Types of financial fraud

NPP Fraud Schemes

• Asset Misappropriation
  The most common form of fraud is misappropriation of assets, in which an employee, executive or owner of a company uses their position to steal, or misappropriate, the assets of an organization.
• Bid rigging and/or Price fixing
  Bid rigging: Bid‑rigging occurs when two or more persons agree that, in response to a call for bids or tenders, to collude; with one or more of them not submitting a bid; withdrawing a bid; or submitting a bid arrived at by agreement.
  
  Price Fixing: Agreements between two or more persons to prevent or lessen competition. Agreements between competitors to fix prices, to allocate customers or geographic markets, or to restrict production of a product by setting quotas among competitors.
• Billing (invoice) scheme
  A fraudulent disbursement scheme in which a person causes their employer to issue an erroneous payment by submitting invoices for fictitious goods or services or inflated invoices (e.g., employee creates a shell company and bills employer for services not actually rendered).
• Bribery and/or Corruption
  A scheme in which an employee misuses their influence in a business transaction in a way that violates their duty to the employer in order to gain a direct or indirect benefit (e.g., schemes involving bribery/kickbacks).
• ‘CEO’ Fraud
  A scam in which fraudsters gain access to the email account of an executive or supervisor, likely from accessing an online email directory from an organization's website. They target employees who have the authority to access and move money. Fraudsters send realistic-looking e-mails, requesting urgent wire transfers or gift card purchases for what appear to be legitimate business or personal reasons, such as 'securing an important contract', or 'a confidential transaction'. They often send the targeted fraudulent e-mail when executives are travelling and do not have ready access to company email or are otherwise difficult to reach.
• Collusion
  Collusion refers to combinations, conspiracies, or agreements among sellers to raise or fix prices and to reduce output in order to increase profits.
• Contract Splitting
  A practice where an employee is splitting a requirement into a number of contracts to avoid having to award the contract through competition or to circumvent the need for a higher approval authority.
• Expense and travel fraud
  A fraudulent disbursement scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expenses (e.g., employee files fraudulent expense report, claiming personal travel expenses for meals lodgings etc. that were never incurred.
• Ghost employees
  A ghost employee is someone recorded on the payroll system, but who does not work or no longer works for the business. The ghost can be a real person who knowingly or not is placed on the payroll, or a fictitious person invented by the dishonest employee. Wage payments are then accessed by the perpetrator when funds are directly deposited to the perpetrator’s bank account or when manual cheques are raised and subsequently acquired by the perpetrator and deposited into their bank account.
• Misdirected payments
  A fraudulent disbursement scheme in which a person steals their employer’s funds by intercepting, forging, or altering a check or electronic payment drawn on one of the organization’s bank accounts (e.g., employee steals blank company checks and makes them out to themself or an accomplice; employee re-routes an outgoing electronic payment to a vendor to be deposited into their own bank account).
• Payroll fraud
  A fraudulent disbursement scheme in which an employee causes their employer to issue a payment by making false claims for compensation (e.g., employee claims overtime for hours not worked, commission scheme, etc.).
• Personal Purchase
  Personal purchase schemes, which occur when an employee submits an invoice for personal purchases to the company for payment, or when an employee uses a company credit card for personal purchases.
• Theft of cash and/or cash equivalent
  A scheme in which the perpetrator misappropriates cash kept on hand at the victim organization’s premises (e.g., employee steals cash from a company safe).
  
  This can also include schemes in which an incoming payment is stolen from an organization before or after it has been recorded on the organization’s books of account (e.g., employee steals cash and/or cheques from daily receipts before they can be recorded and/or deposited in the bank).
• Theft of physical assets (e.g. inventory)
  A scheme in which an employee steals or misuses the employing organization’s resources (e.g., making personal use of a company vehicle while on an out-of-town assignment, taking office equipment home without proper approval, theft of merchandise.)
• Time Theft
  Time theft occurs when an employee is paid for time they were not actually at work or are not working despite being paid for their time (e.g. spending time for personal research online at work, engaging in personal activities without informing their employer, resulting in less hours of work than for which they are being paid.
• Undisclosed conflict of interest
  This situation arises when an employee has an undeclared personal interest and is in a position to exploit their own professional or official capacity to influence or appear to influence the way in which they perform their tasks in the course of their duties resulting in a personal benefit. (e.g. hiring a family member or friend to perform a work assignment without advising the chain of command).