Faculty of commerce

Department of intelligence & Security studies

BBA PSS

PS206

Block 2.2 2014- Semester 2

[28/01/14 – 00/07/14

Lectures /Assignments/Tests

Lecturer: CP Chikomba
 Fraud Management
 Admin Managers as well as security and loss prevention
officers/managers are often required to devise and implement
policy/policies, put in place internal controls to deal with commercial
crime , direct, and or, conduct internal investigations within their
companies. The nature of the investigation whether criminal,
disciplinary or regulatory, requires that responsible managers , and
or, security personnel charged with investigator’s role, be
equipped with a range of knowledge and skills. These include case
planning, the investigation process, gathering and handling
evidence, the management of the investigation, overt and covert
techniques (including CCTV), and legal issues, report writing and
learning from incidents. Now at this juncture, given the short
duration of the course, during which it is expected essential key
areas to be covered, students are reminded to research and read
wide in their own space of time in order to grasp the f
criminological and management concepts donning the field of
fraud as time will be on our side. Remember the course will not
attempt to make you fraud experts overnight but at least help with
the general appreciation of the subject topic.
Fraud Management

What will you learn?

 1. Introduction to concepts of crime : Definition and discussion of the
elements of crime]
 2. The nature and scope of Fraud - [As a criminal common law offence / Financial crime
typology & diverse groupings through which it manifests itself: e.g. [Cheque & Bank
Card
Frauds]
 3 Fraud and Abuse - [Embezzlement The Growing Problem in Organizations ]
 4 Crime Investigation in Context- [A Systematic Planned Process ]:
4.1 Preamble / Introduction
4.2 The Definition and Theories of Criminal Investigation /role of an investigator
4.3 Key investigatory stages, skills, and ,techniques
4.4 Investigations, regulation and legislation – working with the police
4.5 Handling evidence
4.6 Individualization of the crime and arrest of the criminal
4.7 Recoveries of stolen assets / property
4.8 Involvement in the prosecution:
◙ 5 Fraud Prevention - [Organizational Policy and Procedures]
- [Internal Controls]
Objective /Purpose of this module / lecture:
 The purpose of this module / lecture is to introduce you to the concepts and appreciation
of Crime as an introduction to the subject of Fraud Management

Key Words: Concepts /Appreciation of Fraud, and , Fraud Management

Expected Outcomes:
 On completion of module / lecture 1, you will be able to:

1. Defining Crime (general)

2 The Law

3. Explain in the elements , and or core characteristics of crime

4 Theoretical perspectives of White Collar Crime

5. Explaining why people engage in crime

6. Explaining the different criminal activities

7. Explaining how society [individuals, business, governments], as victims are

affected by crime
 Causes of crime & Who Commits Crime
Greed, Revenge, Anger, Poverty
Criminal intentions …. Varied but three main reasons are known i.e.
1. To get rich quick
2. Revenge
3. Anger

◙ Fact
Criminals know that:
 Any unexplained wealth can draw the attention of the police and tax officials
 The proceeds of a crime may provide evidence that links them to the crime; and
 The Government may confiscate may confiscate the criminals’ proceeds of crime

Criminals therefore singly or form syndicates and operate locally, across borders
to commit crime.
What is crime?
◙ There are many definitions of a crime. According to the
Common Law two of the most meaningful appear to be:
(i) “A crime is conduct which common or statute law
prohibits
and expressly or impliedly subjects to a punishment
which is
remissible (excusable) by the State alone and which the
offender cannot avoid by his own act once he has been
convicted.”
(ii) “A crime is a violation of the law for which the State may
exact punishment.”
◙ It is common practice in (our) law to call a breach of the
common law a Crime, and the breach of a Statutory
regulation/law an offence or contravention. In actual fact all
three terms are loosely interpreted to mean the same
What is crime (cont…)
◘ Essential Elements of a crime (X3):

[1]There must be a violation of the law::

Meaning:
 There must be some overt or deliberate act by the accused
person which is done in the execution of a criminal intent.
 The overt act may consist of a commission or omission (e.g.)
a). Where X murders Y by shooting him, this is an act of
commission.
b). Where X fails to take out a licence required by law, this
is an act of omission.
c). However, where X stands by whilst Y is being murdered,

this is an act of pure omission and does not constitute an

overt act in violation of the law (unless there is some
duty
upon X to act).
What is crime (cont…)
◘ Essential Elements of a crime (X3) …/

[b] The law that has been violated maybe a statutory or common
law ::
Meaning:
 Statutory law is written law which is enacted by legislative
bodies 9i.e.., those bodies such as Parliament which have the
powers to make laws). .
 Common law is unwritten law which owes much of its force to custom
and not to legislative enactment.
 The law violated must be in force – [unless the alleged law is in force
there can be no crime. Thus:
a). The law if statutory must be promulgamted and
published in the Gvt Gazette.
b). The law must be abrogated by disuse [e.g. in a certain
leading case in our law on this point …(Green v.
Fitzgerald) whereby it was decided the crime of
adultery
had been abrogated by disuse (Topic can be discussed

letter if necessary).
What is crime (cont…)
◘ Essential Elements of a crime (X3) …/

[2] Punishment must be provided by law ::

Meaning:
a). If there is no punishment provided for the violation of
the
law , there can be no crime.
b). Where crime is created by statute, the penalty to be
inflicted or the maximum penalty, is usually defined.
c). Where no penalty is provided (as is usually the case
with
common law crime) the punishment is in the discretion
of
the judge or magistrate.

