Charity Fraud –What your charity needs to know

March 1, 2011

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Webinar Agenda

Fraud Prevention Month & Charity fraud

Survey results on charity fraud

An inside look at charity fraud

Tips for protecting your charity

Charity Fraud Awareness Quiz

Fraud Prevention Month

Charity Fraud – What is it?

• Impersonators pretend to represent a legitimate charity

• A false charity is created

• The money never reaches the charity

Goals:

• empower Canadians to recognize the signs of charity fraud

• enable Canadians to identify legitimate charities

• ensure that charities maintain Canadians’ trust

Partnership to raise awareness about charity fraud in Canada

Why focus on charity fraud?

Understanding Canadians’ Donation Habits, Views and Awareness about Charity Fraud and Efforts Taken to Protect Against Fraud

Survey Methodology

• February 2nd – 3rd, 2011

• Angus Reid Public Opinion conducted online survey among 1,008 randomly selected Canadians.

• 2011 survey follows up on November 2009 survey

• Canadians are generous –Average 4.8 donations/yr

• Women are more likely to give

• Older Canadians (55+) are more likely to give

• Canadians in Prairies are more likely to have donated

Charitable Giving: Activities and Trends

Preferred Donation Methods

1. Cheque

2. Online

3. Door-to-door

4. Phone

Concerns About Charity Fraud

• Significant increase in the number of Canadians concerned about becoming victims of charity fraud

• 65% vs. 51% in 2009

• Majority believe the risk is greater now than 10 years ago

Concerns About Charity Fraud

• As a result of this increasing concern, more than one-half of Canadians say they are less likely to donate to charities

• Incidences of charity fraud remains low & stable

Protection from Charity Fraud

• Despite the significant increase in fear of charity fraud, many take no steps to protect themselves

• What made people trust a charity:

– Reputation

– Media coverage & advertising

– Being asked by a friend or colleague to give

How Fraud Can Affect Charities

Craig HannafordFraud Squad TV

Frauds Targeting Charities

• Canada has a robust charity, not-for-profit and volunteer community.

• Charities account for approximately 6.8 of GDP.

• Charities employ 12% of Canada’s economically active population

• Charities are a rich target for fraudsters

Frauds Targeting Charities

• Internal fraud

Frauds Targeting Charities

• In a recent study, dollar losses to fraud for charities ranged from $474 to $2,300,000.

Frauds Targeting Charities

• Most fraud cases in charities are detected by accident!

Frauds Targeting Charities

• What types of charities are affected?

Frauds Targeting Charities

• What types of charities are affected?

• Smaller charities appear more vulnerable.

Frauds Targeting Charities

Internal fraud prevention tips:

• Segregation of duties and responsibilities• Regular internal audits• Cheque signing authorities• Proper and documented policy and

procedures• Watch for changes in spending habits of

employees• Tip line or some way employees can make

anonymous complaints. (FOLLOW-UP)

Frauds Targeting Charities• External fraud

• No real statistics – hard to quantify

Frauds Targeting Charities

External fraud types:• False invoices• False directions to donors to change gift deposit

instructions• Advance fee• Materially false applications for funding• Fundraising contractor fraud• Charity identity theft (reputational risk)• Bogus tax receipts• Investment scams

Frauds Targeting Charities

External fraud prevention:• Data protection and restrict access• Proper vetting of new staff• Ensure all staff and external partners

are aware of your ‘normal’ operating procedures.

• Proper documented procedures on crucial processes. (i.e. issuance of tax receipts)

Frauds Targeting Charities

• Processing of invoices follows documented procedures. (Purchase order matched to invoice matched to payment)

• Internet searches on regular basis for your own charity.

• Proper investment policy and procedures. Legal counsel review.

Fraud Awareness in the Charitable Sector

Presented by: Michael Fox

Director, Fraud Strategy, Capital One

March 1, 2011

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The Donor Information Life Cycle

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• At any stage in the above life cycle,

weaknesses in the way information is handled

can lead to the identities of your donors being

used for fraudulent purposes.

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Very Little Information is Required to Commit Fraud

Name Address

Date of

Birth

Credit

Card

Number

Credit

Card

Receipts

User ID /

Email

Phone

NumberPassword

• Fraud can be committed with as little as 2-3

pieces of the above information

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Collection and Transmission

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• In recent years, fraud rings have commonly moved

their attacks to the information transmission stage.

• Limit information collection to what is necessary – if

you don’t need it, collecting additional information is

simply taking on additional risk.

• When processing credit card donations over the

internet, use a secure, encrypted channel.

• Send a follow up email to the donor to confirm the

donation.

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Storage

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• Create procedures to prevent improper access to

information by both external and internal parties.

• Where possible, divide up sensitive information – don’t

store everything about a donor in one place.

