ACFE CEO Speaks to Fraudtoday

“The world continues to get smaller due to advances in technology.  Companies will continue to expand globally.  You can be a small, one-person company at home in India and sell to a company in Europe with nothing more than a computer.  Unfortunately, the differences in legal systems are probably the global fraudsters’ greatest friend.  We will need to find ways to break down legal jurisdictions so that we can get better at stopping global frauds,” says Mr. Scott J. Grossfeld – the CEO of ACFE.


 

Mr. Grossfeld, who initially had an experience in Industry and Consulting, joined the Association of Certified Fraud Examiners as a Chief Financial Officer in 2004. His responsibilities were providing management and oversight of all finances while working with senior leadership to develop organizational strategy, alliances and operations worldwide. Jointly, he managed the company’s IT organization and was responsible for its technological advances. Soon, in 2005, he was appointed as the Chief Executive Officer (CEO) of ACFE.

As the CEO, Mr. Grossfeld is responsible for all the operational aspects of the ACFE including personnel and finances. According to him, his greatest strength is managing the business and improving internal processes and organization. His focus is on business strategies. During the last 4 years, since Scott has occupied the position of the CEO, the membership of ACFE has grown from 34,000 to 50,000.

When Scott was asked about the biggest challenges before him as the CEO of ACFE, he said, “Our biggest challenge is managing our growth.  The ACFE was already experiencing significant growth prior to the economic downturn.  With a down economy fraud tends to increase as we have seen. The ACFE is the only global anti-fraud association. As the world continues to get smaller due to advances in technology it is increasingly important for the ACFE to take a global leadership position and ensure that it can continue to meet the needs of its members across the world.”

According to Scott, the first and foremost quality essential for the anti-fraud professionals in order to fight the fraud is ‘professional skepticism’. He says that the anti-fraud professionals don’t take information or answers at face value. They are willing to look deeper. All it takes is one person asking the right questions to save billions of dollars. He also gives importance to anti-fraud education, specifically mentioning deep fraud awareness, knowledge of fraud cases, and understanding of anti-fraud measures.

When Scott was asked about the initiatives those are globally required to reduce the impact of frauds, he said, “First, spreading awareness that fraud is a truly global problem that needs real solutions should be the part of the dialog among business leaders. There are still places in the world where fraud, to some degree, is considered an acceptable part of doing business. This is unfortunate and rather than accept this with a “play ball” attitude, organizations that trade or have operations across borders need to put pressure on regulatory and enforcement bodies in those countries to take real steps to combat fraud. Also, these organizations have a responsibility to have their own controls in place, including trained anti-fraud professionals, to help safeguard their investments.”

While speaking about the New Delhi based India Chapter of ACFE, Mr. Grossfeld said,
“We strive to support our members across India by providing training opportunities that are practical and useful to them in their profession. This includes online seminars and self-study courses, many of which are international in nature. For instance, online webinars and self-study courses range from essential courses such as “Fundamentals of Fraud Examination” to more focused subjects including “Taking Anti-Fraud Skills around the Globe” and “International Bribery in Business Transactions”, just to name a few.”

As Scott was speaking about the Indian chapter of ACFE, we asked him about his views regarding India in terms of frauds – from the point of view of a forensic accounting/anti fraud profession and he said, “India faces the same challenges as countries all over the world in terms of protecting organizations and investments from fraud. At a time when anti-fraud professionals in the West are looking at Bernard Madoff and even looking back at Enron and Worldcom as the “iconic” frauds of the decade, the Satyam fraud in India last year really brought to the forefront the fact that major accounting frauds can occur anywhere. For many people in India, in particular, the Satyam case was jolting. Anyone holding stock in Satyam saw their investment virtually disappear overnight. It is a frustrating case when you consider that it was perpetrated from the top of the organization and also when you consider the alleged complicity by the auditors involved. One might assume that at any point, they could have – or should have – exposed the fraud. The company’s chairman actually said that what started as a “marginal gap” between real and fictitious profits grew to “unmanageable proportions”. Our position and no doubt the position of anti-fraud professionals in India, is that fraud is fraud – whether it seems “marginal” or “manageable” is beside the point. The biggest frauds often start small and that is why it is all the more important to be vigilant; to create a no-tolerance atmosphere and have anti-fraud controls firmly in place on all levels.”

Scott, thus, mainly spoke about the Satyam scam and, so, also commented on ‘India as the market in the Post-Satyam era’. He said, “A fraud of the magnitude of the Satyam scandal always drives more attention to the anti-fraud profession, and the need for fraud examiners. It’s not enough to depend on auditors to detect fraud; they may not have the anti-fraud expertise required; nor is it necessarily even the focus of their audit. Organizations need to have anti-fraud professionals among their own ranks, or contracted from the outside, to give their business a thorough evaluation that looks not only at fraud, but also the potential for fraud and whether adequate controls are in place. In India, it’s also important that business leaders do not look at the Satyam case and think, “That’s a multi-billion dollar company, and fraud is inevitable at such a massive corporation. My business is small and I know where all of the money is going.” The ACFE has found small businesses to be even more susceptible to fraud. They are more likely to have fewer controls in place, and fall victim to a trusted employee who has the access and opportunity to commit fraud.  In the U.S., the median loss suffered by organizations with fewer than 100 employees was $200,000 (U.S.), higher than the median loss for any other category, according to our 2008 Report to the Nation on Occupational Fraud & Abuse.”

Mr. Grossfeld assumes the Satyam scam as a milestone and emphasizes on the role of the ACFE members in India. He thinks that there is a great opportunity for the ACFE members in India to emerge as the leaders of the anti-fraud profession in their country and the region. He also quotes a recent article in the Asia Times which reported that “forensic auditing work has seen growth of at least 100 percent post-Satyam” (“India’s Forensic Auditors Join War on Fraud”, 3 December 2009: http://www.atimes.com/atimes/South_Asia/KL03Df01.html ).

While talking so much in detail about India and Indian anti-fraud scenario, Mr. Grossfeld specially mentioned about Indiaforensic. He said, “Indiaforensic has been a leader in the anti-fraud profession.  Indiaforensic was founded in 2005 long before the Satyam fraud cause brought attention to the risk of fraud loss in India.  Indiaforensic should be commended for their efforts.”