…/
What is crime (cont…)
◘ Essential Elements of a crime (X3) …/

[2] Punishment must be exactable or remissible by the

state ::
Meaning:
a). The State plays the predominant role in a criminal
prosecution . Private parties have a limited right to
prosecute. This right is, however subsidiary to the
right of
the State.
b). That the right of the State to exact punishment
becomes
barred by prescription (i.e. – lapse of time). (This
topic can
be discussed letter if necessary)
What is crime (cont…)
◘ Distinctions between Crimes and Civil Wrongs

(i) In our law, a civil wrong is called a “delict” (in English law,
a “tort”).
(ii) The main differences between a crime and a delict are:-
a). 1. A crime affects the state or the general public.
2. A delict affects the aggrieved individual
b). 1. The purpose of a prosecution for a crime is to punish the
wrong doer.
2. The real purpose of a civil action for delict is redress
(i.e. Compensation or relief) for the aggrieved person
(although penal damages are sometimes granted.
c). 1. The right to exact punishment for a crime
is vested in
the state.
2. The right to exact redress for a delict is vested in the
aggrieved person.
What is crime (cont…)
◘ Distinctions between Crimes and Civil Wrongs(cont…/)

(d). 1. Only the state can agree to forego prosecution for a crime.
In other words, in all criminal proceedings the
complainant is unable to withdraw the prosecution
without the consent of the prosecutor.
2. However, an action for a civil wrong may always be
withdrawn by the aggrieved person.

iii). In Civil actions there are usually two parties:

1. The Plaintiff – this is the aggrieved party; the one
bringing the action.
2. The defendant – the one against whom the action is
brought.
…/
What is crime (cont…)
◘ Distinctions between Crimes and Civil Wrongs(cont…/

iv). In criminal actions there are usually three parties:-

1. The state – represented by the prosecutor.
2. The accused– the person who is prosecuted by the state .
3. The complainant – the aggrieved party.
v). In some cases, a crime is also a delict:-
Meaning
1. Some acts are both a crime and a delict – e.g. assault and
rape.
2. The fact that the offender is prosecuted by the state does
not prevent the aggrieved party from taking a delictual
action against him and recovering damages.

…/
What is crime (cont…)
◘ Distinctions between Crimes and Civil Wrongs(cont…/

For example;
An accused driver might be criminally prosecuted for
negligent driving. However, where the accused’s negligent
driving caused injury to another, there is nothing to prevent
the injured party from taking delictual action against the
accused and recovering damages in respect of the injuries
received.
4. Where both delictual and criminal actions are pending in the
same case, the court usually postpones the trial of the
delictual action until the conclusion of the criminal trial in
order to avoid the possibility of the Court trying the criminal
case from becoming prejudiced.

…/
What is crime (cont…)
■ Sources of the /our criminal law

(i) The basic source of our criminal law is the Roman Dutch Law –
the law which is the product of the Roman and Dutch legal
writers and the Dutch statutes.
(ii) The Roman Dutch Law was introduced into South Africa at the
Cape during the days of the Dutch East India Company and
from the Cape into Rhodesia by virtue of the provisions of
Section 13 of the High Court Act [Chapter 8 of 1939] which read:
“ … the law to be administered by the High Court and by the
Magistrates Courts shall be the same as the law in force in
the colony of the Cape of Good Hope on the 10th day of
June, 1891, as modified by the subsequent legislation having
in this colony the force of law.
(iii) The above provision is now contained in the Constitution of
Zimbabwe . The English Criminal Law has also been followed
in our Courts.

…/
◘ Prescription of Crime

1. Prescription means that the right of prosecution for a particular crime has
been barred by the lapse of time. The only exceptions to this rule are the
crimes of murder (and theft under certain circumstances ) which never
become prescribed. (E.G)
(i). Common law crimes, except murder, become prescribed after 20 years.
(ii) Statutory crimes also become prescribed after 20 years unless a longer
or shorter period is expressly provided by various
statutes
(iii) Sect 27 of CP&E Act (Chapt 59) prescribes that - the right of
prosecution for murder shall not be barred by any lapse of time.
(iv ) EXCEPT for Theft, the period of prescription begins to run from
the moment the crime is committed - (this because theft is a
continuous offence). As long as the thief remains in possession
of stolen property he/she is still committing theft. …/.

***Read On For More On Prescription Of Crimes. ****

 General Principles & Doctrines of Crime

1. Men’s rea
2. Actus -rea

These two are contemporaneous

 General Principles & Doctrines of Crime (Key
requirements)

1. Men’s rea - (Mental state of mind)

2. Actus –rea – (The act /action or the putting
one’s guilty mind into action)

These two are contemporaneous (meaning they go hand in

hand): i.e. When men’s rea is an element of the crime
charged for example, criminal liability depends upon the
proof of men’s rea at the very time the crime was
committed.
E.G. - It is not robbery where X assaults Y and later steals
his property – this would amount to two separate crimes of
assault and theft (refer to notes on ROBBERY).
 General Principles & Doctrines of Crime (Key
requirements) …/cont
Supplementary reading:
There are two leading cases on this subject (actus rea & men’s rea –
contemporaneousness) – R. v. Chisvibo, 1961 and S. v Masilela, 1968.

N/B:
The is an exception to this general rule in Zimbabwe law. This arises ,
in cases of murder, when an accused has the necessary men’s rea to
commit murder at the time that he performs the actus reus but the
actus does not result in the immediate death of the victim ;-
(E.G);-
Where X with the intention to killing Y stabs him in the chest with a
Knife. Y does not die. X thinks he is dead but in order to cover up his
Crime he throws the “body” into a crocodile infested river. A
crocodile eats Y who dies at this time. [1]. X would be guilt only of
attempted murder if his plan to dispose of the body is formulated
after he stabs Y. [2]. If however, X has a preconceived plan to dispose
of the body before he stabs Y, he will be guilty of murder.
1. Defining Fraud:
1.2. Occupational Fraud & Abuse - (The Definition)

For the purpose of this course firstly; we look at Fraud as a

typology
of common law crime, its legal definition and elements
constituting
both civil and criminal fraud; and secondly we look at
corporate fraud
commonly “technically “ referred to as occupational fraud
and abuse.
1.0. Defining Fraud (Common Law):

(1.1) Generally, “Fraud consists in unlawfully

making with intent to defraud, a
misrepresentation which causes actual prejudice
or which potentially prejudicial to
another”.

(1.2) Essential Elements

(a) Unlawfully
(b) Making a misrepresentation
(c) Intent to defraud
(d) Causing prejudice (actual or potential)
◙ (Defining Fraud) cont…/
3. Discussion of elements
(3.1) Unlawfully
(i) The misrepresentation must be unlawful
(ii) This element of unlawfulness maybe negatived on
proof of
coercion, consent and in some cases where the
misrepresentation was made under lawful authority.
(3.2) Making a Misrepresentation
Conduct
The misrepresentation may be made by conduct as well
as
by words, or by both words and conduct.
Some examples:
(i) X may make a misrepresentation by nodding or
shaking
his head; or by
(ii) Dressing up in a certain was (as in R.V. Banard, 1937,
where a man at Oxford went into a shop dressed as a
college student and ordered goods, and by so doing he
represented that he was a member of a college).
◙ (Defining Fraud)
3. Discussion of elements( …/cont)
More examples of Misrepresentation.

