Interview with Eva Romatzeck: ACFE's European Council on Occupational Fraud and Abuse Takes First Steps

Fraudsters ignore country boundaries. "Fraud is becoming an international crime," says Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE. "Most Fortune 1000 countries have international subsidiaries, he says. Individual fraud schemes frequently involve the fraud occurring in one country and the proceeds of the crime being hidden in another. Anything that we can do to share information and make laws uniform will help."  

The ACFE is helping by establishing the European Council on Occupational Fraud and Abuse (ECOF), Wells says. The ECOF's purpose is to encourage cooperation between European business and government to study the problem of fraud and make recommendations to curb its enormous economic threat. The ECOF is establishing councils in Austria, Bulgaria, Czech Republic, Denmark, Germany, Hungary, Italy, Luxembourg, The Netherlands, Poland, Portugal, Switzerland, and Turkey, with many more to come.

The German Council's representative, Eva Romatzeck, CFE, CIA, is indicative of many fraud examiners who want to see increased synergy between business and government in anti-fraud measures. "During the ACFE European Conference in 2002, I discussed the ACFE activities and member potential in Europe in general and German in particular with Joe Wells and Toby Bishop (president and CEO of the ACFE)," Romatzeck says. "The German Council of Occupational Fraud and I hope to contribute to increased fraud awareness resulting in strengthened preventive actions and quicker detection and, in the end, fewer cases in Germany and even Europe."

Romatzeck comes to the German Council volunteer position with appropriate global credentials. A native of Sweden, she studied English at The Language Centre of Ireland, and German at the University of Stockholm. She received a master's of science in business administration and economics from the International Business Program at the University of Linköping in Sweden.

Romatzeck, a certified German tax consultant, has worked as senior auditor for an auditing and tax consultancy firm, as senior internal auditor for an international pharmaceutical group, and as audit manager for an international tobacco group. She now owns and manages a tax consultancy, risk management, internal auditing, and fraud examination firm in Hamburg, Germany, where she recently spoke to Fraud Magazine about the ECOF and the German Council.

How did you come to be involved in the ACFE's European Council on Occupational Fraud?
During the ACFE European Conference in 2002 I discussed the ACFE activities and member potential in Europe in general and in Germany in particular with Joe Wells and Toby Bishop. Not too long after that, Joe Wells initiated the European Council on Occupational Fraud and asked me if I would be interested in organizing a Council in Germany. It has been my honor and pleasure to assist initiating the German Council on Occupational Fraud.

What are some ways that the members of the German council of the ECOF are working to study the problem of fraud in your country? What are some of your other plans?
Among other things, the members study available fraud reports, published on a regular basis by the major accounting firms, of which two are represented in the German Council, and law enforcement. Additionally, the work and reports by academia are of great interest. The members note an increasing importance of fraud within the educational fields of accounting and auditing.

The members exchange hands-on experience, since fraud fighters from banks, law firms, accounting firms, and large companies listed on the stock exchange are represented. The GCOF has further established interaction with other professional affiliations, such as the German branches of AICPA, IIA, and ISACA.

We will look into options for further reports, covering other aspects than currently available reports. Of course, a fraud report on European level would be highly interesting for the ECOF.

What do you see as some of the benefits of the ECOF not only for your own country but the entire European Union?
One of the major benefits is the growing international network throughout Europe, connected to the large network in the U.S. and the rest of the world. Since fraud is an increasingly global problem, it is very difficult to fight it efficiently on a national level only.

The national benefits, I think are obvious. We will be able to contribute to an increase in fraud awareness and education domestically.

What are ways that the ECOF plans to estimate the cost of occupational fraud in Europe?
We have not specified any plans in this area. The estimates would depend on very complex and variable components, which may be specific for each European country. At this time we refer to existing reports on fraud by law enforcement and the major accounting firms. Additionally, we can use some estimates from the U.S.

What do you see as some of the major potential fraud problems in your country and the EU?
The major fraud problems seem to be more or less the same all over the world, and Europe is no exception. For example corruption is a very serious problem in Germany just as in many other European countries, even though there might be other areas with even bigger problems. We are also faced with occupational fraud, manipulation of financial statements, Internet fraud, and money laundering just as everybody else.

Do you see other ways that the major scandals Parmalat, Ahol, Transtec, Enron, WorldCom have moved the business community to renewed action?
The scandals have increased fraud awareness and the risk has become more obvious. It is a bit easier to talk about this taboo subject. However, the action in the business community is still rather limited. Too many companies realize that there is a risk, but are not willing to accept that the risk might apply to them. Fraud is perceived to only happen to others.

The European Union has recently proposed a directive on statutory audit that would create an audit regulatory committee of member state representatives. The U.S. Public Company Accounting Oversight Board, created by implementation of the U.S. Sarbanes-Oxley Act, has praised the directive and said that it introduces an oversight system that will mesh well with the PCAOB oversight system. What are your impressions on the directive? Do you think it¹s overdue or right on time and why?
The European activities and directives in this field have had an immediate impact on German audit and accounting standards as well. The legal situation in Germany is changing and more emphasis is placed on internal controls and financial reporting. Even though there are national characteristics and differences, the objectives are similar.

