'Technology has had a profound impact on the anti-fraud profession.'
Frank Previti was recently awarded the globally preferred Certified Fraud Examiner credential by the Association of Certified Fraud Examiners, the world’s largest anti-fraud organization and leading provider of anti-fraud training and education.
CFEs detect and trace fraudulent transactions to advise clients, testify at trial and identify the underlying factors that motivate individuals to commit fraud.
Previti, who holds a B.S. in commerce from Washington and Lee University and serves as treasurer for The Steelyard, an arts organization in Providence, discusses ways that businesses can prevent fraudulent practices within their own institutions.
PBN: What factors can lead to fraud and misrepresentation in financial reporting?
PREVITI: A lack of vigilance in maintaining a basic system of safeguards is the single most common contributor to fraud. Without a targeted, customized, and most importantly, effective system of internal controls, organizations are leaving themselves susceptible to fraud. The vast majority of frauds are committed by employees who are considered trusted because of the many years they have been involved with the organization. Over time, management becomes complacent that “business as usual” equates to a safe environment.
PBN: What’s different about current anti-fraud practices?
PREVITI: As is the case in many aspects of our lives, technology has had a profound impact on the anti-fraud profession. Whether it be advanced data-mining software or incredibly dynamic programs that can infiltrate the most sophisticated networks, advancements in how we do business have forever changed the way anti-fraud professionals investigate and criminals perpetrate. The frauds being committed now are vastly more complex than even five years ago.
PBN: When should companies conduct an internal investigation when fraud is suspected?
PREVITI: Never. Allegations of fraud are often based on insufficient evidence. If management suspects fraudulent behavior is taking place, [the association] would suggest that they be immediately contacted. Companies usually have no idea that fraud is taking place. According to the latest Association of Certified Fraud Examiners “Report to the Nations,” the typical organization conducting business today is losing 5 percent of its revenue to fraud each year and the frauds reported have lasted a median of 18 months before being detected. Preventative measures are, in the long run, much more beneficial and potentially less invasive. Companies should be investing in measures designed to shore up any weaknesses in their control environment. [Certified examiners] are uniquely qualified to assist companies in investigations [and to] aid management with designing and implementing internal control systems. •