…………………………………………………………………………………………
……………………………………………………………….
(c) Silence
(i) In certain instances the misrepresentation can be made
by
remaining silent. (e.g.) where a person is obliged to supply
certain information and he fails to do so; as in the case of
failing to enter certain particulars in an income tax return.
(ii) Most cases of Fraud involving a misrepresentation by
silence relate to civil actions, and as such are of no real interest
to Police. However some of the more important points that
have evolved from most of this cases of civil fraud are relevant
to cases of criminal fraud:
(i.i) To constitute fraud, X’s silence must amount to a
designed or purposeful concealment of the truth,
intended to defraud.
…/cont.
(Making a Misrepresentation)
…/cont.
(i.ii) Certain statutes may impose a duty upon a person to
disclose a fact (as in the case of the Companies Act)
[Chapter 190], which imposes a duty upon a director to
disclose the profit he will make out of a transaction between
himself and the company) and a failure by that person to
disclose that fact may, where there is an intent to defraud, amount to
the
crime of Fraud.
(i.iii) Where X’s words, though literally true, give a false
impression unless qualified, X has a duty to make the
qualification. (e.g.)
-In the case Marias v. Edlman, 1934, X represented
that he had for three years pumped a certain borehole
day and night without its failing, but he omitted to say
this “three years” had ended fourteen years previously.
His silence on this point constituted fraud.
- here X makes a representation which he honestly
believes to be true but before Y has acted upon it, he
discovers that it is false, then if he remains silent, his conduct
in keeping silent may constitute Fraud.
-The Seller of an article is under a duty to disclose its
known defects. If , with intent to defraud, he fails in its
duty, he may be guilty of Criminal
Fraud.
(Making a Misrepresentation)
…/cont.
(d) Opinion
Where, X , with intent to defraud misrepresents the state of his opinion, he may be liable for criminal
fraud. (E.G.)
Where X bought goods on credit, knowing that his financial position was precarious. It was held that by buying
goods on credit X impliedly represented that there and then he intended to pay in the future, and that he had
committed fraud because, there and then, he had no such intention. In other words, he had misrepresented the state
of his opinion.

(e) Law
X is guilty of Fraud if, with intent to defraud, he misrepresents the state of the law to Y. (E.G.)
In the case C v. Schnitiker, 1964, X induced a butcher , Y, to buy from him three cards bearing extracts
from certain industrial legislation bearing extracts from certain industrial legislation by telling him that by law
he was obliged to display the same, in a visible place in his butchery. Here X was convicted of Fraud.
(Making a Misrepresentation) …/cont.
(f) Exaggeration:
(Sales talk and “Puffery”): -
When does sales talk or “puffery” (as it is known ) amount
to a fraudulent misrepresentation for example?
f.1 Where a puff is made with no intent to defraud and / or is an honest expression of opinion, then it is not fraudulent.
f.2 Where it consists of a statement which X does not intend or expect Y to take literally, and is in fact an exaggeration only,
then X lacks intent to defraud – for he does not intend his statement to be acted upon.
f.3 In both above circumstances, it is doubtful if Y will actually believe in, or act upon, such statements , and also doubtful if why
will be potentially prejudiced by such statements.
f.4 That said however, what appears to be a mere Sales Talk may well be fraudulent misrep if X has the necessary state of
mind (men’s rea).
(g) Future:
g.1 Fraud charges are often based on what X has represented or promised ostensibly in regard to some future time.
g.2 Whether X is guilty of Fraud in such cases depends upon when X has honestly, impliedly expressed his present state of mind in regard to
the matter represented, or in regard to the promise.
(Making a Misrepresentation) …/cont.
g. 3 Where X acted dishonestly in regard to this implied representation of his state of mind then (provided the other elements of fraud
are proved) he will be guilty of fraud, despite the fact that what he said was expressly related only to the future.
g.4 In cheque cases, if it is clear that X had no honest belief in his willingness to pay, it is not essential to prove that he had no
honest belief in his ability to pay. This is because, by drawing a cheque X represents his bona fide belief in his ability to pay. This is
because by drawing a cheque X represents in bona fide belief as to both ability and willingness to pay.
g.5 Above points are best illustrated by example where say, X bought and obtained delivery of a lorry of cement by giving the seller
Circle Cement Zimbabwe a post-dated cheque – explaining he had no money at the moment of purchase, that money “went in and
out” of his account as he was a car dealer, and that the chq would be met on the due post dated date. The chq bounced. Evidence
later showed that money actually went out of the account and on the date when the chq was due X had not the remotest hope or
intention of meeting the chq. X was/would be convicted of Fraud. He would not have been convicted of Fraud however if the evidence had
shown that at the time of drawing the cheque X honestly believed it would be met on due date.
N/B: It follows from above that those who make promises at a time when then have no intention of performing are liable, whereas those
who merely break promises are not.
3.3 Intent to defraud
(i) Intention may be actual or legal and the general principles apply (refer to notes on Men’s Rea)
(ii) Section 209, Criminal Procedure and Evidence Act [Chapter 59] – Proof of intention to defraud sufficient without alleging whom it was intended to defraud.
The Section provides that:
On the trial of any offence in which any of the following acts have been
charged against the accused, to wit., that he /she –
(a) forged or uttered, offered, disposed of or put off any forged instrument knowing it to be forged; or
(b) obtained anything by means of false pretences; or
(c) Obtained anything by means of a fraudulent trick or device or any other fraudulent means; or
(d) induced, by means of any such trick or device or fraudulent means, the payment or delivery of any money or thing;
or that he attempted to commit or procure the commission of any such act, it shall not be necessary to prove an intent on the part of the axxd to defraud any particular
person, but it shall be sufficient to prove that the accused did the act charged with intent to defraud.
(iii) Intent to defraud is two-fold: Intent to deceive & Intent to Prejudice
(Discussion). …/cont (slide 27)
…/ Intent to defraud continued (from slide 26)

(intent to defraud) cont…/

(A) Intent to deceive:
(i) X must make representation foreseeing that it might be false.
(ii) Negligent conduct can never be sufficient to constitute fraud. Even gross or reckless negligence in insufficient to constitute the crime of fraud.
(iii)All that is required is that X must make the fraudulent misrepresentation intentionally, knowing it to be false.

