Forgery, Theft and Fraud

1. Unit 24 Forgery, Theft and Fraud Facilitator Support Materials for Forgery, Theft and Fraud

2. Unit Aim To provide an understanding of the different activities of forgery, theft and fraud that occur in financial services organisations and how these organisations, customers and law enforcement agencies minimise the risks from these financial crimes. This unit is 20 Guided Learning Hours

3. Unit Description In Unit 23 Introduction to Financial Crime including an Overview of Money Laundering, the learner was introduced to the range of activities that may be regarded as financial crime. In this unit we look in more depth at the different activities of forgery, theft and fraud that occur in relation to financial services. The different types of forgery are investigated along with the actions that financial services providers, customers and law enforcement agencies take in order to minimise the risks of forgery.

4. Unit Description Continued • The risks of theft are studied along with the attributes of identity theft. The actions which have been necessary to reduce the risks of identity theft by the financial services providers and by customers are then investigated. • The final part of the unit concentrates on the prerequisite conditions for fraud to take place, the common types of fraud and how they arise. The consequences of fraud are investigated as are the systems and procedures to discover and prevent fraud. • This fraud section of this unit is concluded by looking at the roles of management and auditors in detecting and preventing fraud.

5. Learning Outcome 1: Understand forgery in relation to financial services Amplification of the Learning Outcome: Different types of forgery:counterfeit money; forged documents and other objects that may give rise to fraudulent activities by criminals against the financial institution concerned eg loan applications, documentation submitted alongside loan applications, securities; forged documentation and other objects that may give rise to fraudulent activities perpetrated against customers, eg cheques; third party withdrawal forms and powers of attorney

6. Amplification of the Learning Outcome Continued: Financial services and customers: Training of financial services staff, eg awareness of the more common features of counterfeit money, ensuring bank statements as opposed to an employer’s reference are used to verify income for a loan application; third party withdrawal forms are completed on the premises of the financial institution, the original power of attorney is submitted by the customer; training of retail outlets customers’ staff, eg refusing to take any notes with a value in excess of £20, ensuring correct procedures are followed when accepting a cheque supported by a bank cheque card

7. Amplification of the Learning Outcome Continued: Law enforcement agencies: Government making it as difficult as possible to forge currency notes by printing notes on special paper that incorporate built-in security features

8. Assessment Criteria for Learning Outcome 1 Assessment Criteria: 1.1 Discuss different types of forgery Open discussion with Learners 1.2 Explain the actions that financial services providers and customers may take in order to minimise the risks arising from forgery Open discussion with Learners 1.3 Explain the actions that law enforcement agencies may take in order to minimise the risks from forgery Open discussion with Learners

9. Learning Outcome 2: Understand theft in relation to financial services Amplification of the Learning Outcome: The risks: theft by third parties, eg theft by deception, armed robbery, theft in relation to Automated Teller Machines (ATMs), theft of physical assets; theft by employees, eg misappropriation of funds, inflating expenses claims, pretending relatives had died to claim bereavement leave; the financial institution is deprived of assets that belong to the business and if the theft is substantial customer confidence can be adversely affected

10. Amplification of the Learning Outcome Continued: Identity theft:obtaining personal identifiers; how financial institutions are affected by fraudulent withdrawals from deposit accounts; fraudulent credit card applications; fraudulent personal loan applications; fraudulent mortgage applications and fraudulent credit and debit card transactions

11. Amplification of the Learning Outcome Continued: Actions that financial institutions and customers can take in order to reduce the risk of identity theft: policies and procedures, eg more rigorous identification procedures have been introduced in order that fake identities cannot be used to set up new accounts, one-off transactions in foreign countries will be followed up by a telephone call to the account holder if the transaction does not fit the profile of the customer’s normal card usage; public awareness campaigns, eg financial institutions making customers aware of conventional phishing techniques, which use bogus e-mails purported to be from banking organisations; technological developments, eg customers only being able to authorise purchases with a plastic card and PIN

12. Assessment Criteria for Learning Outcome 2 Assessment Criteria: 2.1 Explain the risks of theft to financial institutions Open discussion with Learners 2.2 Explain the possible consequences of identity theft Open discussion with Learners 2.3 Explain the actions that financial institutions and customers can take in order to reduce the risk of identity theft Open discussion with Learners

13. Learning Outcome 3: Understand fraud in relation to financial services Amplification of the Learning Outcome: Prerequisite conditions: dishonesty; motivation; opportunity Common types of fraud and how they arise: falsification of documents; credit card fraud; mortgage fraud; insurance fraud; illegal transactions on dormant accounts; teeming and lading; manipulation of accounting information; over claiming expenses Consequences of Fraud: financial funds and assets are lost; detrimental impact on owners and investors’ confidence and cost in terms of time and effort in repairing the damage of fraud

14. Amplification of the Learning Outcome Continued: • Systems and procedures to discover and prevent fraud: standardised procedures; physical controls; virtual controls; dial back; segregation of duties; mandates and authorisation; records and staff awareness • Role of management and auditors: ensure procedures are followed and staff adequately trained; internal auditors to monitor the effectiveness of control systems and external auditors to design their procedures to ensure that there is a reasonable expectation of detecting misstatements that have arisen due to fraud and error

15. Assessment Criteria for Learning Outcome 3 Assessment Criteria: 3.1 Explain the prerequisite conditions for fraud to take place Open discussion with Learners 3.2 Discuss how the most common types of fraud arise in manual and computer processing environments Open discussion with Learners

16. Assessment Criteria for Learning Outcome 3 Continued • 3.3 Explain the consequences of fraud for the financial services organisation • Open discussion with Learners • 3.4 Explain systems and procedures that can be deployed to discover and prevent fraud • Open discussion with Learners • 3.5 Explain the role of management and auditors in detecting and preventing fraud • Open discussion with Learners

17. Appropriate Books Financial Crime, chapter; Forgery, pages 82-95 Financial Crime , chapter; Theft, pages 100-117 Financial Crime , chapter; Fraud, pages 122-148

18. Appropriate websites www.bba.org.uk www.bsa.org.uk www.fsa.gov.uk www.statistics.gov.uk www.ukpayments.org.uk