preventing fraud
TRANSCRIPT
Preventing Fraud:
What are the central securities depositories doing to mitigate this risk?
Cancún, May 21, 2015
2© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
What is Fraud?
Generally, fraud is described as a deliberate act of abuse of trust, taking advantage of swindles. It is done for profit without the consent of the concerned company.
Source: Global profiles of a fraudster. KPMG International, 2012.
3© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
60%
50%
40%
30%
20%
10%
0%
What is the amount of losses due to Fraud activity?
$200,000 -$399,999
$400,000 -$599,999
$600,000 -$799,999
$800,000 -$999,999
$1,000,000and up
Less than$200,000
54.4%
11.8%
6.6% 3.4% 1.8%
21.9%
The average Fraud $145
thousand
Source: Report to the nations. ACFE, 2014.
4© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
Global profile of a fraudster
Source: KPMG International, 2013.
5© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
Why the Fraud occurs?
The damage caused by Fraud activities is 3.5 trillion USD globally!!
26%
22%
18%
14%
11%
9%
Management override
Overconfidence and lack of supervision
Avarice
Weak ethical culture
Financial goals pressures
Economic context pressures
Source: KPMG International, 2013.
6© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
Main global Fraud activities
Types of Fraud
CorruptionAsset
MisappropriationFinancial
Statement Fraud
Conflict of interest
Bribery
Illegal gratuities
Economic extortion
Cash
Inventory and All other assets
Asset/Revenue Overstatements
Asset/Revenue Understatements
Cybercrime
Network intrusion
Intellectual property theft
Improper disclosures
Deny of Service
Typically in the financial industry.Source: KPMG International, 2013.
7© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
Is your organization prepared to tackle Fraud?
0% 10% 20% 30% 40% 50% 60% 70% 80%
6%
66%
28%
6%
71%
23%
2011 2013
Yes
No
Do not know
Source: KPMG International, 2013.
8© 2015 KPMG Advisory Services S.A.S. is a Colombian simplified stock partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
Mitigating the Fraud risk
Fraud RiskManagement
Program
Prevention
DetectionResponse
Diagnostic
Design
Implementation
Eval
uatio
n
Prevention Detection Response
Supervised by: Board of Directors / Audit Committee, control and compliance areas (Risk
Management and Internal Audit)
Fraud Risk Assessment
Company network firewalls
Due Diligence of employees and
third parties
Anti-corruption policies and
manuals
Training the internal audit team
Anonymous reporting
mechanisms (line ethics)
Audit supervision and
control areas
Proactive Data Analysis (DA)
Data mining of critical
business
Monitoring routines
Internal investigation
protocols
Fraud risk matrix for all
the organization
Corrective actions protocol
Source: KPMG International, 2013.
