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When should you
call a Forensic Accountant?
What is Divorce Forensic
Accounting?
Who
typically is responsible for fraud and Embezzlement?
Is Fraud Limited to
Businesses?
What Causes Fraud?
What Are the Signs of Fraud and Embezzlement for Companies?
What are the Telltale signs of Fraud and Embezzlement for Individuals,
Retirees, and the Elderly?
How Does an Individual Avoid Financial Fraud?
What is Leakage?
What are the
Chances of Recovering Funds That Were Embezzled or Stolen?
How Long does it Take to Detect the Fraud?
When Should You
Call a Forensic Accountant?
If your gut is
telling you something is not right, or you suspect an individual or
company is fraudulently stealing money from you, it's time to act.
You need to contact us immediately and do a preliminary forensic
investigation.
Fraud and
embezzlement are financial crimes that usually start with a "one time,
never do it again" opportunity by an individual facing a financial
crisis. They see your
company's checkbook or cash register as a solution to their problem.
But once they get a taste of having access to funds that can
solve many of their problems, they often become reckless and dip into
the company till again and again to straighten out a second, third, then
fourth problem, etc. These
people must be stopped. If
left unaddressed, the problem can
worsen to the point of financial collapse.
If caught early enough, the siphoning of funds can be halted, and
a recovery process begun to recoup a portion of the missing monies.
Most importantly, it allows your company to regain the profit
margins that should have existed all along.
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What is Divorce Forensic
Accounting?
If you are going through a divorce with significant assets
and income involved, and suspect your spouse is hiding these, you should
allow Accounting For Everything to do a preliminary Forensic
Investigation. We can
determine if this is occurring and detail what steps should be taken to
expose it.
A divorce is never a pleasant experience and when finances
are involved all parties develop a war like mentality, which often gets
nasty. Sometimes the major
income provider will attempt to hide or disguise income and assets.
It is very easy on paper to make a privately owned business look
like a failure with little or no assets, but a proper Forensic
investigation can uncover the real financial picture.
The fact that any attempt to disguise assets or income generally
leads to a bigger financial deception that can result in a completely
different divorce settlement.
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Who
Typically is Responsible for Fraud and Embezzlement?
For many
businesses, Partner or Corporate Officer greed accounts for much of the
financial discrepancies.
When a business has two or more partners or owners, there often is a
sense of entitlement that one partner deserves more compensation than
the other because they feel they are doing more of the work.
They often find ways of diverting funds, through the use of
corporate credit cards, fake invoices, fake vendors, and hundreds of
other methods.
Employee
Embezzlement and Fraud is another major contributor to these financial
crimes. Many times
employees can develop very clever schemes that allow them to pilfer
funds from the company that can be hard to detect.
When a company begins to see an unexplained erosion of margins,
it is urgent that a complete forensic review be implemented.
Sometimes this will lead to an employee, business partner, or
relative committing fraud or embezzlement, but sometimes the forensic
review simply uncovers costs that have outgrown the sales mark-up.
Another major cause
of fraud is a person has a gambling or drug problem, which leads them to
steal from companies they work for or individuals they are related to.
It is urgent that these people be located and stopped as their
addiction usually becomes more severe and the amount of theft increases
over time.
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Is Fraud limited to Businesses?
People, especially
the elderly and religious, are very susceptible to fraud through family
members, caregivers, telemarketers, con artists, fake financial
institutions, fake charities, religious organizations, pyramid schemes
or disreputable companies.
It is critical that a forensic examination of the financial records be
conducted to determine how the fraud is occurring and develop steps to
catch the predator, and make some attempt at recovery of the funds.
The chances of full recovery are very low, but identifying the
predator will stop the theft of funds and allow the person to understand
the depth of the problem.
For Low Income
individuals living on Social Security with meager savings we will often
do the forensic investigation for free or at a minimal fee.
