Daily Archives: May 27, 2009

Some Fraud Prevention Steps from Oversight Systems

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The Shared Services & Outsourcing Network recently ran an article on their Q&A with Patrick Taylor of Oversight Systems which covered some steps your organization can take to prevent fraud. Given that each incident of fraud costs you $441,000 on average, every bit of advice helps — especially since most fraud losses are internal in an average organization.


  • Clearly define your entry and reporting requirements.
    Make sure each transaction is verified with supporting documentation. No expense report without matching receipts, no payment without a verified invoice and matching goods receipt, and no large wire transfers without a contract and a (e-)paper trail.

  • Implement good controls that cannot be easily, or autonomously, overridden.
    Two or more approvals should be required for every payment that is off contract, that is for goods redirected to a non-standard location, or that is to a new vendor. The need for collusion reduces the risk of fraud.

  • Implement a continuous auditing system that examines every transaction.
    A system that examines, and re-examines, every transaction looking for unusual entries or unusual patterns is much more likely to find fraud than a random audit of the books. Are you going to detect all duplicate payments? Are you going to notice the same expense report submitted six months in a row? Are you going to notice six installment payments to a contract that was only supposed to have three if you don’t have immediate access to the contract? Are you going to notice repeated payments to the company of your employee’s brother for “miscellaneous services” that are a couple of months apart? Probably not … but an appropriately implemented transaction monitoring system that supports a range of user defined rules and a best-practice artificial intelligence will.

Slime in the Sunshine


Editor’s Note: This is Norman Katz‘s first post as a regular contributor on Sourcing Innovation. (His previous guest posts are still archived.) Norman, who has published dozens of articles on the subject, is a supply chain fraud and supply chain risk expert and will be covering these topics in his new column. He recently started a newsletter, and past issues are archived.

Ah — the innocence of youth, now lost to me forever. When I consider what I know now and have experienced, would I be happier not knowing or am I glad I have a better understanding of how the world works and some of the directions it has gone? Well, if to be forewarned is to be forearmed, I’m happy for the insight, as it has allowed me to become quite proficient in fighting for my rights as a consumer against various product companies and such “untouchable” titans as the cable, telephone, power, mortgage, financial, and insurance companies I’ve be a customer of over the years who have attempted to perpetrate their own brands of fraud against me. I will not settle for poor customer service, and have found ways around those entities, complaining to “higher authorities” and getting noticeable results. I’m saddened that they’ve likely gotten away with it against lesser-experienced consumers who lack the knowledge and fortitude to stand up for their rights, as this seems to be more and more the norm for “customer service”.

I live in South Florida, which is considered to be the counties of Miami-Dade (major city: Miami), Broward (major city: Fort Lauderdale), and Palm Beach (major city: West Palm Beach). Sometimes Monroe County (major city: Key West) is included.

It’s pretty tough to get people from one county to drive to an event in another county unless they are already close to the county line. People from Palm Beach and Broward seem to bristle at being lumped into the “Miami” metropolitan classification, at least when it comes to some of the more glaring statistics about this area:

  • In 2006 & 2007, Miami was ranked # 1 in mortgage fraud; even in 2009, we’re holding our own in one of the top 5 spots nationally.
  • In 2007, Miami had the 2nd highest rate of foreclosures nationally, and we’re still holding our own as a top-five contender nationally here too.
  • In 2008, Miami was ranked # 1 in Medicare fraud, and I see no sign of us losing this ranking anytime soon.
  • In 2006 and 2007, Miami was ranked # 1 nationally for rudest drivers, and I see us holding this ranking for many years to come.

I recall a year or two after moving down here, the FBI indited the entire Miami city commission with fraud and criminal charges and all commissioners were removed from their positions. Even today, between all three counties, public servants — notably commissioners — or their spouses are being caught breaching ethical guidelines as well as laws, such as Florida’s Government “In The Sunshine” law which ensures that the public may inspect any state, county, and municipal record, and that providing access to these records is the responsibility of each individual agency, and that business must be conducted “in the sunshine” (not behind closed doors).

And now South Florida is in the running to add another notch to its national ranking belt: a leader in pain clinics which dispense oxycodone and other such pain medicines, dealing mostly in cash and offering doctors five and six-figure monthly incentives to write prescriptions, often dispensed from their own in-house pharmacies. On the up-side, this looks like it has increased the out-of-state tourist traffic, a boon during the sour economic times.

Is it any wonder why the subject of fraud interests me so much? I’m completely surrounded by it!

For years I wondered why South Florida seems like such a magnet for all these different kinds of frauds, bad behavior, and weird events that seemingly no other area in the country suffers from, and then I discovered the answer: Miami is — in fact — one of the corners of the famed Bermuda Triangle. Well … I can’t think of a better and more comprehensive explanation that that.

Norman Katz, Katzscan

Welcome to Sourcing Innovation, Norman.