Making the case for anti-fraud training in higher education

Have your students ever asked you some of these questions?

“Someone’s been using my credit card to make purchases online. What do I do now?”

“After my job interview, the company ran a background check. They notified me I wouldn’t be getting the job because the information that came back showed a conviction for theft. It’s not me. How do I fix this?”

“I was working on a computer and a message popped up that said my personal files are encrypted, and I have 96 hours to pay $500 or lose everything. Help!”

Identity theft, impostor scams, increased exposure through free Wi-Fi, ransomware, phishing schemes, spearfishing — these are no longer topics confined to fraud examiners or industry specialists. College students find themselves victims of fraud in increasing numbers.

According to the Federal Trade Commission (FTC), more than three million victims reported consumer fraud in 2016. Of those cases, 13 percent (almost 400,000 cases) were related to identity theft. The latest edition of the Consumer Sentinel Data Book, published by the FTC in March 2017, categorizes the complaints by several characteristics and provides year-to-year comparisons of identity theft trends. The report is prepared from the Consumer Sentinel Database of complaints that are available only to law enforcement.

Most educators teach fraud examination courses from the accounting perspective. However, anyone pursuing a career in business — or looking to be the next Mark Zuckerberg — must be familiar with the red flags of fraud and the impact they have on organizations. Incorporating red-flag awareness into formal college curriculums is challenging as the number of required courses increases leaving students few available electives from which to choose.

The ACFE’s 2016 Report to the Nations states that a typical organization loses 5 percent of annual revenue to fraud. Loss of revenue, in whatever form, can lead to downsizing and layoffs, which affects all aspects of businesses. The report shows that anti-fraud controls both lower the risk of fraud and make quick detection possible.

A key element of a fraud prevention program is employee training. We can help to jumpstart that training by familiarizing students with the red flags of fraud prior to their entry into their careers. They’ll be better equipped to address issues in the workplace and even become fraud prevention champions.

Let’s look at some ideas for expanding fraud awareness among student populations.

Rationale/background

Fraud, by definition, involves deception and intent often for perpetrators’ personal gain. However, few people start out saying, “I’m going to commit fraud today.” An individual can easily get caught up in a situation they weren’t prepared for and give in to workplace pressure. We can train students to recognize the red flags of poor tone at the top and management coercion that can help them avoid situations like the one in which Betty Vinson found herself.

Vinson, an accountant at WorldCom, was sentenced to five months in prison for her role in making false journal entries in the accounting records. Her boss pressured Vinson to be a team player and make the entries only “this one time.” However, that one time turned into many — even though she knew it was wrong. (See Ex-WorldCom official sentenced to prison, CNN, Aug. 5, 2005 and Ordered to Commit Fraud, A Staffer Balked, Then Caved, by Susan Pulliam, The Wall Street Journal, June 23, 2003.)

Managers don’t just coerce employees in accounting and finance departments. Bosses in production and operations might ask or tempt their workers to falsify metrics to meet performance targets or receive bonuses. Supervisors might coax marketing professionals to play with the numbers to show more favorable results.

Students’ perspectives

Often described as “digital natives,” students are always instantly connected to information in real time. Few of them give much thought to how easily technology is susceptible to fraud and abuse unless they’ve been victims of identity theft or hacking.

The proliferation of fake news highlights the need to develop fact-checking skills to navigate the world of instant information. The old phrase “trust but verify” has never been more relevant. Developing some healthy skepticism and learning the importance of validating or verifying information are skills that young adults can practice while they’re in college. Practicing financial literacy and protecting oneself from becoming a fraud victim are important life skills to develop — personally and professionally.

New hires who are familiar with fraud prevention might just demand corporate cultures that emphasize a tone at the top, which supports transparency and models the behavior expected of employees.

Employers’ perspectives

The role of technology in both facilitating and preventing fraud continues to grow. Organizations are vulnerable to hackers’ penetrations and data breaches because of the human element — often the weakest link.

A recent computer virus forced employees at a New York hospital to use paper and pencil when its electronic health records system was hacked. The investigation continued for weeks, and the system still hadn’t been fully restored. (See ECMC computer hack under investigation, by Jordan Williams, WIVB.com, April 11.)

Something as simple as an employee opening an email attachment can be responsible for bringing business to a halt. As we rely more on electronic data, the need for employee education increases.

As I discussed in my May/June 2017 column, The FCPA: Developing a global perspective, many businesses no longer have defined geographic boundaries. As companies continue to grow globally, a basic understanding of the Foreign Corrupt Practices Act (FCPA) is essential. Understanding cultural differences and what’s necessary for compliance with the FCPA is important for all companies because certain provisions apply to everyone.

Identity theft can also have a negative impact at the business level, particularly in an industry like health care. Criminals can perpetrate Medicare and Medicaid fraud using stolen identities they’ve bought from hackers.

The risk of fraud also is high in the insurance industry. According to the Coalition Against Insurance Fraud, an anti-fraud alliance and watchdog group for the industry and its consumers, fraudulent claims and other schemes cost insurance companies at least $80 billion a year.

Ingeniously incorporating fraud awareness training on and off campus

The obvious method for educating college students about fraud are stand-alone, credit-bearing courses. But educators can’t always persuade university administrators to establish those courses. Therefore, educators face such challenges as adding more to already content-rich courses, deciding who takes responsibility for implementation and assessing consistency of course content when multiple instructors are involved. One option is embedding anti-fraud discussions in selected courses in the accounting or business curriculums. (Though that also has its challenges.)

You can use the ACFE’s numerous resources for introducing fraud examination and prevention to students. See “Details and Benefits — Student Membership”. Then, after you’ve attended a meeting of your local ACFE chapter, you can consider encouraging your students to begin a student chapter.

You and your students can present fraud examination principles and prevention techniques to business, social sciences, computer science and criminal justice student clubs, and at campus career centers. Also, you can incorporate service components in your courses such as anti-fraud presentations to local businesses and nonprofit organizations. Student chapter members can publicize your outreach efforts on and off campus.

Once you’ve planted the seeds, you can move toward a gold standard of engagement at the college level — certificate program courses taught by CFE practitioners in the classroom or online. The natural progression? Students studying to earn their CFE credentials.

As educators, we often struggle to incorporate anti-fraud elements into our accounting and business courses, but we know we must. Our students need to learn fraud examination principles that they can carry into the work world. Keep up the good fight!

Thank you

I’ve had the pleasure of serving as the chair of the ACFE Higher Education Advisory Committee for the past two years. The committee members recently elected Steve Morang, CFE, CRMA, CIA, as the new chair. Steve already edits the “Big Frauds” column in Fraud Magazine, so the committee co-chair, Sandra Damijian, Ph.D., CFE, has graciously agreed to become the editor of this column.

With each “Fraud EDge” column I wrote or facilitated, I looked for ways to encourage and expand collaboration between the classroom and the profession. The most rewarding comment a student can make at the end of an assignment or course is “I’ve learned to think differently.” I hope at least one of my columns has had that same effect on you.

Patricia A. Johnson, MBA, CFE, CPA, is the program coordinator of the Master’s in Science in Forensic Accounting program at Canisius College in Buffalo, New York. She’s the former chair of the ACFE Higher Education Advisory Committee. Her email address is: johnsonp@canisius.edu.