“The act” of fraud typically involves not only the execution of the scheme itself, but also efforts by the fraudster to deliberately suppress or conceal their bad behavior and then convert it into a personal benefit.
Understanding how fraudsters could hide their crimes can help professionals to better design anti-fraud measures (including internal controls, policies, procedures, data analytics, training, etc.) with a higher-level of precision to prevent a fraud or enhance the likelihood of uncovering the warning signs or “red flags” of fraud sooner!
Practice Pointer: Always remember when designing anti-fraud measures to consider the possibility of management, senior executives, or owners overriding internal controls.
When we discuss the Meta Model below, you can see that when it comes to considering the “Crime” that concealment is an element.
The ACFE has published the top eight (8) concealment methods used by fraudsters that anti-fraud professionals should consider. I added a few of my own.
- Creating fraudulent physical documents; 55%
- Altering physical documents; 48%
- Creating fraudulent transactions in the accounting system; 42%
- Altering transactions in the accounting system; 34%
- Altering electronic documents or files; 31%
- Destroying physical documents; 30%
- Creating fraudulent electronic documents or files; 29%
- Creating fraudulent journal entries; 27%
- Destroying electronic evidence
- Deleting accounting entries and using journal entries to balance the books
- Using materiality or another story to build a false sense of integrity – (deception, deflection, distraction)
- Delaying or completely ignoring the reconciliation of cash or other accounts
- Suppressing information
- Using one fraud to hide another
Lastly, the ACFE noted that only three percent (3.0%) of the fraud cases DID NOT involve ANY attempts to conceal the fraud.
Your comments and additions are welcome!