AML COMPLIANCE CHALLENGES
From a generic or simplistic perspective , fraud is deception . Over time , the weight of the deception will cause the fraud to collapse . How long does it take before a fraud collapses and is detected ? It could be right at the start . It could be a matter of days , weeks , months or years . The useful life of a fraud is contingent on numerous considerations . The more situationally aware you are regarding the risk of fraud , the more likely that a fraud can be prevented or detected sooner rather than later .
There are a variety of specific fraud schemes that range from investment fraud to corporate fraud , embezzlement , check fraud , elder fraud and so many more sham activities . Regardless of the scenario , it should be viewed as deception and then from the type of specific fraud scheme it is . You need to consider which specific fraud schemes you are more susceptible to from both a personal and business perspective . Common themes to assess will originate with the potential abuse of trust and circumvention of control mechanisms . Regardless of whether it is an investment fraud , business fraud , embezzlement , elderly fraud or a check fraud , the abuse of trust and circumvention of controls will likely be a factor .
Disruptive and preventive measures leading to the deconstruction of a fraudster
Deconstructing a fraudster requires proactive and reactive measures . Preventive steps will be more proactive and detection mechanisms will be more reactive . Deconstructing a fraudster begins with fraud prevention . The best form of prevention is deterring a potential fraudster from crossing “ the line of integrity .” To do so , build a perception of detection by minimizing opportunity and reinforcing the fact that a fraudster will face serious consequences for their illicit activity .
Best practices to limit opportunity include having strong internal controls , consistent monitoring and a fraud risk assessment , assessing and testing the trust environment , and overall vigilance and situational awareness . In a business setting , promote a no tolerance for fraud policy . This begins with the tone at the top of the organization .
Business leaders must endorse strong ethical standards and embrace a no nonsense , no tolerance policy .
If you are reacting to a fraud that has been detected , deconstructing the fraudster starts with planning . You must assess the situation and prepare a written plan to address the fraud . Depending on the circumstances , you should determine how to exploit the vulnerabilities of the fraudster and how to develop evidence regarding the fraud . This requires understanding . The greed and arrogance of a fraudster cannot only cause them to lose focus , but it could cause them to more openly talk about their scheme and add additional layers of spin and deceit . The added spin and deceit adds additional weight to the fraud leading to its ultimate collapse . In addition , many fraudsters want you to know they are the smartest guy or girl in the room and they will not shy from talking about it . Be a good listener and let them talk and implicate themselves .
Other steps you need to consider in furtherance of deconstructing a fraudster includes not allowing the fraudster to gain the upper hand . Planning and preparation can assure that you maintain the upper hand . You must gather your facts objectively , be persistent and be analytical in evaluating the information you gather and assess the reasonableness of the situation . Another element to consider when planning is to develop contingencies to deal with potential exit strategies the fraudster might contemplate . Depending on the circumstances and the specific mindset of the fraudster you are dealing with , you can be confronted with a variety of potential exit strategies . Understanding and planning are the keys to deconstructing a fraudster .
Understand the consequences of fraud
It is important to recognize and understand the multiple consequences of fraud . All actions or inactions regarding fraud have consequences for victims , financial institutions and other third parties , as well as to the fraudsters themselves . Victims of fraud face financial loss , potential devastation and emotional distress . Financial institutions and other third parties could find themselves in the contrasting situation of serving as a facilitation tool or being a detection mechanism . Regardless of whether they find themselves as a facilitation tool or detection mechanism , they could face the consequences of financial , reputational and / or litigation risk . Invariably a fraud will collapse . Fraudsters face the consequence of prosecution and incarceration , restitution , seizure and asset forfeiture . In addition , fraudsters face the loss of family and loved ones as a result of their fraudulent behavior . The more that can be done to publicize and visualize the negative consequences fraudsters face , the greater the possibility of deterring potential fraudsters from crossing “ the line of integrity .”
Conclusion
What part of committing fraud is a good idea ? If fraudsters were truly aware of the inevitable negative consequences of their illicit actions , they would more likely be deterred from fraudulent behavior .
Trust is the foundation for meaningful relationships . Trust is also a fraudster ’ s best friend . Develop situational awareness for fraud with a focus on trust . Do not allow trust to negate control mechanisms . Limit the opportunity of fraud from occurring . Perception of detection is significant fraud deterrence . Strong internal controls will limit the opportunity for fraud . In promoting a perception of detection , reinforce the negative consequences of committing fraud . If a potential fraudster considered the inevitable negative consequences of fraud , they would likely be less inclined to cross “ the line of integrity ” and not commit fraud .
Once a fraud is occurring or has taken place , deconstructing a fraudster comes down to understanding and planning . You must understand the fraud risk , the mindset of a fraudster , the attributes of a fraudster , the fraud crime problem and the consequences of fraud . Understanding all of these should lead to better preparation and planning , which will subsequently lead to disruption and prevention .
Dennis M . Lormel , CAMS , internationally recognized CTF expert , president & CEO , DML Associates LLC , Lansdowne , VA , USA , dlormel @ dmlassocllc . com
ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS . ORG | ACAMSTODAY . ORG 53