Asset tracing can uncover fraud

With the economy in turmoil, your clients may be more at risk of suffering occupational fraud than ever. Fraud experts can help companies detect such wrongdoings — and potentially recover their funds — by identifying and tracing misappropriated cash assets via the point of payment.

Fictitious billing

The Association of Certified Fraud Examiners estimates that fictitious billing schemes (such as an employee submitting inflated invoices or invoices for fictitious goods or services) carry a median loss of $128,000.

To uncover such schemes, an expert will pore over cash receipt and disbursement journals, ledger accounts, purchase orders, invoices, canceled checks, and electronic payment data. Red flags for inflated invoices include notations for “extra” or “special” charges with no additional explanation or mention of related goods or services; variances between the invoice amount and actual payment; and unusually high charges.

Where fictitious billing is suspected, fraud experts pay special attention to accounts with no tangible deliverables, such as those for consultants, commissions and advertising. Electronic bank statements can also expose unknown and possibly fictitious payees and suspect transactions.

Fraud experts also look for multiple vendors with the same mailing address, as well as vendors whose address matches up with that of an employee. Post office boxes and consecutive invoice numbers (suggesting a lack of other customers) warrant attention, too.

Canceled checks often provide experts with valuable information. For instance, it’s uncommon for legitimate businesses to actually cash their checks instead of depositing them. They don’t typically endorse checks to third parties, either. A fraud examiner can search for any connections between the vendor or third party and your employees.

Finally, checks are generally stamped with the name of the endorser and, if deposited, the financial institution of deposit. That information can be critical in determining a fraudster’s identity.

Ghost employees

Experts can also use asset tracing to tie nonexistent (or “ghost”) employees who receive paychecks to current or former employees. To work their way back to the culprit, they’ll examine items such as:

  • Payroll lists,
  • Current and former employee lists (with start and termination dates and Social Security numbers),
  • Authorized deductions,
  • Withholding forms,
  • Personnel files, and
  • Employment applications.

The data gleaned from these sources can provide links not otherwise discernible.

Blink of an eye

Regardless of the exact type of fraud, documentation is the cornerstone of any asset-tracing investigation. Missing documents, discrepancies and other anomalies will demand a fraud expert’s additional attention. And time is of the essence: These days, misappropriated monies can move across the globe — possibly to unreachable jurisdictions — in the blink of an eye.

If you have questions about this, or any other matter, visit www.warrenaverett.com to learn more about our Fraud and Forensic services, as well as Business Valuation and Litigation Support Services.