Fraud 2

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  1. Check Tampering Schemes
    Perpetrator physically prepares the fraudulent check

    • Depends on:
    • access to check stock
    • access to bank statements
    • access to cash disbursements journal
    • ability to forge signatures or alter other information on the check
  2. Forged Maker Schemes
    An employee misappropriates a check and fraudulently affixes the signature of an authorized maker

    • must have: access to a blank check
    • convincing forgery of an authorized signature
    • ability to conceal the crime
  3. Obtaining the check stock
    • Employees having access to company checks
    • Employees lacking access to company checks
    • producing counterfeit checks
  4. Safegaurding the check stock
    • Maintained under lock and key
    • access limited to those with check preparation duties
    • boxes of blank checks should be sealed with security tape
    • periodically check the security of unused checks
    • voided check should be promptly destroyed
    • checks should be printed on watermark paper with security threads and distinctly marked paper
    • out-of-sequence cancelled shecks and duplicate check numbers should be investigated
    • each day the first check of the day should be reconciled to the last check written the previous day
  5. Forging the signature
    • Free hand forgery - may not need to be particularly accurate
    • Photocopied forgeries - made of legitimate signatures and affix to check
    • Automatic check- signing mechanisms - produce perfect forgeries
  6. Forged Endorsement Schemes
    • Employee intercepts a company check intended for a third party
    • Signs the third party's name on the endorsement line of the check
  7. Altered Payee Schemes
    • Employee intercepts a company check intended for a third party
    • Payee designation is altered so the check can be converted
    • Less chance of discovery unless canceled checks are reviewed during reconciliation
  8. Concealed check schemes
    • Employess prepares a frudulent check and submits it along with legitimate checks
    • check is payable to the employee, and accomplice a ficticious person, or a ficticious business
    • occurs when checks are signed without proper reveiw or reviewer is busy
    • in many cases, only the signature line is exposed and the payeee is concealed
  9. Authorized Maker Schemes
    • Employee with signatory authority writes a fraudulent check
    • overriding controls though intimidation
    • poor controls
  10. Concealing check tampering
    • Fraudster reconciling the bank statement
    • re-alteration of checks
    • Falsifying the disbursements journal
    • reissuing intercepted checks
    • bogus supporting documents
  11. Electronic Payment Tampering
    • Abusing legitiate access to employer's payment System
    • gaining access through social engineering or password theft
    • Exploring weaknesses in internal control or payment system
  12. Payroll Schemes
    Occupational frauds in which a person who works for an organization causes that organization to issue a payment by making a false claim for compensation

    • ghost employee schemes
    • falisified hours and salary schemes
    • commission schemes
  13. Ghost Employees
    Someone on the payroll who does not actually work for the victim company

    • ficticious person
    • friend or relative
    • accomplice
  14. Ghost Employee Schemes
    • adding the ghost to the payroll
    • collecting timekeeping information
    • issuing the ghost's paycheck
    • delivery of the paycheck
  15. Commission schemes
    • Pay is based on an employee's output rather than hours worked or a set salary
    • Falsify the amount of sales made
    • Frudulently increase the rate of commission
  16. Expense Reimbursement schemes
    • Employees are reimbursed for expenses paid on behalf of their employer
    • business purpose explained and receipts attached per the organization's guidelines
  17. Mischaracterized expense reimbursements
    • Purpose of reimbursement request is misstated
    • fraudster seeks reimbursement for personal expenses
    • Perpetrators are usually hihg-level employees, owners, or officers
  18. Overstated Expense reimbursement
    • altered receipts
    • overpurchasing
    • overstating another employee's expenses
    • orders to overstate expenses
  19. Ficticious Expenses
    • Producing ficticious receipts
    • obtaining blank receipts form vendors
    • claiming the expenses of others
  20. Multiple reimbursement schemes
    • A single expense item is submittes several times to receive multiple reimbursements
    • Submit the credit care receipt for items charged to the company's credit card account
    • submitting the same expenses to different budgets
  21. Register Disbursement Schemes
    • False refunds
    • False voids
  22. False REfunds
    • A refund is processed when a customer returns an item of merchandise purchased from the store
    • merchandise is placed back into inventory
    • purchase price is returned to the customer
  23. False refunds
    • fraudster takes cash from the register in the amount of the false return
    • debit is made to the inventory system showing that the merchandise has been returned to the inventory
  24. Overstated refinds
    • fraudster overstates the amount of a legitimate refund and skims the excess money
    • customer is paid the actual amount owed for the returned merchandise and the excess is kept by the fraudster
  25. Credit card refunds
    • refunds appear as credits to the customer's credit card rather than as cash disbursements
    • Perpetrator does not have to pysically take the cash from the register
    • refunded to the prpetrator's credit card
  26. FAlse Voids
    • also generate a disbursement from the register
    • copy of customer's receipt is attached to the void slip
    • managers must generally approve voided sales
    • rubber stamp approvals allow the fraud to succeed
    • management and the employee may conspire
  27. COncealing register disbursements
    fraudsters typically do not make any effort to conceal the shrinkage

    • small disbursements
    • destroying records
Card Set
Fraud 2
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