Fraud Has No Borders
August 20, 2021
At a glance:
- The main takeaway: Fraud is a global concern, as evidenced by some of the most famous global fraud cases in modern history.
- Impact on your business: Continued technological advances and modern fraud techniques mean no business is entirely protected – and the source can come from virtually anywhere.
- Next steps: As fraud techniques continue to evolve, companies should reassess their anti-fraud controls and re-evaluate their risk level.
Don’t wait to protect your company against fraud. Contact Aprio’s Litigation Support and Forensic Accounting team for a tailored risk assessment or to find the truth behind the numbers.
The full story:
Fraud is no more of an American problem than it is a European problem, or an Asian problem, or an African problem – fraud is everywhere and constantly evolving. Each year, millions of companies around the globe become victims of fraud, amassing billions of dollars in losses.
Advances in technology provide more access to commit fraud than ever before, making geographical boundaries nearly irrelevant. No matter the origin, each new fraud case provides an opportunity to identify patterns and learn more about how fraudsters operate.
Consider some of the most famous fraudsters or fraud cases in modern history: Charles Ponzi, Steinhoff International, and Dankse Bank. These cases from all over the map are famous undoubtedly for their magnitude, but they also each represent a new lesson learned that continues to influence fraud investigations to this day.
Everyone knows the Ponzi Scheme. Even though Charles Ponzi may not have invented this method of investment fraud, he was the one to make it a household name. The scheme lures investors with high returns but exclusively relies on newly recruited investors to pay those returns, all while the leading fraudster rakes in the profits. Charles Ponzi himself raked in approximately $15 million within eight months by persuading tens of thousands of investors that he knew the answer to quick and easy wealth. Ponzi schemes have been known to occur in many countries all over the globe.
Steinhoff International, a South African international retail company specializing in furniture and household goods, was found to be overstating profits by approximately $7.4 billion in an accounting fraud case involving a group of former top executives. The accounting fraud was revealed during a forensic investigation performed by PwC when they found the company recorded fictitious transactions over eight years. Investigators found that former top management entered into fictitious transactions with entities purported to be independent third parties to create the illusion of income used to hide losses at the company’s global operating units. The end result of the accounting fraud included multiple resignations, numerous lawsuits, a significant drop in shareholder value, and a $12 billion valuation write-down of the company’s assets.
While Dankse Bank didn’t invent money laundering, the bank’s Estonian branch is under investigation by several countries, including the U.S., over suspicious transactions that flowed through the bank from 2007 through 2015. The scandal has become one of the largest money-laundering scandals in Europe – and possibly the world. The Danske Bank money laundering scandal involved billions of dollars of suspicious money transfers from many countries, namely Estonia, Russia, and Latvia, to Western European and U.S. banks. Danske bank may have facilitated the transfers or turned a blind eye to the suspicious transactions. The Dankse Bank scandal revealed just what’s at stake when large institutions don’t implement appropriate anti-fraud controls.
These fraud cases are each notorious for their own unique reasons, but they are also each based on fundamental concepts of fraud that even most laypersons would recognize. The ubiquity of these concepts in every corner of the world proves that, while fraudsters may constantly be evolving, the existence of fraud will always be constant. The silver lining to that consistency is the ability to continue studying and recognizing patterns that lead to stronger anti-fraud controls and faster fraud identification to better prevent the volume of losses experienced in the cases above and find the truth behind the numbers.
The bottom line
History demonstrates that fraud is an unavoidable threat to any company, no matter where you do business. To mitigate risks and protect assets, companies need to assess their anti-fraud controls in place. And if your company has already been victimized by fraud, then you need the best possible investigators on your side. Aprio’s Litigation Support and Forensic Accounting team can help find the truth behind the numbers.
Our professionals have years of experience developing solutions to investigate alleged bad acts. Additionally, our multidisciplinary team of experts can provide a risk assessment and develop unique anti-fraud controls designed for your company’s individual needs.
About the Author
Haley Beatty is a forensic accounting, financial crime reporting expert. Her specialties include Anti-Money Laundering (AML), Know Your Client (KYC) investigation and regulatory compliance. She has advised some of the largest financial institutions in the world and led teams of 500 investigators. Haley works closely with clients to establish and advance AML compliance, monitoring and reporting programs that exceed regulatory requirements. She has experience advising a broad spectrum of financial industry clients from FinTech companies to MSBs and transaction processors.