Second generation speaks

The ACFE began in 1988 with a small group that needed training and materials, which would teach them to catch fraudsters and deter future bad behavior. Twenty-five years later, the movement that Dr. Joseph T. Wells, CFE, CPA, James T. Ratley, CFE, and many others began is still expanding around the globe because the early CFEs taught their apprentices well.

In this article, we hear from 13 more young CFEs early in their careers as they apply anti-fraud knowledge from the ACFE, higher-education programs (most of which didn’t exist in the ’80s) and their ACFE-trained mentors. (Read part 1 here.)

ABOUT THE PARTICIPANTS

As the ACFE begins celebrating its 25th anniversary, we thought it would be good to look to the future. So, we asked numerous senior CFEs in many different industries and fields to send us the names of young, promising CFEs in their 20s and 30s who are beginning to make a mark in the fraud examination profession. They supplied us with 41 prospects, and 27 responded to our questionnaire. We’ve distilled the answers into a two-part article; part 1 was in the September/October issue. (We regret that we couldn't include all of their quotes.)

We realize that these 27 individuals don’t accurately represent all young CFEs (though they do show some of the great diversity in the ACFE). Fraud Magazine will profile other young members from around the globe in future issues. However, their views might give you a picture of the face of the fraud examination profession in the next quarter century. We believe we’ll be in good hands.

ADVICE FOR PROSPECTIVE FRAUD EXAMINERS

The second generation, of course, begets the third. This group of young CFEs is already training budding fraud examiners.

“If you want to help solve crimes and keep the bad guys off the street, but you don’t want to carry a gun, and you like accounting, then fraud examination is the job for you,” says Christopher Lee, CFE, forensic accountant with the U.S. Department of Justice. “It’s a rewarding profession, and every case has a twist. It keeps you on your toes and is always exciting.”

Though cases can be exciting, many young CFEs say that good fraud examiners are a rare breed. “Be certain that you are comfortable interviewing people and asking the tough questions,” says Jeff Windham, J.D., CFE, senior forensic analyst and general counsel with Forensic Strategic Solutions, Inc., “even when people are older than you or ‘high on the totem pole.’ Be even more certain that you can ask those questions in a respectful manner.”

Ryan Hubbs, CFE, CIA, CCSA, PHR, forensic audit manager at Halliburton, says, “For some, the work can be exciting and rewarding; for others, it may be overly confrontational and stressful. ‘Know yourself,’ and choose the career path that will be the most rewarding to your personal characteristics and skill sets.”

Many agree that new and possible fraud examiners can’t be hermits. “Network, network, network,” says Sarah Malcom, CFE, CPA, forensic analyst at Forensic Strategic Solutions Inc. “Attend local ACFE chapter meetings, join the organization and meet fraud examination professionals who can share their experiences and advice.

“I met many of my co-workers and managers before I came to work at my firm,” Malcom says. “Speaking with them, learning about the industry and discussing what my day-to-day job duties would look like confirmed to me that fraud examination was something I actually wanted to do and not just a passing interest.”

Paul Drew Scown II, CFE, a special agent with the FBI, is direct. “Learn how to talk to people,” he says. “Interviewing skills — in addition to knowing how to analyze financials — is a key to any good fraud examination.”

Aaron Kahler, CFE, CAMS, director of anti-money laundering compliance services at Capgemini, says those considering a fraud examination profession should associate with like-minded professionals. “The people you meet and work with now will become an influential part of your personal and professional lives,” Kahler says. “We are lucky to have some of the most dedicated and good-natured —with a healthy dose of professional suspicion — people in the fraud examiner field.”

And don’t be daunted by paying your dues; you won’t always sing the blues. “At first, it took a while for me to receive my first case,” says Michael Schaefer, CFE, CPA, audit supervisor at Boulay. “I was new and inexperienced, and our firm was the new player in town. I was frustrated and almost wanted to give it up after the first year. Once I got that first case, it was a huge relief.

“I quickly learned that investigations are not a repeat business, and you have to get out there every day, market yourself and meet people. Eventually those contacts will pay off and you will start to become a well-known investigator,” Schaefer says.

