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Fraud fighters: anti-fraud training for ECA auditors

The ECA offers its auditors in-house training on fraud and compliance, and also on ethics and integrity. Since 2018, this coursework includes a training provided by the Association of Certified Fraud Examiners (AFCE), aiming at fraud prevention and detection and leading to the CFE exam. After passing, a participant becomes certified fraud examiner. Robert Lamers is Head of European Partnership Development in ACFE and was the trainer for the first course in the ECA. He explains the need for training in the area of fraud and reflects on the ACFE training provided to the ECA.

By Robert Lamers, Head of European Partnership development,
Association of Certified Fraud Examiners

Fraud is everywhere

Open a random newspaper or watch the news on television and there is a good chance you will be confronted with stories about fraud, compliance and ethics. New cases of fraud and corruption are exposed almost on a daily basis. And they occur at any level of our society. On the one hand, this is quite alarming, but the upside is that the public opinion about fraud and corruption is changing rapidly. Where lacking knowledge and limited persecution led to a certain acceptance of fraud and corruption in the past, nowadays, fraudulent acts and corruption are deemed unacceptable. Even more interesting is the change of opinions, also on the political level, in the way people think about actions that used to be a grey area between right and wrong, such as tax avoidance.

Box 1 — the Association of Certified Fraud Examiners (ACFE)

In 1988, Joseph T. Wells, an accountant-turned FBI agent, founded the Association of Certified Fraud Examiners (ACFE). The mission of the ACFE is to reduce the incidence of fraud and white-collar crime and to assist its members in fraud detection and deterrence. With 85 000 members in 160 countries the ACFE is the world’s largest anti-fraud organization and premier provider of anti-fraud training and education.

Officially tax avoidance, which entails various methods used by private individuals as well as companies to minimize the amount of tax they have to pay, might not be an illegal action. And in the past it was even pretty normal and accepted to avoid paying too much tax, for example by using tax havens. However, the public opinion on such schemes has turned 180 degrees following several scandals, such as those that were uncovered with the publication of the Panama Papers in 2015. Many people all over the world were shocked and disgusted to find out on what scale tax was being avoided worldwide, and the publication put severe pressure on companies and especially VIP’s, such royals and politicians from across the globe.

The Panama Papers exposed a hidden world where dodgy law firms and trust funds created complicated financial and fiscal constructions to help their rich clients to hide large sums of money from tax authorities on all continents. And although such constructions are not always illegal, the public opinion is clear: such behaviour is morally wrong.

But what exactly is fraud?

Fraud is an umbrella term that includes any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means. It causes tremendous damage to the global economy and undermines the trust of citizens in governments, institutions, and — especially — in the financial sector. The important question is how this risk can be reduced significantly, and what the best ways are to detect and fight fraud.

An important challenge here is that fraudulent schemes and fraudsters come in all sorts of shapes and sizes. The amount of modus operandi is virtually unlimited and fraudsters come from all walks of life. In addition, the overlapping conditions that can be found in all fraud cases are quite general. Any person can come to commit fraud if there is enough pressure, e.g. because of financial problems, to commit fraud, if there is an opportunity to misappropriate funds, and if the individual can convince himself he has good reasons to commit fraud.

Anti-fraud training at the ECA

The variety and frequency of fraud obviously means that, for an organisation to be successful in fraud prevention, detection and investigations, it will need to train its staff in order to gain sufficient knowledge about the characteristics of fraudsters and fraud schemes. The ECA is no exception here, and although its main mission is not to detect and report fraud, its auditors do encounter — suspected — fraud cases during their work, in which case they are required to inform OLAF, the EU’s Anti-Fraud Office.

Box 2 — Certified Fraud Examiner (CFE) credentia

Source: ACFE.

In order to improve the general and specific knowledge and to set high standards for continuing professional education, the AFCE developed the Certified Fraud Examiner (CFE) credential. People with the right combination of academic skills and a minimum of two years professional experience in a fraud related field can apply for this international CFE credential.

Source: ACFE.

This credential can be acquired through a 4 or 5-day classroom CFE Exam review course, which teaches participants about fraud investigations, law, financial transactions, fraud schemes, and fraud prevention and deterrence. To maintain the credential every CFE must follow at least 20 hours of continuing professional education per year.

To enhance its auditors’ knowledge and skills in the area of fraud, the ECA set up a training programme, which includes the Certified Fraud Examiner (CFE) review course offered by the Association of Certified Fraud Examiners (AFCE). The first group of ECA auditors took, and successfully completed, this course in October 2018. The participants discussed topics such as the difference between assumptions and fact finding, and how to deal with suspected fraud. Participants got information showing that it can be tough to move from a suspicion of fraud to a proven fraud case.

Added value for teachers and participants alike

The ultimate goal of the course we provide is to make participants CFE in five days. This means getting familiar and digesting a lot of material, plus four exams consisting of 100 questions each. During the week at the ECA nearly everybody was able to pass the exams, resulting a several new CFEs at the end of the week. Teaching this ECA class was not only very pleasant but also gave real added value to my colleague Kurt and me. We learned a lot about the specific issues the ECA auditors face when assessing EU expenditure and policies. Enriching our work for future groups.

This article was first published on the 2/2019 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.

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