GACO event: Are we safe from internal fraud? - 7th June 2023

A report from the ACFE (Association of Certified Fraud Examiners) shows that a company loses at least 5% of its annual income as a result of internal fraud. Moreover, 23% of the fraud committed by employees involves a loss of at least € 850,000.

Internal fraud can therefore cause a great deal of damage to your company. Internal controls and clear procedures undoubtedly limit the risk of internal fraud, but these systems are not always able to cope with employee conspiracy.

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Types of internal fraud

Employees use different practices to commit fraud. The most common forms of internal fraud are embezzlement of cash and fraudulent payments.

Embezzlement of cash

Fraud involving the misappropriation of cash receipts falls into two categories. Depending on the timing, we distinguish skimming and theft.

Skimming

Skimming is a form of theft where the perpetrator steals money before it is registered in the accounting system. This form of theft is difficult to detect because the offender leaves no traces behind in the accounting system that internal controls can reveal. Employees who collect payments can easily withhold money in this way.

One of the most common skimming systems is the sale of goods or services to a customer where an employee collects the payment from the customer and then retains the money himself without actually registering the sale. Signs of this type of fraud are a loss of gross margin and a shortage of stock.

Theft

We speak of theft when the money is already registered in the accounting system. In that case, the perpetrator steals money from the cash register immediately after he processes the sales transactions. Effective internal controls and procedures can detect this form of fraud.

Fraudulent payments

In the case of fraudulent payments, offenders pay out company money to themselves or to accomplice third parties who are controlled or have a relationship with the employee. The three most common fraudulent scams are invoice fraud, wage fraud and expense fraud.

Invoices

In the case of invoice fraud, the perpetrator draws up fraudulent invoices and processes them in the supplier system. Also personal purchases with a business credit or debit card or transfers for personal use through business bank accounts fall under this form of fraud.

Wage

In the case of payroll fraud, the fraudster forges invoices in order to induce the company to pay a salary to third parties. The most common form involves so-called ghost employees. These people who do not really work for the company are included in the system as someone who provides services. That third party can be a fictional person, but also a real person with bad intentions. Also common is a malicious employee who creates a ghost employee with a name that closely resembles that of a real employee and then collects the salary himself.

Expenses

In the case of fraud involving the reimbursement of expenses, the offender manipulates the certificates of expenses in order to be reimbursed for non-commercial expenditure. Forgery of declarations by overestimating expenses or the production of false invoices are also common practices.

Therefore, the question is: Is your company safe from internal fraud? How can you identify any signs of internal fraud early? How can you effectively protect yourself against internal fraud? And if it happens, what can you do against internal fraud?

GACO is very happy to have engaged a specialist in this field: Louise Abbott, Partner at Keystone Law UK to deliver this very interesting webinar.

Louise Abbott

Louise is a disputes solicitor with 20 years experience and has a distinct specialism in domestic and international civil fraud, cryptocurrency, and recovering the proceeds of fraud.

Recently, Louise has taken on a number of UK based, European and global clients who have lost funds as part of the FTX collapse and is the go-to English solicitor for guidance on all aspects of crypto currency fraud.

In addition to being a Partner at Keystone Law, Louise is also a Director at M2Recovery Limited which is offering the world’s first before-the-event legal expenses insurance for crypto asset recovery. Prior to joining Keystone Law, Louise was Head of Commercial Litigation and Civil Fraud at Howard Kennedy where she led a team of 50 litigators.

Louise frequently contributes to articles through journalists from newspaper and media agencies on all legal aspects of fraud.

Date: 7th June 2023
Time: 09.30 - 11.00am CET
Type: Webinar (online)
Fees: GBP 35 GACO Members/GBP 50 Non-GACO Members

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