fraud prevention plan(5)-final from henry hardoon at
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8/9/2019 Fraud Prevention Plan(5)-Final from Henry Hardoon at www.hhassociates.co.uk
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Paul Lower and Henry Hardoon 2010
FRAUD DETECTION & CONTROL
FRAUD PREVENTION PLAN
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FRAUD PREVENTION PLAN
Henry Hardoon ACA, FCCA, FAIA, CMC, APM, MIIT
Chartered Accountant & Chartered Management Consultant
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There is no cookie-cutter fraud response strategy that is
appropriate for every business.
The diversity of fraud risks associated with different business
environments and situations requires that fraud risk responsesbe appropriate for the specific business operations, business
environment, and fraud experience.
It is a plan that enables an organsisation to respond
appropriately if the need arises.
FPP - Intro
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The use of the plan should enable the Organisation to:
prevent further loss
establish and secure evidence necessary for disciplinary and
criminal action
assign responsibility for investigating the incident
establish circumstances in which external specialists should be
involved
establish lines of communication with the police
FPP - Purpose
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The use of the plan should enable the Organisation to:
keep all staff with a need to know suitably informed about the
incident and the organisation's response
recover losses
deal with requests for references for employees and students
disciplined, dismissed or prosecuted for fraud
review the reasons for the incident, the measures taken toprevent a recurrence, and any action needed to strengthen
future responses to fraud.
FPP Purpose cont
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Consider that the ideal fraud opportunity might include any of
the following factors:
A weakness in the internal control system or the ability to
easily override the control system (i.e., an opportunity).
Pressures or incentives to commit fraud sufficient to overcome
the pressures or incentives not to commit fraud.
Perceived reward for fraud is relatively high.
Perceived risk of detection is relatively low.
Potential penalty, if caught, is perceived as being small or
relatively inconsequential.
Defining FPP
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Therefore, an effective fraud response plan should:
Limit fraud opportunities by establishing strong internal
controls andlimiting overrides of those controls.
Managepressures and incentives inherent in the businessprocess (to the extent this is possible).
Focus fraud prevention and detection efforts on risks where
potential financial loss is the greatest or where cumulative
losses from smaller frauds may be significant.
Foster a strong perception of detection through proactive
fraud identification, detection, and investigation efforts.
Respond to identified fraud by consistently applying a zero-
tolerance policy.
Defining FPP cont
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Initiating action
Notification of suspected fraud
Prevention of further loss
Establishing and securing evidence
Recovery of losses
Reporting financial fraud to the Audit Committees
Reporting lines
Responsibility for investigation
Review of the fraud response plan
FPP Elements
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Initiating action
Suspicion of fraud or irregularity may be captured through a
number of means, including the following:
the operation of proper procedures
the requirement on all staff under the Law (if relevant) to report
fraud
the public disclosure policy ('whistle-blower's charter')
planned audit work
FPP Elements cont
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Notification of suspected fraud
All actual or suspected incidents are reportable immediately to
the senior designated official. There will be special
arrangements for other staff levels.
The Senior designated official will determine whether to
investigate a suspected incident under the Organisations
Disciplinary Procedure or this Fraud Response Plan. Normally,
the senior designated official of the Organisation will determine
that an investigation will take place under the Organisations
Disciplinary Procedure for 'minor' losses or infringements, and
the Fraud Response Plan will be used for major suspected
wrong doing.
FPP Elements cont
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Notification of suspected fraud
If the investigation of an incident is to take place under the
Fraud Response Plan, the senior designated official will decide
on the initial response and take such steps as are necessary
to:
Prevent further loss/damage
Establish and secure evidence
Notify the necessary individuals, committees, and outside
authorities
Recover any loss
FPP Elements cont
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Setting up of fraud response group (The Fraud ResponseGroup will advise the Senior designated official of the
Organisation and the Director of Finance on the necessary
measures to enable the formulation of a plan of action. This
will normally include an investigation, led by the Senior
designated official of the Organisation).