The only requirement is that if we do find fraud in any form the
affected individual must file a police report and/or Securities
and Exchange Commission action and prosecute the perpetrator so others
can avoid the calamity of losing their life savings, even if it is a
family member. We know this
will be an extremely emotional and potentially embarrassing experience
but good people have to work together to put a stop to those who are
greedy and criminally selfish.
Retirement funds
can be completely stolen by a
fraudulent telemarketer or fake charity, without the family knowing it. Often the elderly person is too embarrassed to admit the
problem and continues to send money to the fraudster in the hope that a
little more cash paid out will deliver them the windfall of a lottery or
contest that will never come.
Sometimes it is just their innocence in not understanding
there are people out there who seek to criminally exploit the vulnerable
for their own personal greed.
You must control your anger, especially if the funds lost were
your inheritance. Take a
step back, take a breath, realign your attitude and then approach the
victim with a sincere and understanding mind-set. Be there as a healer, not a disciplinarian.
Churches are especially liable for the financial abuse of the
elderly. They make claims
of buying the elderly's way into heaven, when in fact; they are just
taking the money from people who often have to sacrifice medications, or
day-to-day living expenses and simply can't afford these contributions
to line the pockets of church leaders. A legitimate church must refuse the donations of the elderly
on a fixed income, or if the elderly insist on contributions, return
those funds in full by providing meals or paying for their medications.
As a caring family member you have to be available and
patient with the victim of the crime.
Be understanding, not judgmental, for often the victim is not
fully aware of how seriously they have been exploited.
They often fall into these financial traps as a result of trying
to define their financial legacy, to leave something for their
relatives, or to get out from under the tremendous pressure of living on
a limited, often insufficient retirement income.
Make sure they know you are going to be there to help them
through it. Sometimes it is
going to be extremely frustrating, and other times it will be very
emotional, but often only a family member can offer the type of support
and understanding they so desperately need. Don't stand in the wings, go forward and force your way into
their lives, no matter how proud the victim is. Make them understand you are doing this as an act of love,
not punishment.
Often these family members will be in denial, so you must
prove to them how they are being taken advantage of, and often it is
best to find videos from credible news organizations that lay out how
the fraud occurred and what to do when it has happened.
If you feel there is any type of financial irregularity
involving an elderly person or a person with a disability, take action
and contact Adult Protection Services.
Let them investigate the issue and take the proper legal action
to put an end to any unauthorized or suspicious transactions.
They have the resources to prosecute the person responsible and
to provide the necessary protections to stop the financial abuse.
Sometimes the State or County agency will not have the
resources to do a full forensic investigation into the finances of the
abused person, and Accounting For Everything can provide those services
to make the prosecution of the individual criminally responsible far
easier and swifter.
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What Causes
Fraud?
Greed is the single largest cause of fraud facing companies
and families and that is why laws and regulations exist to prevent this,
and, when exposed, to prosecute it.
We provide the intelligence to determine who it is, and much of
the evidence to prosecute them. We know this is an emotional and potentially heartbreaking
situation, but if not addressed this funneling of funds can lead to your
financial distress and eventual collapse.
To stop them takes a decision on your part to explore the
potential of fraud or embezzlement.
You need to allow us to do a preliminary investigation in which
we do a cursory review of your financial records to determine if there
is a pattern of abuse.
Typically a cursory review will take 3 to 5 hours for small
companies and individuals, while larger companies can take significantly
longer depending on the accounting software or the method of
bookkeeping. If the
accounting was shoddy or done by hand instead of using an accounting
program, it will add greatly to the time necessary to locate the fraud
events and determine who committed them.
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What are the signs of Fraud and Embezzlement for Companies?
If you have noticed
that the profit margins have been declining without a reasonable
explanation, it is urgent you contact us to investigate the cause. If you find that the amount of cash in the bank has routinely
decreased and there is no explanation, you need to take action.
There are schemes
greedy people use to increase costs and keep those funds for themselves.
Sometimes margins do change because costs go up, but your company
has not adjusted the selling prices to reflect this, and it is a matter
of just proper margin control.