• Conduct privacy training to educate employees about the

importance of protecting personal information.

• Establish clear lines of accountability for information

storage and protection. Appoint an internal “champion”.

• Do not store information, such as credit card data, that

you will not be using again.

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Storage

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• The risk of an attack from internal sources is often

greater than from external parties.

• Specific access controls must be in place to limit

employees to only the personal information that is

needed to do their jobs.

• Restrict any transportation of donor information

offsite, in both paper and data form.

• If possible, track when donor information is accessed

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Ongoing Usage

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• If credit card information must be kept – such as in the case

of monthly donations – additional security is appropriate. A

reputable, experienced third-party payment processor is

often the best solution.

• Obtain specific consent from donors for any ongoing use.

• Screen any third parties that you will be transmitting

information to (such as for Direct Mail or Telemarketing),

ensuring they uphold high standards. Use data encryption.

• Continue to follow clear internal access control procedures.

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Disposal

Ongoin

g

Usage

Storage DisposalCollection and

Transmission

• Personal information should not be retained any longer

than is absolutely necessary. The best way to avoid

losing data is to not have it to begin with.

• Establish clear rules outlining the minimum length of time

information shall be held to fulfill tax or regulatory

requirements, and the maximum time information shall be

held before being destroyed.

• Regularly review existing information to ensure that it is

still required.

• Information must be disposed of in a way that minimizes

any potential of illegitimate access.

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What if Our Information is Compromised?

• If suspects have been identified, it is appropriate to contact law

enforcement

• Payment associations such as Visa/MasterCard, along with

credit reporting agencies, should be contacted when there is a

risk of identity theft. They will be able to take action to minimize

the impact on individual donors.

• The Office of the Privacy Commissioner of Canada should be

notified when there is a breach involving personal information.

• Donors should be notified as soon as possible that their

personal information has been compromised, including;

– The specific personal information involved,

– Any corrective actions that have been taken to rectify the problem,

along with corrective actions that will be taken,

– Instructions to donors on steps they can take to protect themselves

against identify theft and fraud.

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Additional Resources

• Canadian Standards Association Model Code for the Protection

of Personal Information - 10 Basic Principles:

1. Accountability

2. Identifying Purposes

3. Consent

4. Limiting Collection

5. Limiting Use, Disclosure, and Retention

6. Accuracy

7. Safeguards

8. Openness

9. Individual Access

10. Challenging Compliance

• Personal Information Protection and Electronic Documents Act

(PIPEDA): http://www.priv.gc.ca/leg_c/leg_c_p_e.cfm

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Methods to Instill Confidence in the General Public

• Avoid “suspicious” soliciting techniques that are overly aggressive or

high pressure.

• Ensure those soliciting on your behalf are up front about the name of

the organization, with proper identification

– Make it easy to find and contact your organization to verify

information if people are suspicious

• Be clear about the charity and about how donations are used

• Provide an annual report and financial statement

• Outline the portion of donations that goes to charitable activities, and

the portion that goes to administrative costs.

• Ensure compliance with any do-not-call lists

• Have a clear and simple process for donors to end recurring donations

The Charity Fraud Awareness Quiz

The Charity Fraud Awareness Quiz

• March 1st - March 31st

• Each participant eligible to enter their favouritecharity for a chance to win weekly and monthly prize

• Prize donations from Capital One:

• Weekly $1,000 donation• Grand $20,000 donation

The Charity Fraud Awareness Quiz –2010 Winners!

Congratulations to last year’s winners:

• Gabriola Health Care Foundation, Gabriola (BC)

• IWK Health Centre Foundation, Halifax (NS)

• Nuu Rain Inc, Nipawin (SK)

• Canadian Breast Cancer Foundation

How can you win?

Encourage your supporters to take the

Charity Fraud Awareness Quiz and increase your charity’s chances to win!

ABOUT MYCHARITYCONNECTS

• Join us for thought-provoking keynotes, practical how-to workshops and plenty of chances to learn from other non-profits about what works online… and what doesn’t.

• Proud partner in Net Change week

MyCharityConnects Conference 2011

JUNE 6 – 7 | MaRS Centre, Toronto

www.mycharityconnects.org/2011Conference

Registration now open!

Upcoming Webinarswww.mycharityconnects.org/webinars

• March 9 – Facebook Basics for Your Organization

• March 15 – Charity Fraud, Part 2

• March 23 – The Art of Storytelling: 2.0 Edition

• April 13 – Blogging Basics

• April 27 – Social Media Done Right: 5 Case Studies

• May 11 – Spruce up your E-newsletter

• May 25 – 10 Tips to Improve Your Website

• June 15 – Getting the Most From your MyCharity

Account & Reports

QUESTIONS

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