What does “fraud” mean?
The term fraud is an Anglo-Saxon term and cannot be directly translated into German. Rather, the term is understood as a collection of various types of economic crimes such as e.g. tricking, swindle or deception. However, nowadays the term fraud is increasingly used as a synonym for, among other things, the aforementioned types of economic crimes. At the same time, in German-speaking countries, the term “dolosus Handlung” (malicious act) is a term which comes close to the word fraud. This is understood as the intentional act, toleration or omission, which causes harm to the company or third parties (see Quentmeir, 2012, Praxishandbuch Compliance, page 64).
The range of economic criminal acts that fall under the term fraud seems inexhaustible. The economic and technological developments of recent years have taken fraud to new levels. Some examples that fall under the term fraud are listed in the following diagram:
To illustrate why economic criminal acts occur, the so-called “fraud triangle’ according to Dr. Donald R. Cressy provides a helpful first approach.
The Federal Criminal Police Office as well as the federal state criminal police offices have already repeatedly warned about this new method of fraud. In this case, fraudsters “spy” on companies they want to attack and represent themselves as managing directors, members of upper-management or partners, with the aim of having larger amounts of money transferred into an account, mainly abroad.
How do you protect yourself from such a scam?
You and your employees and colleagues should pay close attention to e-mails which instruct payments of at least 5-digit money amounts and scrutinize these. Do not hesitate to contact the sender of the e-mail, even if this is a member of the board or a managing director. Another possibility is the regular review of publicly accessible information about the company. This also includes personal posts of employees in social networks about the company. Also, the introduction of internal control mechanism such as the 4-eyes principle or specifying limits for transfers can certainly protect you from CEO fraud.
There are a few other prevention and security measures. You are welcome to contact us about this. We will assist you in the implementation of fraud prevention and fraud detection measures.
Do you have questions about other compliance topics?
Q_PERIOR offers consultancy and support across all industries on topics such as e.g. securities compliance, economic sanctions, anti-money laundering (AML), outsourcing, data protection, fraud, internal control systems, legal compliance and also governance, risk & compliance applications.