Organization Profile: The Fraud Advisory Panel

Editor’s note: The following interview excerpt is from our latest Fraud 360 magazine (Issue 1 2015)

The Fraud Advisory Panel (FAP) is the charity which champions best practices in fraud prevention, detection, investigation and prosecution. Its vision is for everyone to have the knowledge, skills and resources they need to protect themselves against fraud and to help protect others too. Panel members are anti-fraud professionals from all sectors united by a common concern about fraud.

CRI Group is a Corporate Member of the Fraud Advisory Panel. We had the pleasure of speaking with David Kirk, chairman of the FAP. He is a lawyer specializing in fraud matters with a particular emphasis on bribery, corporate liability and financial services regulation.

CRI: How do you define fraud?

DK: Fraud is the deliberate use of deception or dishonesty to deprive, disadvantage or cause loss (usually financial) to another person or party.

Legal definitions of fraud vary across jurisdictions. For example in the UK the Fraud Act 2006 creates a criminal offense of fraud with three ways of committing it: by false representation, failing to disclose in-formation or by abuse of position. The U.S. has similar provisions in Chapter 47 of the U.S. Code — Fraud and False Statements. In a European context, Germany’s Criminal Code, sections 263 and 266, penalizes a range of fraud and embezzlement offenses using similar terms to those in UK law.

Apart from the theft and deception offenses, the wider definition of fraud includes bribery, money laundering, cartels and markets offenses.

CRI: Who should be responsible for an organization’s fraud control framework?

DK: Fraud control culture and tone must be set from the top, and the board must have ultimate responsibility for protecting the organization from fraud, but in addition every employee in an organization has a role to play in managing the risk of fraud. Nothing less than an organization-wide approach to fraud risk management can ever be truly effective.

Anti-fraud strategy should be a board-level responsibility. The board has a duty to safeguard its assets, people and data, and should take an active interest in preventing fraud by setting the ’tone’ and policies for the organization. Senior management should implement and monitor compliance with these, and staff should adhere to them and report any concerns.

CRI: What do you recommend to an organization on how to prevent fraud in first place?

DK: Strong ethical leadership, coming straight from the very top, is often the best defense against fraud. Getting the tone from the top right will go a long way toward creating a good corporate culture, instill integrity and guide ethical behavior throughout an organization.

The risks faced by all businesses come both from outside and from within. Insider fraud is as much of a threat as fraud com-mitted by external forces. Therefore, the defenses every organization must set up to protect it from fraud range from sound and secure physical systems and controls through to a strong audit function and a simply articulated anti-fraud policy. The latter should clearly set out the organization’s stance of fraud (i.e. zero tolerance) and the behavior expected of staff and others.

Increasingly investors, customers, employees and regulators are looking to organizations that actively promote ethical behaviors and trading practices. Good fraud risk management can act as an enabler to business — enhancing reputation, staff and customer loyalty, and improving the bottom line.

Read the full interview in Fraud 360 magazine. Just sign in (for free) to subscribe and get immediate access to the online version.