Brian Willingham, CFE, president of Diligentia Group, sums it up with some basic advice. “There are no shortcuts to experience; you need to learn by doing,” Willingham says. “No amount of wisdom will take the place of experience and plain old hard work. If you want to get noticed, do great work. Then do it over and over again.”

DETER THAT FRAUD BEFORE IT BEGINS

What is the ACFE’s foundation? Prevention and deterrence, of course. You’ve heard that before, and so have these CFEs. But how do we do it? To roughly paraphrase Hamlet, therein lies the truth.

“I still find that most companies seem to prefer to react to instances of fraud instead of take preventative measures,” says Pamela Wickes, CFE, CPA, CFF, ABV, director of forensic accounting services for Teal Becker & Chiaramonte CPAs PC. “However, I have seen more fraud awareness in companies lately and more concern of adequate segregation of duties.

“It all boils down to the perception of detection,” Wickes says. “If the tone at the top of a company indicates that fraudulent activity is absolutely unacceptable, and an employee feels like the eye in the sky is always watching, I think a potential fraudster would be deterred from committing a fraud. We have to continue to raise awareness within the business community about establishing adequate anti-fraud programs in their companies. We have to help companies understand that prevention is the most cost-effective way to go,” she says.

“Additionally, I always find the employees who worked with a fraudster were shocked that they or the company they worked for was a victim of a fraud scheme. They describe circumstances surrounding the incident to me that I recognize as red flags; unfortunately they did not. We have to continue to raise awareness of red flags to reduce the duration of the fraud schemes,” Wickes says.

Joshua Shilts, CFE, CPA, CFF, CGMA, director – forensic audit for Citizens Property Insurance Corporation, says he “absolutely” has seen improvement among organizations in finding new ways to deter fraud. “In two recent positions I have held, the focus has been on the proactive mitigation of fraud risk,” Shilts says.

“The organizations used data analytic and audit activities to specifically root out fraud. The recent interest in compliance and ethics has helped foster the employment of fraud examiners and forensic accountants to audit, investigate and enhance governance activities,” Shilts says.

Stephanie Wall, CFE, forensic auditor with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, says anti-fraud controls can only go so far. “While it’s important to be aware and mitigate temptation and risk with controls wherever feasible, it’s equally important to foster a work environment of trust and integrity,” Wall says. “This is a tone that must be set at the top and developed with time and actions and therefore is much more difficult to implement, especially in a society that often focuses on quick fixes over lasting results.”

Schaefer says that he hasn’t seen much improvement among organizations in finding new ways to deter fraud. “Many of the organizations I work with don’t devote a significant amount of time to detect fraud,” he says. “Rather they focus their time and resources building and expanding the business despite the alarming statistics that fraud is a problem. Often, after a fraud occurs, I hear from them. ‘How could this happen to our business? I trusted my employees.’

“I do have one company I work with at least once a year that has taken a proactive approach. Several years ago they were a victim of a large fraud, and after this fraud came to light, they elected to be proactive about fraud prevention and detection. I spend about two days once or twice a year looking over their internal controls, testing select areas and providing recommendations for improvement,” Schaefer says.

FIXING IT

The 2012 ACFE Report to the Nations shows that occupational fraud, waste and abuse is increasing despite greater emphasis on anti-fraud controls and legislation. But do these CFEs in the trenches see fraud gaining?

“Based on the conditions of the economy over the last few years, I believe that as budgets grew tighter, organizations discovered fraud,” says Leah Wietholter, CFE, owner of Workman Forensics. “Fraud was more than likely happening the entire time, but when the cash flow slowed, the fraud stood out. This has contributed to the apparent increase in fraud. Also, as fraud instances appear to have been discovered due to smaller budgets, priority for spending money on fraud prevention and detection has decreased.

“Most of our occupational fraud cases involve small businesses, financial institutions and not-for-profits. In my experience, it’s most difficult to convince small organizations that they need assistance in establishing business systems and controls because they are so convinced that their friend/office manager of 20 years ‘would never steal anything,’ ” Wietholter says. “However, we continue to train, speak, bring awareness and provide tools to small businesses as often as we have the opportunity.”