FPP cont
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A Fraud Response Group will support the senior designatedofficial of the Organisation, and may include as relevant:
Deputy Principal forStrategy and Resources
A solicitor recommended by the legal advisor
Director of Finance
Group Management Accountant (where necessary)
Group Financial Accountant (where necessary)
Director of Human Resources (where relevant)
FPP cont
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Establishing and securing evidence thesenior official will
Maintain familiarity with the Organisations disciplinary
procedures, to ensure that evidence requirements will be met
during any fraud investigation following consultation with the
senior staff
Establish and maintain contact with the police. Ensure that
staff involved in fraud investigations are familiar with and follow
rules on the admissibility of documentary and other evidencein criminal proceedings.
To ensure interviews with suspects must be conducted under
rules defined in the Police
FPP cont
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Recovery of losses
Recovering financial losses is a major objective of any fraud
investigation.
The Director of Finance shall ensure that, in all fraudinvestigations, there is the quantification of the amount of any
loss. The Organisation will seek the repayment of losses in all
cases.
FPP cont
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Recovery of losses
Where the loss is substantial, the Organisation Solicitor will
immediately obtain legal advice about the need to freeze the
suspect's assets, through the court, pending conclusion of the
investigation. The Organisation Solicitor will also seek legaladvice about prospects for recovering losses through the civil
court, where the perpetrator refuses repayment. The
Organisation would normally expect to recover costs in
addition to losses.
FPP cont
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Prevention of further loss
Where initial investigation provides reasonable grounds for
suspecting an individual, or a group of individuals, of fraud, the
Senior designated official of the Organisation will decide howto prevent further loss/damage, taking advice from the Fraud
Response Group.
This may include suspension of appropriate staff. It may be
necessary to plan the timing of suspension to prevent the
suspects from destroying or removing evidence that may be
required to support disciplinary or criminal action.
FPP cont
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Notification of suspected fraud to othersenior staff
FPP cont
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Reporting financial fraud to the AuditCommittees
The Senior designated official of the Organisation shall report
any incident to the Chair of the Finance and Audit Committees.
The Senior designated official of the Organisation shall
promptly report any significant variation from the approved
fraud response plan, together with reasons for the variation, to
the chair of both the Finance and the Audit Committee.
FPP cont
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Reporting financial fraud to the AuditCommittees
On completion of a special investigation, a written report shall
be submitted to the Audit Committee containing:
A description of the incident, including the value of any loss,
the people involved, and the means of perpetrating the fraud
The measures taken to prevent a recurrence
Any action needed to strengthen future responses to fraud,
with a follow-up report on the actions taken.
FPP cont
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Reporting lines
The Fraud Response Group shall provide a confidential report
to the Chairman of Court and the Chairman of the Audit
Committee, external audit and the Director of Corporate
Communications at least monthly, unless the report recipientsrequest a lesser frequency.
FPP cont
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Reporting lines -The scope of the report shall include:
quantification of losses/damage
progress with recovery action
progress with disciplinary action
progress with criminal action
estimate of resources required to conclude the investigation
actions taken to prevent and detect similar incidents.
The individual(s) under investigation will be informed of the
outcome, when the report has been completed.
FPP cont
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Responsibility for investigation
The Senior designated official of the Organisation shall
normally lead all special investigations. Where appropriate, the
Senior designated official of the Organisation may delegate the
conduct of the investigation to the Director of Finance or otherstaff.
FPP cont
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Responsibility for investigation
In undertaking any investigation under the Fraud Response
Plan, the investigation will follow those principles and
procedures detailed in the Organisations disciplinary
procedures.
Those charged with the investigation will have unrestricted
right of access to all vouchers, documents, accounts, computer
data, and any other information. This includes the right to
verify assets and have direct access to any employee or
person responsible for the administration or management of
Organisation resources with whom it is felt necessary to raise
and discuss such matters. All managers are required to co-
operate with requests for assistance in respect of any
investigation.
FPP cont
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Responsibility for investigation cont
All investigations shall be completed in a timely manner.
Some special investigations may require the use of technical
expertise that the Organisation does not possess. In thesecircumstances, the Fraud Response Group may approve the
appointment of external specialists to lead or contribute to the
special investigation.
Any disciplinary action arising from the investigation will follow
the procedures set out in the appropriate Organisation
disciplinary procedures.
FPP cont
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Review of fraud response plan
There will be a review of this plan by the Senior designated
official of the Organisation and Director of Finance for fitness
of purpose at least annually, or after each use. The audit
committee will approve any change to the plan.
FPP cont
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Thank you !Thank you !