(B) Intent to prejudice:

(i) In addition to X’s intention to deceive Y, he must also intend to cause Y prejudice.
For Example: If X persuades Y to buy a watch from him by fraudulently representing that it is a valuable gold watch, and Y thereafter realizes that the watch is neither gold or as valuable as stated i.e. it is in fact worth
very little than what he/she Y paid for, then X is guilty of the offence of Fraud.
(ii) Actual prejudice or loss is, however, not essential to constitute fraud. It is
sufficient if X foresaw the possibility of prejudice or loss, and was reckless .
(iii) If prejudice is not foreseen, then there is no intention to deceive.
 …/ Intent to defraud continued (from slide 26)

(elements of fraud cont…/)

3.4. Causing:
(i) The definition of fraud indicates that the misrepresentation
must “cause” the actual or potential prejudice. Following points seek to expand on this statement:
(a) It does not matter that Y neither believed nor was induced to act to his prejudice upon X’s misrepresentation (as where X false gives out that some pieces of glass are diamonds-something which Y already knows very well. Here while there is not actual prejudice,
there is potential prejudice.
(b) Likewise, if Y actually ends up better off (as where the shares he was induced to buy rise in value for some reason), there is nevertheless potential prejudice.
(c) In many cases of actual prejudice, even if it is not clear that the prejudice was caused by the misrepresentation, X will still be convicted because of the potential prejudice.
(E.G.) In a case where X induced a jeweler to part with 2 diamond rings $100 worth against the security of a cheque for $100 – promising to return next Wednesday to tell the jeweler which of the 2 diamond pieces he preferred to buy. X had no Bank Account . He disposed
of the 2 rings before the Wednesday arrived. The Jeweler later acknowledged he had not been induced to trust X with the rings by the handing over of the chq. X was non- the less convicted of fraud.
 …/ Intent to defraud continued (from slide 26)

(elements of fraud) - Causing cont…/

(d) In some cases, it is irrelevant that Y ‘s misrepresentation was not the “cause” of some resulting arrangement between X and his victim. In such cases it is sufficient that X ‘s misrepresentation caused potential prejudice.

3.5: Prejudice:
(i) Means suffering loss (Actual or Potential)
* “Actual Loss means loss suffered in real terms” – (financial or otherwise)
* “Potential Loss means the possibility that one could have / can suffer” – (financial or otherwise)
(ii) The prejudice need not or material (i.e. it need not be what is known as, proprietary prejudice). The prejudice may be non proprietary (i.e. involving the impairment of reputation or a duty, for instance).
For Example: Where a false driver’s licence is produced to a Public Prosecutor or Police Officer. This is because the State has a duty to control drivers of motor vehicles, and as a false licence is produced, this duty will be affected and the state will be prejudiced.
(iii)Other examples of non-proprietary prejudice:
Fraud can also be committed where a person participates in a written examination on behalf of another.
…/cont
 …/ Intent to defraud continued (from slide 26)

(elements of fraud) - Prejudice cont…/

(iv) As alluded before, prejudice can be actual or potential prejudice. This is best illustrated by the following examples:
(A) ACTUAL PREJUDICE: A stolen or lost cheque (in post) is cashed to the prejudice of the actual drawer or payee intended.
(B) POTENTIAL PREJUDICE: e.g. Where X forges a cheque in the name of Y and X loses the chq whilst on his way to a bank to cash it. Potential prejudice exist because of the possibility that Z may find it and cash it to the prejudice of Y.
OR
e.g. Where X an African male adult steals a Visa Credit card in the name of Mr I Smith, drawn on bank of Scotland UK intending to use it at a clothing retail merchant outlet in Harare. The plan is foiled after an alert counter sales employee demands for
X’s ID or Passport. X runs away leaving card behind. Potential prejudice exists because Mr I Smith would have suffered loss or prejudice had the shop sales floor employee not exercised due diligence (i.e. asked for positive identification from X).
(v) It follows, therefore that potential prejudice is considered to exist where the act of X, in the normal course of events, is calculated to cause loss to another.
(vi) Potential prejudice must be proved and also must not be too remote”. The meaning of “too remote” is largely within the discretion of the courts.
(Read & Continue discuss more examples later …/)
 …/ Intent to defraud continued (from slide 26)

4. Attempted Fraud
There are at least four situations where attempted fraud can be said to have been committed:
4.1 Where the misrepresentation is not communicated to Y, as the letter containing it is lost in the post.
4.2 Where the misrepresentation is communicated, but it causes no actual prejudice, and because it is so obviously ridiculous, it is not such as could reasonably harm anyone and there is therefore no potential prejudice either.
4.3 Where for some other reason the misrepresentation though communicated, contains a risk of prejudice which is “too remote”.
4.4 Where as a result of a mistake of fact X thinks his representation is false, whereas it is actually true, or thinks his misrepresentation can cause prejudice, whereas prejudice is impossible.
5. Competent Verdicts / Statutory Provisions:
5.1. Neither theft, nor theft by false pretence nor forgery is a competent verdict on a charge of Fraud, nor is fraud a competent verdict on a charge of theft. However, fraud is a competent on a charge of theft by false pretences and on a charge of forgery.
5.2. Section 196, of the CP&E Act [Chapter 59] – on fraud charge court may convict of a certain other offences.
…/cont.
 …/ Intent to defraud continued (from slide 26)

(Competent verdict …Sect 196 CP&E Act …/cont.)