Thi Tra, CFE, forensic accounting analyst – associate, at Hill Schwartz Spilker Keller LLC, has a different take. “Occupational fraud is increasing because of the development in technology and the increase in financial pressure from the economic crisis,” Tra says. “Management needs to be more flexible in balancing company profits and employees’ benefits. When employees are happy, they can work harder to increase the profit for the company. Additionally, whenever we decide to apply new technology, management needs to ensure to apply appropriate controls before fraudsters figure it out.”

Malcom takes a more philosophical view. “Regardless of our efforts to prevent fraud, the element of human justification and rationalization will always be there,” she says. “Whether it pertains to the pressure of greed or need, when pushed to a certain threshold and when given the opportunity to do so, people will commit fraud. Witness the fraud triangle.

“This behavior is likely to continue regardless of legislation and anti-fraud measures. Preventive measures can be circumvented, and the human need/greed factor often outweighs the perceived consequences of committing fraud. That’s not to say that our anti-fraud efforts are not working. We can and must continue to make it more difficult for fraudsters to increase the perception of detection and to emphasize the existence and severity of the consequences,” Malcom says.

SHOULD YOU BECOME A HIGH-TECH PRO?

“Trying to be an expert in everything is an exercise in futility,” Willingham says. “But having some basic knowledge in high-tech tools and techniques not only helps you understand the possibilities but the best ways to approach them.”

A recent case solidified Wietholter’s views on learning high-tech methods. “A few months ago, our firm was engaged to perform a fraud examination involving an IT department of a company and its expenditures,” she says. “We quickly realized that to understand the expenditures, we had to know about the IT components as well.

“I decided to have an IT specialist work with us to examine the more complicated elements, but my team and I still had to learn the high-level information to understand the context of the examination.

“I strive continually to improve my knowledge of technology. If I did not believe that understanding technology was important prior to this case, I definitely believed it afterward!” Wietholter says.

Wall says it isn’t necessary to be a high-tech “quasi expert” to be an effective fraud examiner. “But it is extremely important to learn about emerging technologies fraudsters may be utilizing to be better aware of how to detect and prevent fraud,” she says. “Unfortunately, fraud examination is more often than not more reactive than proactive, and as technology changes so quickly, so do fraud schemes.”

Lee, a forensic accountant, said that when he was deciding what he should earn an advanced degree in he chose a Master’s of Science in Accounting and Information Technology. “Today we need to be IT literate and not always rely on IT pros because they might not always be there to help you when a problem arises,” Lee says.

FRAUD EXAMINATION PROPONENTS IN THE WORKPLACE?

Fraud isn’t necessarily the dirty word in organizations as it once was. However, overzealous CFEs — armed with solid statistics plus test-driven principles and methods — might run the risk of scaring off management and employees who want to do the right thing.

“Fraud is an organizational disease that needs to be approached just like controlling or combatting any biological disease,” says Hubbs. “Education is the key to prevention. If people are not aware, then they are more susceptible to becoming a victim or being influenced by fraud. Unfortunately, I do not think enough is done at this level to proactively combat it. 

“Routine follow-ups, exams, continuous monitoring and other appropriate tools are as necessary as they require expertise to carry them out. However, combatting fraud is not a 100-yard dash; it’s a long-distance marathon. Taking a ‘chicken little,’ sky-is-falling approach with management can damage an organization’s fight against fraud, especially when non-anti-fraud professionals do not actually see the sky fall,” Hubbs says.

Wall believes the best way to be a fraud examination proponent is to foster “continual awareness and communication within the organization of potential vulnerabilities rather than waiting until it’s too late to make changes or call in an expert.

“We like to assume the best in people and think that no one would ever take advantage of the company, so we often overlook internal control weaknesses in the workplace that could easily be protected. The best way to mitigate temptation and risk is to think like a fraudster,” Wall says.

Others suggest a strategic approach that begins with the fraud examiner. “The key to the success of fraud prevention in the workplace is leading by example: put your own integrity on display,” Windham says. “Others will notice, and it will influence them to ‘buy in’ when you suggest fraud prevention measures and controls. If you do your part to implement and actively ‘work’ these controls, others will be more enthusiastic to follow your lead.”