On the other hand, if costs for your company have gone up, it
could be because you have someone in your company exploiting a situation
in which they are stealing using a criminal enterprise that requires a
forensic investigation to detect.
If you find credit
card use has increased, it is critical that the charges be examined for
legitimacy and as true business expenses.
Owners of businesses are notorious for using their corporate
credit cards for personal use, and this practice can lead to special
investigations by the IRS and State tax officials.
Anytime money is spent on a credit card it MUST be for a
legitimate business expense.
If it is not, it is considered a personal withdrawal and the
person making the charge has to include that as income, unless they pay
the company back for the full amount charged.
If you suspect
financial theft in your company, you need an independent third party to
review your financials and come to an unbiased determination of whether
there are any real discrepancies.
The good news, the majority of times the discrepancies are just
bookkeeping errors that are easily addressed.
But when there is fraud involved it must be addressed
immediately, and for the owners to seriously consider civil or criminal
action; or a change in corporate structure.
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What are the Telltale Signs of Fraud and Embezzlement for Individuals,
Retirees, and the Elderly?
For individuals,
being able to detect when they are in distress can be difficult, even
impossible. Usually it
starts off subtlety. They
change their spending habits, such as stop going to lunch to save money,
or they don't handle stress as well as they used to, or their
personalities seemed to have changed, where they were once jovial, now
they are more serious.
They often will
look like they have not slept well in weeks.
If you ask how they are sleeping and they answer they are not
sleeping well, and other signs of distress have appeared, inquire as to
why they are not sleeping well.
Most often they will either divert the question or answer in a
way that suggests nothing is wrong.
Remember, often these people are stressed, and they are not
thinking clearly. Casually ask them if they have played any lotteries or
contests, or have they made any contributions to a charity and how
often?
Never talk down to them, talk to them as you want to be
talked to. Do not berate
them for making a mistake. Accept it, even if it affects you financially.
If you are a spouse or relative, it is important that you treat
the situation with a great deal of understanding; even though you may
now be subject to the same stress and anxieties your loved one is
enduring. Work together to
seek out a solution.
If you or loved one find yourself in this situation, do not
hesitate to contact Accounting For Everything and we will guide you as
to how to approach this difficult time at no charge.
We recognize people come first, and your well-being is our
reward.
One of the biggest exploiters of the elderly is religious
organizations and churches.
They play on the fear and vulnerability of the elderly, pushing forth
the farce that their money will help them get to heaven and better their
community. Churches,
especially Mega Churches have one purpose, to abscond with the social
security and pensions of the retired, for these people are the most
vulnerable to fear and fraud.
A person on a fixed retirement income should NEVER make
donations to religious organizations, for they are giving up a sizable
portion of their income they need to survive, while the church or
religious organization often uses the Elderly's donations to benefit the
leaders and to build an empire.
Ask yourself, who needs the money more, the retired person
who has to skip medications and meals, or the person who is riding
around in a luxury car preaching how the Church needs their money to
spread the word and survive?
Shame on them.
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How Does an
Individual Avoid Financial Fraud?
There are five
specific situations all people should be wary of:
1) Investment Schemes:
Any investment that promises interest income of 10% or more per
year should be scrutinized extensively.
An investment scheme offering greater than 15% interest is bound
to be fraudulent, and could be illegal or conducted by unscrupulous
people. Either Accounting
For Everything or you must do a complete background check of the
company and the individuals managing the company, plus the person you
are dealing with directly.
If they have any criminal history the investment should be avoided.
Be wary of the
investment advisor who tells you they have something that is going to
pay off big time, but you must make the investment right this minute. HANG UP. An
investment can only be made with careful consideration and due
diligence.
Be especially
cautious of the telemarketer that says a friend of yours referred them
to you. Even if they name
that friend, do not make the investment.
Speak to that friend; see if they really did make the
recommendation. If they did
you MUST do your own research, independent of your friend.
Remember, there will always be safer investments with realistic
returns in the future.
2) Contests, Raffles, Lotteries: If anyone ever asks you over the phone to participate in a
Contest, raffle, or lottery, immediately hang up on them.
