A risk-based approach: how due diligence can mitigate fraud being committed in your organisation

This isn’t a new phenomenon, with many cases around the world, but the most recent scam appears more sophisticated than usual.

The Chinese business involved (whose name translates to ‘Overseas Student Assistant HD’) operates through social media. It allegedly charges customers thousands of dollars for forged degrees and diplomas purportedly from leading Australian tertiary institutions. The business claims to source from the same parchment paper providers used by the universities to create the certificates. For a premium price, the business also claims to be able to input the student details fraudulently into university databases, as well as the official qualification register system run by the Chinese government’s Education Department. This raises issues around the verification process to be considered by hiring entities.  

In our experience, when companies have had problems with unethical (or fraudulent) behaviour from employees or business partners, our investigations have uncovered misleading information or documents provided by the employee early in the recruitment or contracting process. 

But those unethical behaviours can remain undetected at the initial stages of a business relationship, because companies trust the information given to them by employees or business partners. 
 
Fraudulent documents presented to prospective employers will look and feel real (they are supposed to!) as people will go to great lengths to deceive where they perceive the reward may be high.  

While trust is an important part of any work environment, the business mantra should be ‘trust but verify’. So what’s the solution?
 

Firstly, companies should:

KordaMentha recommends that an initial risk rating of an employee or business partner should be identified (e.g. Low, Medium or High risk). Once that risk is established, we suggest making further enquiries. Below is a sample of an approach we have used on a larger organisation:

As each business is unique compared to another, a standardised approach applicable to all situations is unlikely. Thus some ‘Level 2’ review may be applicable to a ‘Level 1’ review if the situation is sensitive to a certain aspect. By tailoring the approach for the right level of due diligence, organisations will invest in the optimal level and gain more effective results.
 

Just like a university student, the answer is clear. Do your homework.
 

In January 2015, we published a Forensic Matters article on integrity due diligence and how corporations can protect themselves by getting a better understanding of the ‘unknown unknowns’.

1. http://www.news.com.au/finance/work/the-great-aussie-degree-scam-forgers-raking-in-thousands-selling-bogus-qualifications/story-fnkgbb3b-1227284475119