Lee says that in some workplaces anti-fraud professionals aren’t allowed to talk about what they do. “All they can mention is their generic job description,” he says. “In those cases, I believe you need to make co-workers aware of fraud indicators, but don’t overwhelm them.”

Schaefer says CFEs can talk about fraud in the workplace, but they shouldn’t let the topic dominate conversations. “At first, my senior colleagues didn’t openly talk about fraud, and the younger generation I mentor didn’t either,” he says. “However, I try to discuss fraud with every client and my engagement team in some way to at least make them think about it. My fellow colleagues have started to call me the ‘fraudster’ — in a good way!”

“As a professional you can ensure risk management/compliance policies, procedures and controls are effective yet realistic and cover all applicable areas of your organization’s applicable risk assessments,” Kahler says. “By providing documented rationality on your approach to fraud examination and management and necessary knowledge transfer to your peers, you can succeed in being an anti-fraud proponent of sorts while not going beyond your role and losing value in the delivery of your message.”

Wietholter has a unique method of spreading the anti-fraud gospel to non-CFEs in her organization: local ACFE training events. “Promoting attendance at these training events and chapter meetings would be a great way to introduce co-workers because they provide excellent information in a low-pressure environment,” she says.

ALL FOR ONE, ONE FOR ALL

Though the roster of CFEs grows by thousands every year, they remain a fairly close-knit group because of the anti-fraud niche they inhabit. When they see those CFE pins during chapter meetings and conferences and at work, they know that they’ve found kindred spirits.

“No warrior can fight against fraud alone,” says Tra. “Within the group or the firm, when we examine documents, we are sharing pieces of the same cake. When we get together to discuss and compile the work, red flags appear, and we figure it out.

“Although CFEs may be in different firms — we are even competitors sometimes — we are siblings in the same family — we have esprit de corps — because we have the same enemy,” Tra says.

Wickes agrees. “When I attend the Annual ACFE Global Fraud Conference and meet other CFEs, I feel that there is a bond among us and a willingness to help each other,” she says. 

“I feel like fraud examiners are a special group of individuals who want to help organizations and societies together,” says Lee. “We thrive on finding errors because fraud examiners simply want to catch the bad guys. You get to do all the behind-the-scenes work and watch justice be served. It is very rewarding to know the difference you can make based on your hard work.”

Kahler believes that CFEs’ often-unpopular duties construct a shared DNA. “CFEs understand the fine balance between furthering business within an organization and ensuring proper fraud and risk management controls are in place for prevention of financial and reputational risk,” he says.

“We also understand that in a workplace, whether we are working in the fraud examination function in-house for our employer or as an outside consultant, that sometimes doing the right thing is not always the easiest and most effective way — in costs, resources and time — of promoting ‘business as usual’ with financials being the key driver,” Kahler says.

Shilts sees a cooperative spirit among his group members “and other business units that support anti-fraud initiatives. My group and I work very closely with human resources, the special investigative unit, and ethics and compliance in strengthening these areas. We plan training events together and share resources and knowledge to make sure we are providing the best service.”

Hubbs believes the bonds among CFEs are growing because of their increasing status in the workplace. “The most enthusiastic part of the anti-fraud profession is the desire, and in some instances the requirement, to have anti-fraud professionals on staff,” he says. “The profession is growing, the CFE credential is becoming more recognized and valued, and CFEs have been at the forefront of uncovering some very high-profile fraud cases as of late. It’s always a good thing to see others advance the profession and bring positive awareness to your line of work.”

Windham is on that same wavelength. “The public is fed up with the greed, financial fraud and the abuse of the public trust,” he says. “The ‘golden age of fraud’ from approximately 1980 through 2010 is no longer en vogue. The public is mad, fearful and less trusting than it has ever been. And, thanks largely to the pioneering integrity of the first generation of CFE, today’s CFEs have a higher position of trust and respect than ever before,” Windham says.

Dick Carozza, CFE, is editor in chief of Fraud Magazine. 

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