This Section provides that:
If an accused is tried upon an indictment, summons or charge alleging the commission of an offence in which an alement consists of false representations as to the nature of quality of a certain article or substance, and if the accused would, by the transaction in which those representations were made , have committed some other offence if his
representations had been true, the court trying him may, if it acquits him/her of the first mentioned offence, convict him of having committed or attempted to commit such other offence as if he had been charged therewith.
6. Distinction between Fraud and Theft by False Pretences:
(Read Note on Theft By False Pretences)
7. Forgery and Uttering :
7.1 Forgery and Uttering are two separate common law crimes and as such are dealt with individually.
7.2 In essence there is no difference between forgery and fraud, and a person who has committed forgery maybe charged with fraud.
7.3 For a conviction of forgery it is not necessary that the forged document should have been uttered. As soon as the document is forged, the crime is complete.
(Read Notes On Forgery & Uttering)
1.Assignment : Group discussion and presentations
2.In-class test 1 :
2. Occupational Fraud and Abuse (The Definition):

For the purpose of this lecturer, having taken a walk on the definition of
Fraud in the broader common law perspective, we want to look at
Corporate Fraud – commonly and “technically” referred to as
“Occupational Fraud and Abuse”.

…/cont.
Occupational Fraud and Abuse (The Definition)…/cont . (2.1)

2.1 According to Wells, Joseph T. (2012), “ Occupational Fraud and Abuse “

consists in the use of one’s occupation for personal enrichment through the
deliberate misuse or misappropriation of employing organizations ‘s
resources or assets.
Generally, the kind and nature of crime/crimes termed or that fits into the
realm or world of embezzlement , and or, I will add on to say, (commercial,
economic/financial crimes).

The definition’s width and breath means that it involves a wide variety of
unlawful conduct by say, executives, managers, other principles of the
organisation and the general employees, and can range from sophisticated
investment swindles (e.g.) the BCC Financial Scandal by Tony Leeson ( ), to
petty theft.
It can also include common violations such as misuse and misappropriation of
assets, fraudulent statements, corruption, pilferage, false accounting claims
e.g. overtime claims, pay roll manipulation and abuse, sick leave facility
abuses.

…/
Occupational Fraud and Abuse (The Definition)…/cont . (2.1)

2.1.1. The key: is that the activity or activities is/are:

(a) Clandestine
(b) Violates the employee’s fudiciary duties
(c) Committed for the purpose of direct or indirect financial benefit to
the employee and
consists of the employ organization assets, revenues, or reserves.

2.1.2. An employee in the context of this definition is any person who receives
regular and periodic compensation from an organisation for his/her
labour. The term is not restricted to the rank and file only but also not
restricted to the corporate executives, and, corporate presidents.

…/
Occupational Fraud and Abuse (The Definition)…/cont . (2.1)
…/

2.2. In broad sense according to Wells, Joseph (2012), Fraud encompasses

deception (misrepresentation) as its principle modus operandi: (Method
of Operation). Of the three ways to illegally relieve a victim of money -
force, trickery, or larceny – all offences that employ trickery are frauds.
Since deception is the linchpin of fraud, we will include Merrian
Webster’s synonyms : … ‘Deceive’ implies imposing a false idea or
belief that causes ignorance , bewilderment, or helplessness; ‘mislead ‘
implies a leading astray that may not be intentional ; ‘delude’ implies
deceiving so thoroughly as to obscure the truth ‘beguile’ stresses the
use of charm and persuasion in deceiving.

N/B: Although all frauds involve some form of deception, not all
deceptions are necessarily frauds. Under Common law, four general
elements must be present for fraud to exist or be constituted (i.e.)
…/cont
Occupational Fraud and Abuse (The Definition)…/cont . (2.2)
…/cont.
1. A material false statement
2. Knowledge that the statement was false when it was uttered.
3. Reliance on the false statement by the victim.
4. Damage as a result (usually in the form of loss – (actual or potential).

N/B: Remember also over and above the KEY elements of a crime must be present
(i.e.) (unlawfulness and intention to deceive and cause harm, damage/loss must
be present;

Also remember that, The Legal Definition is the same whether the offence is
Criminal or Civil; the difference is that criminal cases must meet a higher burden of proof =
[Unlawfulness; Intention to steal and Stealing – proof).

…/cont (2.2)
…/cont (2.2)

For Example ;- An employee lets assume did not deceive anyone but stole valuable
computer chips while no one was looking and resold the same to a competitor.

Question is: Has he committed the crime of Fraud or has he committed Theft?.
Answer of course is that it depends. This because employees have a recognized fudiciary
relationship with their employer under the law.

The term fudiciary “according to Black Law Dictionary” is of Roman origin and means:

“A person holding a character analogous to a trustee, in respect to the trust

and confidence involved in it and the scrupulous good faith of condor which it
requires. A person is said to act in a “fudiciary capacity” when the business
which he transacts, or the money or property which he handles is not for his
own benefit, but for another person, or to whom he stands in a relation,
implying and necessitating great confidence and trust on one part and a high
degree of good faith on the other part.

So in the above example the employee has not only stolen the chips – in so doing, he has
(also) violated his fudiciary capacity. That makes him an embezzler (misuse &
misappropriation) – (Remember not outright Fraud > because there was/is no
misrepresentation to talk of).
…/cont (2.2)
•In other words embezzlement is a special type of (FRAUD).

•Also on the one hand “Conversion” [Theft by conversion ] in the legal sense is :

“an unauthorized assumption and exercise of the right of ownership

over the goods or personal chattels belonging to another, to the
alteration of their condition or the exclusion of the owner’s rights. An
unauthorized act which deprives an owner of his property permanently
or for an indefinite time. And Unauthorized and wrongful exercise of
domination and control over another’s personal property, to the exclusion
of or in consistent with the rights of owner.

So, going back to the example:

By stealing, the COMPUTER CHIPS, the employee also engages in Conversion of
Company ‘s property.
The legal term for stealing is “LARCENY “ which is:
“felonious stealing, taking and carrying, leading, riding, or, driving away with
another’s personal property, with the intent to convert it or to deprive the
owner thereof (permanently that is). The unlawful taking and carrying away of
property of another with the intent to appropriate it to a use inconsistent with
the latter's rights .
…/2.2
(Larceny 2.2 cont. …/)
…The essential elements of a “Larceny” are an actual or constructive
taking away of goods or property of another without the consent and
against the will of the owner and with a felonious intent. Obtaining possessions
of property by FRAUD, TRICK or DEVICE with pre –conceived design or intent
to appropriate, convert, or steal is Larceny.