All Lotteries are basically losing propositions.
If you have to participate in a gambling scheme, the only lottery
you should ever participate in are those sponsored by the government and
sold in retail outlets like 7-Elevens, Circle Ks, etc.
If somebody you don' know calls asking for money to enter you
into a contest, raffle, or lottery:
HANG UP. They are
not legitimate, and it is going to lead to greater and greater financial
risk.
3) Telemarketers:
NEVER deal with a telemarketer.
There are very few legitimate telemarketers, and many use various
ruses to entice you, the target.
One approach they use is they are doing a survey, another is they
are calling from a religious organization.
If any telemarketer ever asks you to take a survey, HANG UP. If any telemarketer says they are calling from a religious
organization that you do not recognize HANG UP. Do not engage them in any conversation. Do not say "No Thank you". Just HANG UP!!!!
NEVER be kind or
courteous to a telemarketer.
Don't tell them you are not interested and then continue to be
kind to them. The only way
to stop a telemarketer is to hang up on them.
If you suspect a telemarketer JUST HANG UP.
Do not say a word, JUST HANG UP.
If they get even the slightest hint that you are courteous or
kind, they know they have you as a target and will continue to hound you
for money. Even worse they may sell your phone number to other
telemarketers.
4) MLM (Multi-Level Marketing): Companies like Amway, Herbalife, Nu Skin, ACN, etc. are
pyramid schemes in which there is little to no chance of ever making any
money or achieving sales goals, and their promises of riches are near
impossible to achieve. Most
people caught up in these scams are through so-called friends or
business associate. Their products tend to be inferior and grossly overpriced.
Be very wary of ads that say "work from home" or "earn money in
your spare time", as these are often enticements to sign up for a
Multi-level Marketing Scam.
. There is little to no
chance of recovering funds stolen by these people and companies,
however, often there are lawsuits or class actions against the company
and it would be wise to join one of them.
5) Charities, especially religious Charities:
Religious people are extremely susceptible to Churches and
religious organization preying on the Elderly.
As they face the end of their life, they are susceptible to
claims that their money will be for the greater good or will help them
get into heaven. The hard
reality is most religious charities benefit the people who run the
charity or church instead of their parishioners.
Asking for money for a new building or for a crusade in another
country, these are all a means of getting money from the elderly, and if
you examine their financial statements, you will find that the majority
of the money is never used for the stated purpose, but rather is used to
raise more funds and to pay the leaders of the charity exorbitant
salaries and benefits.
If your relative or
acquaintance is living on a fixed retirement income, help them see that
their donation does not benefit the people they think it is.
If you want to know
if a charity is legitimate and what their operating expenses are
compared to the funds used for the stated purpose go to:
https://www.charitynavigator.org/
This website has a great deal of public information that is
required to be filed by charities, however, you will find a consistent
lack of religious organizations being listed, because they know they are
operating a fraud scheme and the law is allowing them to do it under the
guise of religion. If a
religious organization was legitimate they would insist of publishing
their financial data so everyone knows they are doing the work they
promise. When you are
operating a fraud, the last thing you want is a public record of their
finances.
If someone insists
on making a religious donation, steer him or her towards one with a
public disclosure that shows the money is really being spent as
promised. Enrich the lives
of the people who need it, the elderly on fixed income.
If you have already
fallen into one of these schemes, get help.
Allow your family member or close friends to help you.
A fresh set of eyes will give you sensible advice and an unbiased
voice. You need help to
deal with the problem and contact Adult Protective Services and see if
they can offer advice and take action to stop the abuse, not only to
you, but also to potentially others.
This is going to be
embarrassing, it is going to be emotionally draining, but you need to
seek help and get the problem resolved, and put an end to the continued
financial abuse you are experiencing.
Realistically, you will begin to heal somewhat, but never fully. If possible, use your family and friends to help you through
this time.
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What is
Leakage?