This process has been ongoing for some years, and fraud directives are logical steps. It can be discussed, if legislation and accounting standards alone will result in the major changes we hope for. They are definitely major steps towards the overall objective of reduced fraud, and sometimes the business community doesn¹t know what¹s good for it but has to be forced by laws and directives to protect their assets and reputation.

Do those in the German and European accounting profession realize that they will be affected by U.S. accounting changes? If yes, in what ways?
Yes. For example, the Sarbanes-Oxley Act is very present in Europe and Germany at the moment and the effects are obvious, since concerned entities are required to comply. The acceptance and importance of U.S.-GAAP is growing as well. Looking back in time, the accounting history shows that Germany lags a few years behind the U.S., but quite a few U.S. accounting changes reach Germany in due time. The accounting practices are often adapted, still taking national characteristics into consideration.

What are your thoughts on the trend to incorporate anti-fraud training into European accountancy programs? Do you know of specific programs of note in your area, country, or the EU?
What are some ways the ECOF might help this movement? The trend is clear, but not yet distinctly developed. Once fraud is regarded as a regular business issue, as opposed to a taboo subject, fraud training will be a topic just like tax and controlling in accountancy programs. By introducing more educational aspects to the German and European business community, we hope to speed up the process.

After all the major scandals, U.S. companies have been switching to smaller accounting firms but reportedly in Europe the trend is still toward fewer and bigger accounting companies. Alexander Shaub, director general of internal markets at the European Commission, described the contraction in global audit firms from eight to four as a time bomb. What are your thoughts on that?
As long as independence and objectivity can be kept, the size, structure, and number of accounting firms are probably not the most important issues. The question is, if these criteria are still met in a situation of few very dominating accounting firms.

The European Union¹s Anti-Fraud Office (OLAF) has incorporated a Web-based Round Table on Anti-Fraud Communication with the stated goal of deterring EU fraud by informing the public. Can you see the ECOF getting involved in this dialogue? (Possibly it already has.) Are there other ways that the ECOF is working with the OLAF?
The GCOF has not yet established contacts to the OLAF. A possible involvement has not been specified, but an interesting dialogue could possibly be developed in due time.

During a recent OLAF training seminar, Deterring Fraud by Informing the Public, Szabolcs Fazakas, chairman of the Committee on Budgetary Control of the European Parliament, said, Initially, my idea was that fraud investigators should not appear in the press at all. Indeed, their work relies on confidentiality. But he said that he reconsidered his opinion and now believes that citizens must learn not only about the villains putting the rule of law at risk but also about those who protect them. What are your thoughts on this?
Both statements are valid, and it is very much depending on the situation. You may put an investigation at risk if you communicate your mission too early or to the wrong people. And somebody known to be a fraud examiner cannot really work undercover anymore, even though some investigations would require it. On the other hand, the "good guys" can do an excellent job for increasing awareness and also for educational purposes. Few people can tell such exciting stories as experienced fraud examiners.

What other anti-fraud measures would you like to see the EU implement?
Anything that helps will be welcomed! Some expert suggestions would probably be very efficient, such as a database for cases of corruption and money laundry, stricter legal consequences, timely investigations with qualified staff, and communication guidelines.

The most important measure would probably be increased transparency on a national and international level, combined with higher standards of business ethics but those are probably the most difficult to implement, too.

This may be impossible to measure, but do you think the average German citizen knows the extent of occupational fraud in the country and in Europe? What is the general awareness of the U.S. fraud debacles such as WorldCom and Enron and how they¹ve affected the U.S. accounting profession?
Several studies show, that the extent of occupational fraud is not known to the average German. This is supported by the experience of numerous fraud examiners. U.S. fraud cases have been discussed in German media and are quite well-known. Accounting professionals are also aware of the resulting legal action, such as the Sarbanes-Oxley Act, of which they experience the effects in their work.

What are your own professional goals regarding fraud prevention, detection, and prosecution?
The German Council of Occupational Fraud and I hope to contribute to increased fraud awareness, resulting in strengthened preventive actions and quicker detection and, in the end, fewer cases in Germany and even Europe. If we can accomplish that, we¹ve done a great job.

How did you come to be a CFE?
I did not know too much about the ACFE before I attended an ACFE training session during a stay in the U.S. and learned about the educational resources and other benefits. After looking into the membership options I realized that I would qualify for the CFE designation, since I have plenty of experience in this field of work. The international waiver, which is still valid in Germany, made it very easy to make a decision on the CFE application.

How has the ACFE benefited you professionally?
One of the major benefits is the professional educational resources, which are often difficult to find anywhere else. The selection of educational literature enables you to refresh your knowledge and to obtain up-to-date information on current topics.

Additionally, the CFE designation has emphasized my professional expertise in various situations.

Dick Carozza is the editor of Fraud Magazine.

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