N/B: As a matter of law, the employee in question could be charged with a wide
variety /range of criminal and civil conduct: Fraud, Embezzlement, obtaining Money under
False Pretences, or Larceny.
•As a practical matter, he probably will be charged with only one offence, - Commonly

Larceny .
“Larceny by Fraud or Deception” means that:

“A person has purposely obtained the property of another by deception. A

Person deceives if he purposely : (1) creates or reinforces a false impression
as to law, value, intention or other state of mind; but deception as to a person’s
intention from the act alone that he/she did not subsequently perform the
promise; or (2) prevents another from acquiring information which would
affect his judgment of a transaction ; or (3) fails to correct a false impression
Which the deceiver previously created or reinforced , or which the deceiver
knows to be influencing another’ to whom he stands in a judiciary or (…/cont)
(Larceny 2.2 cont. …/)
…confidential relationship’ or (4) fails to disclose a known lien, adverse
claim, or other legal impediment to the enjoyment of property which he /she
transfers or encumbers in consideration for the property obtained, whether
such impediment is or is not valid , or is not a matter of official record.

2.3. N/B: THE FRAUDULENT ASPECT OF OCCUPATIONAL FRAUD;-

THE FRAUDULENT ASPECT OF OCCUPATIONAL FRAUDS, THEN; DEALS

WITH THE EMPLOYEE’S FUDICIARY DUTIES TO THE ORGANIZATION. IF THOSE
DUTIES ARE VIOLATED , THAT ACTION MAYBE CONSIDERED FRAUD IN ONE OF
ITS MANY FORMS. UNDER THE DEFINITION OF OCCUPATIONAL FRAUD AND
ABUSE, THE ACTIVITY MUST BE CLANDERSTINE. THE COLLINS ENGLISH
DICTIONARY DEFINES “CLANDASTINE” AS “SECRET, HIDDEN, CONCEALED;
USUALLY FOR SOME ILLEGAL OR ILLICIT PURPOSE.”.

…/ cont. - (Defining Abuse)

…/ cont. - (Defining Abuse)

2.4. Defining Abuse:

Organisations are plagued with a litany of abusive practices. Examples are:

1. Use of employee discounts to purchase goods for friends and relatives –

(Retail store business environs-common in Advanced world economies e.g.
The US, Canada, UK, France and Germany.)
2. Take products belonging to the Org. (Retail store business environs)
3. Getting paid for more hours than worked.
4. Collect more money than due on expense re-imbursement.
5. Taking a long lunch break without approval (common in Public
Enterprises, Government departments, Rural/ Urban Council Offices, and
relatively , in mismanaged Private Sector companies – mostly in emerging
economies where corporate governance issues do not exist, and or, are not
adequately addressed.
6. Coming to work late or leaving early
7. Use of sick leave off days when not sick
8. Do slow or sloppy work
9. Work under the influence of alcohol
10. Use office for Corrupt practices e.g. (asking for bribes).
…/cont
(Defining Abuse)…/cont

N/B: The term “Abuse” has taken on a largely amorphous meaning over the years,
frequently being used to describe any misconduct that does not fall into clearly defined
category of wrongdoing. Merzian Webster states that the word “ABUSE” comes from the
Latin word “Obusus” - to consume – and that it means (1) A corrupt practice or custom ;
(2) Improper or excessive use or treatment, misuse; (3) deceitful act ; deception.

NOW: Given the common language use describing both FRAUD and ABUSE, what are
the KEY differences ??

EXAMPLE -(FRAUD):

Suppose a bank teller employed by a bank steals US$100.00 from her cash drawer or till
and in the process creates fictitious to balance the books: This will be broadly defined as
FRAUD: But if the teller takes money from the petty cash box hoping to use it over night
and return it the following morning before anyone discovers, but falls sick and does not
report to work in the morning: This might be called ABUSE (WHY – DISCUSS).

…/ (example : difference between fraud & abuse) cont.

…/ (example : difference between fraud & abuse) cont.

Example (2)

Suppose an employee works for a government agency or a private

company. Sick leave abuse or claim could in its strictest sense be taken
as FRAUD: WHY? - because the employee made a false claim to the
employer or his/her representative.

Example (3)+ Class participation (more examples and discussions) …/

Conclusion: Fraud and Abuse

In the world of commerce, organisations incur costs to produce and sell their products or
services . The costs run the gamut: labor, taxes, advertising, occupancy, raw materials,
research and development - and , yes, Fraud and Abuse by both employees and external
criminals including customers. The latter cost(s), however is fundamentally different from
the former. The true expense of FRAUD and ABUSE is hidden, even if it is reflected in the
Profit and Loss figures.

For example, suppose the advertising expense of a company is US$400K. P.a., but
unknown to the company, its marketing manager is working in collusion with the outside
advertising agency and has and continues to receive US$40K in kickbacks to steer
business to that firm. That means the true advertising cost or expense is overstated by at
least the amount of the kickback - if not more. The result of cause, is that, US$40K comes
directly off the bottom line, out of the pockets of the investors and the workforce . The
crime committed by the marketing manager and those externals involved is FRAUD.

This example given is clear cut but more about Occupational Fraud. Yet much of
Occupational Fraud & Abuse is not well defined. Suffice to conclude at this early juncture
that there is wide spread disagreement on what actually constitute Occupational Fraud and
Abuse or any other of these offences . [Read -“Corporate Fraud: detection and prevention ;
Joseph T Wells. – 3rd ed. P.cm”] and More [Refer to Course Outline for guidance].
OCCUPATIONAL FRAUD & ABUSE

TABLE
It is apparent that some view financial crime as an aspect of white
collar crime, whereas others, perhaps the more phlegmatic
traditionalists only accept that certain financial crimes can be viewed as
white collar crime. It will be shown briefly (here) that to do so is
unnecessarily restrictive and ignores socio-economic changes since
Sutherland’s time.

Financial crime covers a variety of offences including false accounting,

deception and plain theft. The term describes the substance of the
offence. Whereas the term White Collar Crime traditionally embroils the
characteristics of the offender into the definition. The term is now an
ambiguous one and in doing so provokes a debate.

N/B The term Financial Crime is in itself too wide in definition. It is

contended by several authors that the term White Collar Crime now
includes all Financial Crimes
…/ cont. next.
…/ cont. from prev.
As Alluded to in the beginning, fraud is described as “The deliberate
deception, trickery or cheating in order to gain an advantage” This brief
examines this concept of deceit and how it is central to contemporary views
on white collar crime.