Leakage is an
accounting term in which there are funds used for purposes that are not
for the corporate benefit, often taken from a cash register or other
cash transaction. Sometimes
it is inventory that is normally sold that is diverted to personal or
internal corporate use. An
example would be an office supply store taking copying paper and using
it in their corporate copiers, versus selling it to a customer.
It can be as simple
as someone taking $5.00 from the cash register to buy coffee.
Can this be stopped, yes and no, it depends on what steps you are
willing to take.
Some companies
allow employees to do this as long as they provide a receipt.
This permits the bookkeeper to enter the transaction as an
expense, and allows for a complete reconciliation of the cash draw.
But this can also lead to a sense of entitlement, in which
dipping into the cash draw becomes more attractive to the employee, and
emboldens them to do it more often.
Another approach is
to reimburse employees who use their personal credit cards in the form
of a payroll payment for receipts submitted.
This can be tricky, because technically it is a personal income
item, instead of an expense for the individual.
Also worth
considering is getting reusable gift cards, or a debit card linked to a
specific account, which the employee can use, as long as they submit a
receipt. Never fill the
card or account with more money than would be reasonable.
As an example, a Manager might get a card with $100 on it at a
time so they can buy coffee for several people as a reward for a job
well done, while a regular employee would get a card with just $25.
It is important to note that a manager should only spend the
money as a reward, versus a daily occurrence, unless you want this to be
an added benefit for the employees.
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What are the Chances of Recovering Funds That Were Embezzled or Stolen?
The truth is there
is little to no chance of recovering all of the funds that have been
stolen. Depending on the
person who stole them and how they were used will determine the chances
of recovery. If they have a
drug or gambling problem, most likely the funds will never be recovered,
but at least you can stop the bleeding, and potentially sue in civil
court for a small amount of recovery, now or in the future, if the
person has any real assets.
On the other hand
if it is just greed that motivates the criminal, chances of a small
recovery are better, but not great.
Often they spend money on assets like real estate, cars, boats,
jewelry, collectibles, etc.
These items can be seized and sold to recoup a portion of the stolen
funds.
There is a limited
time to recover funds, and often a delay can result in substantial
additional losses. But
often this fraud will result in little to no recovery, but our
investigation will allow you to put an end to it, and if you so choose
to pursue criminal or civil prosecution in court.
We are determined
in our approach. We take
our assignment very seriously and do more than just examination
financial records; we explore hundreds of other avenues that help us to
determine the fraud, and what recovery of funds can be achieved, if at
all.
Once the criminal
converts the funds into cash it is very difficult to trace them, and if
they have been sent out of the country, chances are slim to none of
recovering those funds.
Accounting 4
Everything will conduct a preliminary examination of your financial
records based on the information you provide to determine if there is
the potential of fraud or embezzlement.
Uncovering fraud is challenging, and as Forensic Investigators
all we can do is detect it, and trace the funds to the person
responsible. If you want to
recoup those funds, it will require an attorney and the filing of a
civil case against one or more of the suspected fraudsters.
This gives you the power of subpoena and the ability to place an
injunction on those believed to be criminally or civilly at fault.
With this power we can freeze their assets, and then get their
bank records and other financial documents to build the case and
determine what the potential of recovery is.
Often the cost of civil litigation will be far greater than
the amounts to be potentially recovered.
In this situation, the best alternative is to pursuit criminal
charges against the individuals responsible, but this takes a lot of
time and any funds stolen will most likely be moved into cash and then
not be recoverable.
If the money leaves
the United States it is usually to areas in the world where US legal
authority is nil to none, and in fact the criminal may be fully
protected. But if the
individual transferred the funds through the United States Banking
System a trace can be made to where the funds went, but there is little
that can be done to recover them
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How Long Does it
Take to Detect the Fraud?
Every occurrence of
fraud is unique and singular.
There are always variations that surprise us, but for the most
part the inkling of fraud is usually detected within 5 to 25 hours of
investigation, depending on the size of the company for smaller
companies and large family matters.
For larger companies, it can take weeks to isolate the fraud
because there are so many transactions that have to be assessed and
researched.
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