In the Year of The Scam – The Rise of White Collar Crime

Scams of amazing magnitude in the government; frauds that have the potential to bring down big companies are carried out by employees in the private sector.  2010 could well be ‘The Year of The Scam.’

The politician-businessman nexus has come to the fore with a vengeance, putting a new spin to public-private partnership!  Equally disturbing, if not scary, is the rise and rise of employees ransacking the coffers of their employers.  Gone are the days of misappropriating stationery and inflating expense sheets.

The ingenuity of the employee fraudster is a testament to their mis-applied intelligence as well as the lack of caution on the part of businesses.  The ‘it cannot happen to us’ outlook is all too prevalent in Indian industry.

Lots of companies do not report or prosecute theft by their employees.  Only 20% of companies in India carry out employee background screening.  Many companies – especially the SMEs – have little or no internal controls.  Those that do have them do not apply them rigorously.  The result is an average loss of 5% of annual revenue.

However, what is very clear in the scams that have come to light during 2010 is that they involve high technology, huge sums and a thorough knowledge of the victim companies’ processes.  That translates this way – the employees are senior management, have access to many process areas, are trusted and their activities not carefully monitored.

The higher the position in the organisational ladder that the fraudster occupies, the greater the loss they cause the company.  The very complexity of the scams shows that two things are either lacking or very weak – robust internal controls and thorough and regular background vetting of employees.

Just because a person has been in the organisation for several years, draws a hefty salary and occupies a position of trust does not mean that they will stay honest.  The circumstances of the employees change, the perception changes.  Also if an opportunity presents itself and they assume that they can get away with their crimes, they will seize their chance.

The best way for companies to stay on top of the situation and prevent the embarrassing frauds that we have seen all year, is to keep a continuous tab on their employees.  It is well within their rights.  When staff know that they are being monitored they are much less likely to abuse their positions.

As with all things – an ounce of prevention is better than a mountain of cure.

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Education Loan Scam

Innocent Students, Anxious To Get A Degree, Cheated

‘A little learning is a dangerous thing,’ wrote Alexander Pope.  To turn that phrase on its head, getting’ that little learning is now a dangerous thing.  The newspapers are full of the story about a gang, in North-East Delhi, who duped many desperate and needy youngsters wishing to better themselves.

Such was the fraudsters’ success, till they were caught, that they managed to cheat aspiring students of more than 1 crore rupees!  A couple of other surprising facts are their relative youth and the involvement of a several young girls.

The story also puts the education industry, in India, in a sorry light.  The difficulties and bureaucratic hurdles to getting an education loan are huge.  So much so students, and their parents, are forced to explore dubious and unsecure avenues to fund their hopes and dreams.

The competition for seats is also huge.  With almost 14 million youngsters seeking entry into university every year the pressures multiply if finance is a problem.  They are then susceptible to all sorts of false claims and scams by unscrupulous people.

Students are at risk from other types of education fraud.  They often pay a ‘donation’ or capitation fee to get into institutions of doubtful pedigree.  Only to find out later that the degrees are not recognised by the Education Ministry and the University Grants Committee.

Checking, carefulness and a good dose of caution should be the three Cs for hopeful young students.  Fraudsters and their schemes are everywhere.  The thing is not to become their victims.

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Database To Curb Fake Degree Certificates

Electronically Formatted Degree Certificates and Database

At last!  It is really heartening to learn that the Ministry of Human Research Development is moving on the issue of developing and creating electronically formatted mark sheets and degree certificates.  Hopefully the era of fake and forged degree certificates will pass into history.

Various education related bodies, and even the CBI, had been suggesting that the Ministry switch to the tamper-proof electronic format certificates.  The CBI suggestions came in the wake of their investigations into large-scale and nation-wide racket of forged degree certificates.  The fact that there are more than 500 accredited universities in India makes the problem all the more complex and difficult to contain.

The fake degree situation is reaching epic proportions and it is hurting the image and value of Indian higher education.  This is borne out by the recent McKinsey-Nasscom report, which stated that only 25% of the graduates from technical institutes and 10 to 15% from colleges are employable.

The knock-on effect of fraudulent degrees, unqualified and dishonest job applicants is also being felt in the world of business.  Pressurised HR departments do not have the time, resources or expertise to authenticate and verify qualifications from the hundreds of universities around India.  There is a whole industry devoted just to the manufacture of fake degree certificates!

The setting up of a national electronic database of qualification, from school to professional degrees as announced by Mr Sibal, HRD Minister is also a huge step in the right direction.

These two measures will go a long way to closing down the massive fake degree market in India.

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In-house Fraud In South Africa – Lessons For India

There was a really interesting news report that came out of South Africa, a couple of days ago.  It presented details of a white collar fraud survey.  The first of its kind in that country it proves to be very interesting reading.  In some instances the numbers are poorer than the global averages.

For instance the study said that fraud by employees took between three to five years to detect.  Contrast this with the global average of 18 months to 2 years.  The finding brought to light the fact that 42% of companies did not have fraud detection or prevention controls in place – whereas the world-wide statistic is 28%.  This is alarming considering that 71% reported incidences of fraud.

What is a pity though is that there are no numbers (reported at least) on the categories, of internal fraud, such as asset misappropriation, accounting frauds, espionage, data theft, etc.  One hopes that these will be studied in the next round of studies.

We must remember that South Africa, like India, is an emerging and potentially strong player on the world economic stage.  The lessons learned there would be very useful and a great learning for us.

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Linkedin Under Threat From Fraud

The ingenuity of cyber crooks is truly astounding. There is no stone that they will not turn in order to make the illegal buck. The personal emails of people were subject to a barrage of phishing scams. This was followed by the Nigerian 419 fraud mails that caught many people in their nets.

The more recent identity thefts on Facebook and Twitter have been making the news. There seems to be no end to the travails of innocent users of various internet facilities. Now CISCO has come up with the information that even a rather secure site like Linkedin is under fire.

The modus operandi is to send emails with false contact requests hiding a trap for the unwary. The email contains a link to malicious software called ZeuS that goes on to capture personal information.

Linkedin, unlike other networking sites has a rather good security and screening system in place. However, no amount of pre-screening and other security measures can replace good old caution. The best advice is, ‘if you don’t recognize it, don’t go near it.’ An internet scam can be as potent as a bomb left under a bus seat.

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