, beware: Some foreign business environments present serious fraud risks. Before you make the decision to cross borders, familiarize yourself with the country’s culture and laws. Threats everywhere Corruption is a business risk in every country, but in some countries, it’s omnipresent. For example, if you want to build a factory, you could encounter officials who expect gifts to “grease the wheels” or local politicians who are accustomed to excessive wining and dining in exchange for their cooperation. If you import...

16 Jul 2023
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Good Acquisition? Not if your Seller’s Hiding Something

Roger Rossmeisl, CPA
Fraud Briefs
Good Acquisition? Not if Your Sellers Hiding Something

If you’re considering buying a company, fraud may be the last thing on your mind. Unfortunately, you can’t afford to ignore the possibility that your acquisition target is hiding something — possibly something that will have negative financial and legal implications after the deal is complete. To ensure the transaction is what it appears to be, acquaint yourself with the issues and include a forensic accounting expert on your deal team. Look at the numbers During the due diligence process of a merger or acquisition, forensic experts review financial statements for subtle warning signs of fraud. These include excess inventory, a large number of write-offs, an unusually high number of voided discounts for returns, insufficient documentation of sales and increased purchases from new vendors. Another suspicious sign...

19 Jun 2023
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Financial Statement Fraud: Don’t Believe Everything You Read

Roger Rossmeisl, CPA
Fraud Briefs
Financial Statement Fraud: Don't Believe Everything You Read

Financial statements are central to understanding any business. A public company’s balance sheet, income statement and cash flow statement enable investors, lenders, the media and other stakeholders to value the company, forecast short- and long-term performance, and determine potential credit risk, among other purposes. To ensure analysis of a company is accurate and insightful, financial statements must be reliable. For this reason, financial statement fraud — the exaggeration or outright fabrication of numbers by insiders, such as owners and executives — is extremely dangerous. It can lead to criminal charges, lawsuits, large financial losses and even the company’s demise. It’s critical that your business do everything possible to prevent this type of fraud. More common than you might think Financial statement fraud involving large public companies has received...

15 May 2023
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Before Your Scan a QR Code, Make Sure It’s Legitimate

Roger Rossmeisl, CPA
Fraud Briefs
Before You Scan a QR Code, Make Sure It's Legitimate

Technology has made seemingly everything fast, convenient and easily accessible. This is certainly true of quick response (QR) codes, those ubiquitous symbols you can find on everything from restaurant menus to product packages to advertisements. When you scan QR codes with a smartphone, you can access prices, instructions, product information and even payment apps. But as with most technologies, fraud perpetrators have found ways to exploit QR codes — and steal from consumers and businesses. Here’s what you need to know. How thieves use them Last year, the FBI issued an alert about QR code tampering. Fraudsters replace or alter QR codes so that users are directed to malicious websites or inadvertently download malware onto their devices. Such schemes enable fraudsters to access victims’ account usernames and passwords...

05 May 2023
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Got Fraud? Call a Forensic Accountant

Roger Rossmeisl, CPA
Fraud Briefs
Got Fraud? Call a Forensic Accountant

Fraud perpetrated by employees, management, vendors or customers can happen to any business. And if it does, it can take years to recover from the financial losses and reputational damage. In some cases — especially those involving small companies that lack the cash reserves to cushion the blow — a fraud incident can shut down a business. If your business suspects fraud, engaging a forensic accountant to investigate, zero in on a perpetrator and gather evidence that can be used in court, is generally money well spent. In fact, the faster fraud is found, the less your company is likely to lose. The Association of Certified Fraud Examiners reports that fraud schemes have a median velocity (or rate at which financial losses pile up) of $8,300...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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