There is a wide variety in both size and the sorts of frauds. What might be
considered as fraud by the archetypal man on the Clapham Omnibus does
not always mean that those acts are fraud in the strict legal sense. A good
example is the concept of Tax Avoidance (legal) and that of Tax Evasion
(illegal). In (1993) in the UK the author witnessed a general public disquiet,
over the legal (Tax Avoidance) steps taken by BBC employees to reduce
their tax liabilities.

The insidious nature of white collar crime and the fact that it is chameleon
like, blending into those acts which are considered legitimate, has prompted
some such as Abel to say that those committing such acts are far greater
threat to society than those committing what is considered as conventional
Crime.
…/ cont. from prev.
White Collar Crime (The Definition) By Sutherland (1940):
Sutherland first penned the term White Collar Crime in 1940 in an attempt to

challenge what he considered to be in equalities and classist nature of the attribution of

criminal behavior – arguing that actions of the well to do could also be classified as
criminal. His definition now thought restrictive and gives a platform of debate states:
“White Collar Crime is/are crime(s) committed by a person of respectability and high

social status in the course of his occupation.

Sutherland’s work was based on the dealings of several large USA corporations and

distinguished individuals. His study attempted to do basically 2 things:

1. to present evidence that members of upper social class commit many crimes
and that these crimes should be included within the general theories of criminal
behavior.
2. To present an hypothesis that explained all criminal behavior – namely that
of differential association: “ that criminal behavior is learned in association with those
who define criminal behavior favorably and & in isolation from those who define it
unfavorably and that a person in an appropriate situation engages in such criminal
behaviour, if & only if the weight of the favourable definitions exceeds the
unfavourable definitions. In giving further evidence, Sutherland stated that social
disorganisation maybe either of 2 ways i.e. (1) Anomie & (2) Conflict of standards
…/ cont. from prev.
A Challenge to Sutherland’s Definition (By Croall et al 1989)
Sutherland’s definition dictates that White Collar Crime is an occupational crime. Contemporary
writers like Hazel Croall et al (1989) , arguing to show that Sutherland’s definition is too restrictive
and lacks significance in these more ‘prosperous’ days, pointed out that although white-collar crime is
traditionally associated with high status and respectable offenders. She/they further argue that if strict
adherence is kept to his definition, a high number of offences such as crimes committed against insurers
and credit card offences will not be classified as white collar due to the fact that they are not carried
out during the miscreants occupation.

In her later book Croall lists the characteristics of white collar crime as:-

 Complex nature
 Low Visibility
 Complexity
 Diffusion of responsibility
 Diffusion of Victimization
 Difficult in Detection
 Ambiguous Laws
 Ambiguous Criminal Status
 Lenient Sanctions
 Difficult to Prosecute
Library Visit: Research & Discussion (By groups)

The Psychology of White Collar Crime or Economic Crime:

Discussion: The suggestion that White-Collar Crime is no different

from any other type of Financial or Economic Crime, and that the same
security principles applied to counter financial and related threats can be
applied to combat it.
Understanding Characteristics Of The Offender:-

• Commercial Criminals (Local dimensions) – Lone Operators, Syndicates

& Modus Operandi

• Commercial Criminals (International dimensions) – Lone Operators
Syndicates & Modus Operandi
▪ Commercial Crime Systems – (Organized Crime / International
Criminals Organisations & Brokers
Understanding Some of the Characteristics Of The Offender:-

By Category: Recent literature categorizes Fraud by type and the person conducting it
and differentiates between first-party and third-party Fraud. In a banking fraud
scenario, a first party fraud may involve a legitimate client betraying say, the bank
by depositing and cashing against dad cheques. Whereas in third party fraud, the
client falls victim to criminals who steal Identity , cheque books, bank cards to access
account(s), for payment of services or receiving payment/gain by diverse means
(Gates and Jacob, 2009: Green, 2009).

Near Example:

• Commercial / Non-Commercial Criminals > (Cheque and Card Fraud, Lone

Operator(s) , male, female, age, type/ Syndicates & Modus Operandi] -
(Local/International) etc.
▪ Commercial Crime Systems – (Organized Crime Syndicates
/Organisations & Brokers
SOME COMMERCIAL CRIME TYPOLOGIES

FRAUD
• Doc Fraud – (I/D Fraud, Fraudulent Account App/Bank Card Fraud )
• Cheque Fraud(s) – (Theft, Forgery & Uttering, Cashing to non-customers):
• Bank Card Fraud
• Computer Crime: (Developing Policy, Access Control )
• Embezzlement - (the growing problem)
• Corruption (and the Zimbabwean Perspective)
• Money Laundering
• Theft – (Theft Common, Embezzlement, Shop Lifting)
Investment Scams - Insider Trading
3.0 UNDERSTANDING SOME OF THE FRAUDS & THE PROACTIVE

APPROACHES TO PREVENTION

• ID Doc Fraud – (Fraudulent Account App/Doc Fraud)

• Cheque Fraud(s) – (Forgery & Uttering e.g. Cashing cheques to non-customers):
• Bank Card Fraud - (Debit and Credit Card Scams)
• Computer Crime: (Developing Policy, Access Control )
• Embezzlement - (the growing problem)
• Investment Scams - Insider Trading - (Local and International Trends from ).
• Corruption & Money Laundering - (The Zimbabwean /Global Perspective).
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/

3.1 ID Doc Fraud

Examples:

3.1.1 (Fraudulent Account App – Bank & Retail Fraud)

3.1.2 (Debit / Credit Card Application /Postal Fraud)
3.1.3 (Loan Application )
3.1.4 (Life Assurance Policy Fraudulent Claims & Insurance Fraud

Prevention Approaches:
3.1.1
3.1.2
3.1.3
3.1.4
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/

3.2 Cheque Fraud ( Forgery & Uttering e.g. Cashing cheques to non-customers)

Examples:

3.2.1 (Cashing fraudulent cheques to non-customers– Bank & Retail Fraud)

