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Fraud Risk Management Program Governance

Individuals, organizations, and their counsel often turn to outside forensic examiners to answer concerns around possible financial statement fraud, asset misappropriation, corruption, and bribery. False entries, embezzlement, misappropriation of assets, bribery, bid rigging, illicit kickbacks, and other frauds can introduce significant risk of regulatory sanction and reputational harm to businesses.

Families can be forever damaged and relationships destroyed in disputes over inheritances and estates. Corrupt caretakers, advance fee thieves, and romance swindlers can wipe out a retiree's life savings.

With deep experience in investigations, FLC will quickly assemble a core audit team and develop an investigative strategy designed to identify documentary and digital evidence, internal and external sources of relevant data, and logical witness interviews.

We approach every investigation with a singular driving purpose – to resolve the issues as thoroughly, effectively, and timely as possible, with the fewest persons required, in the least intrusive manner to the client.

Secondarily, and no less important, is an objective to determine the root cause of the event and point attention to control environment deficiencies exploited as part of the case.

FLC’s investigative team comprises former FBI senior executives and managers, corporate security and fraud executives, and computer forensic specialists and intelligence analysts, among others. FLC’s investigations are led by its senior principal who brings forty years of experience to forensic accounting and internal/occupational fraud investigations.

Areas of expertise involve investigations surrounding:

Corruption, including conflicts of interest, purchasing schemes, sales schemes, bribery, bid rigging, kickback schemes, illegal gratuities, economic extortion, self-dealing and undisclosed relationships
Asset Misappropriation, including embezzlement, skimming and account receivable lapping, and write-off schemes; fraudulent disbursements resulting from billing schemes, payroll and expense reimbursement schemes; check tampering and other unauthorized transactions
Financial Statement Fraud involving net worth/net income understatement schemes tied to timing differences, overstated liabilities and expenses, improper asset valuations, etc.; and net worth/income overstatement schemes involving fictitious revenues, understated expenses, and concealed liabilities
Identity Theft, Title Theft, Credit and Debit Card Fraud
Business Email Compromise (BEC) frauds, family-owned business disputes, estate and inheritance disputes, bankruptcy fraud, trustee abuse/fraud, senior and elder financial abuse, commercial and personal loan origination fraud, PPP loan fraud, construction loan fraud, floor planning schemes, etc.
Whistleblower, integrity and ethics hotline, and anonymous allegations

Business disputes, especially so between co-owners of closely held businesses, often involve elements of fraud, i.e., intentional acts of deception, misrepresentation, or lying used to gain an unfair financial advantage over a partner. Small, closely-held partnerships, LLCs, and Subchapter S corporations are highly susceptible to internal fraud because they typically lack staff to separate financial duties and often rely on misplaced trust.

Often missing is the key fraud control of Segregation of Duties. One employee often handles purchasing, invoicing, receiving, recording of cash receipts, bank deposits, and bookkeeping. Absolute control vested in a single employee, exercised without a “second set of eyes” on transactions, promotes misappropriation of assets, corruption and bribery, and financial statement fraud, whether by that employee or at the direction of a corrupt partner.

Some common examples of partnership fraud include:

Skimming
Cash Larceny
Inventory and Other Asset Misappropriation
Fraudulent Disbursements made though Billing, Payroll, and Expense Reimbursement Schemes
Bribery and Kickbacks through fraudulent Purchasing and Kickback Schemes
False Bookkeeping Entries leading to False and Misleading Financial Statements, as well as False and Misleading Tax Returns

Small businesses also find themselves the victims of external fraud in contract and business disputes. False and misleading representations, false financial statements, inflated net worth statements, and other deceptive practices are commonly used by unscrupulous actors bent on cheating others in business relationships and commercial transactions.

FLC's principal has a record of over forty years experience in teaming with federal prosecutors, internal and outside counsel, and private counsel in resolving the most complex of investigations - criminal, civil, and administrative. As a corporate senior fraud executive, Jeff teamed with in-house and outside counsel in delicate ethics, employment discrimination, wrongful termination, and internal/occupational fraud investigations involving document and data discovery and analysis, coordination of computer forensic analysis, open-source intelligence analysis, witness interviews, and reporting. As an FBI Inspector, Jeff led sensitive criminal and administrative investigations into FBI employee misconduct allegations in partnership with the FBI Office of Professional Responsibility and the Department of Justice - Office of Inspector General.

Beyond providing expert reporting, FLC's principal has extensive experience in providing testimony, whether before federal grand juries, in state and federal district court in both criminal and civil matters, and at arbitration hearings. He has also testified in Congress to criminal investigations and case findings before U.S. Senate committees and sub-committees.

In 2016, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its Fraud Risk Management Guide as a framework for organizations to follow in addressing the risk of fraud to operations. The Guide builds upon the 2013 COSO Internal Control - Integrated Framework, recognized as a leading global framework for designing, implementing, and operating internal controls and assessing their effectiveness.

The 2016 Fraud Risk Management Guide is considered by many fraud, audit, and risk specialists to be the standard against which organizations should measure their Fraud Risk Management Programs (FRMP), including:

Establishing fraud risk governance policies and procedures
Performing an enterprise-wide fraud risk assessment
Designing and deploying fraud preventive and detective control activities
Conducting investigations, and
Monitoring and evaluating the total fraud risk management program

The Guide contains principles and

points of focus highlighting fundamental concepts of internal control and their underlying important characteristics. The Guide's five principles are consistent with the five COSO Internal Control Components and the 17 COSO principles.

FLC's principal is deeply skilled in fraud risk management, fraud governance, investigations, fraud monitoring, and in facilitating internal and external assessments of an organization's FRMP against the COSO Fraud Risk Management Guide. He has led both internal and external (independent) assessments of an organization's FRMP.

He has also led comprehensive fraud risk assessments across a global enterprise, leading to findings around division and sub-division risk appetite, residual risk, and controls deficiencies, with recommended action plans designed to bring residual risk in line with the organization's risk appetite.

As Vanguard's senior fraud executive responsible for protecting over $5.1 trillion in client assets, FLC's principal led the development and execution of its enterprise fraud prevention, detection, and response defenses, including its web threat detection and big-data solutions. He was also instrumental in devising and improving the organization's client channel authentication strategies - web, mobile, phone, and mail, in concert with its Client Channel Security Strategies team.

FLC's principal presented often on Vanguard's fraud and authentication controls before the SEC, FINRA, the OCC, the PA Department of Banking, major Institutional clients and prospects, as well as Retail ultra-high net worth clients and personal business home offices. He was considered Vanguard's single voice of authority on internal / external fraud and physical and personnel security.