3.2.2 (Accepting third party cheques for account payment by shops
3.2.3 Phony signatures (Please sign here)
3.1.4 Split deposit scams
3.1.5 Nigerian Letters
3.1.5 Counterfeit cheque creation

Prevention Approaches:
3.2.1
3.2.2
3.2.3
3.2.4
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/

3.3 Bank Card Fraud - (Merchant Fraud, ATM Fraud)

Examples:
3.3.1 POS Multiple Imprint “The Kenyan Problem”) – (Issuer & Acquirer
Proprietary and Non-proprietary cards) – Lost or stolen cards.
3.3.2 Counterfeit “White Plastic” Fraud
3.3.3 Telegraphic Transfer “ Non-face-to-face
3.3.4 Merchant Fraud – (Fraudulent Merchants)
/ 3.3.5 ATM debit/credit card fraud)– shoulder surfing, robbery, lost stolen cards
3.3.6 Phishing
3.3.7 Barclays Case Studies - A Zimbabwean Perspective (2000)
3.3.8 Case Studies (Global)

Prevention Approaches:
3.3.1
3.3.2
3.3.3
3.3.4
3.3.5
3.3.6
3.3.7 & 3.3.8
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/

3.4 Computer Fraud

Examples:

3.4.1 Hacking.
3.4.2 Phishing
3.4.3
3.4.4

Prevention Approaches:
3.4.1
3.4.2
3.4.3
3.4.4
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/
3.5 Embezzlement (Fraud & Abuse - the growing problem) :
Embezzlement, or defalcation, is defined as the intentional misuse or misappropriation
of funds or property entrusted to an employee. All embezzlements share the same three
common elements, regardless of the actual method used to commit the crime. An
embezzlement occurs when:
(a). A person is in control of real or personal property, or in a similar position of trust
(b). Appropriates or makes unlawful use of that property in his/her rightful possession,
for personal use.
(c). Without the owner’s permission or consent
Embezzlements ‘re generally committed by one of three methods:
Examples:
3.5.1 By trickery, deceit or misrepresentation (e.g. a/c holder impersonation or
creating fictitious accounts)
3.5.2 By document (e.g. cashing a dad cheque, false authorization) and
3.5.3 By technology e.g. on-line computer, fax machine, ATM access.

Prevention Approaches:
3.5.1 Formulating & implementing a Fraud policy (stand alone or embedded in the
Security & Fraud Risk Policy, and or Operations Risk Management Policy)
3.5.2 Become better informed about the scope of the embezzlement problem
3.5.3 Recognize and understand embezzlers common denominators & windows of
opportunity sought by embezzlers
N/B: More …read Module 3 Handout: “Embezzlement”
(3.0Understanding Some Of The Frauds & The Proactive Approaches To Prevention) …/

3.6 Investment Scams (Insider Dealing or Trading) :-

Case Study: The Barings Case - Nick Leeson 1992-1995):
A crime in which a person connected with a company uses for his own or
company ends, to generate huge profits, confidential information that would, if
generally known, affect the share price of the company in whose securities he or
she is dealing. e.g. happens usually where say a senior investment banker gets
tip offs when firms are about to be taken over. He/she would then use the
privileged information to make quick investments (share dealings) in the
companies before anyone realises that a take over was in the wind, and or,

Other Examples: (Class Partipation By - Group– (Library Visit 2 hrs –

Break 15 min - Presentations 45 min -(15 per group)
3.5.1 (UMB) United Merchant Bank Zim(Roger Boka 1990) – (Family Bus)
3.5.2 The Century Bank Zimbabwe (Family business)
3.5.3 Bancho Ambrosiano-The Vatican Bank (1982)
Prevention Approaches: (Class Participation BY-GROUP)
3.5.1 Policies & procedures: develop, implement and provide means to monitor
& update.
3.5.2 Introduce and improve on corporate governance & business ethics
3.5.3 Increased controls /close supervision by immediate superior & Audits
(these were minimal on Leeson)
4.0 Fraud Management and Prevention: (Day 4 - 6)
4.1 Fraud Prevention Programme - [Policy & Procedures]
4.2 The nature, scope and the role of investigations within an organisations
(criminal & civil)
4.3 The Definition and Theories of Criminal Investigation e role of an investigator
4.4 Key investigatory skills and techniques
4.5 Investigations, regulation and legislation
4.6 Handling evidence
4.7 Recoveries
4.8 Prosecution: Conducting interview(s), writing statements and compiling
dockets
4.1 Fraud Prevention Programme

4.1.1 Designing & Implementing A Written Fraud Policy and Procedures

To monitor and update on (i.e.):-
- Personnel- (Recruitment & Training, Transfer/promotion)
- Internal Control Systems – (Documents, computers & records; and
- Facilities
- Local Law Enforcement/Cooperation Against Commercial Crime(s)
- Prosecuting Offenders
- Fast Track Program(s) For Financial Institution Fraud(s)
4.2 The nature, scope and the role of investigations within an

organisations (criminal & civil)

4.2.1 Crime prevention is the primary role of any Security Programme

whether by Police , Private Investigative Security Officers and
Forensic Investigators. A known fact however is that absolute
prevention is impossible and the police, private investigative
security officers, and, forensic investigators alike , are thus
responsible for collecting evidence when a crime is committed. It
is also the responsibility of the police to ensure the criminal or
alleged criminal will be present at the trial and to submit the
evidence required to reveal his unlawful action. ….cont./
…………………………………………………………………….
…………………………………………………………………….
…/
4.3 The Definition and Theories of Criminal Investigation e
role of an
investigator
4.3.1Criminal investigation is a systematic search for the truth with the
primary purpose of finding a positive solution to the crime with the
help of objective and subjective clues. Van Heerden (1986:188)
describes the objective clues as the factual proof and objective
explanation of these, that is the so-called mute, indirect or
circumstantial evidence. Subjective clues, on the other
hand , are defined by Van Heerden as the evidence offered by
witnesses and villains) who are directly or indirectly involved in the
crime. Collecting evidence or facts is according to this definition
the fundamental character of criminal investigation. These
facts can therefore be subjective, that is, verbal evidence, or
objective, that is, physical clues. [Also see definition by Caldwell
(1965:317)….cont./
Objectives of Criminal Investigation – (Refer to Chapter 1.3
p4)
-Preamble: …Criminal investigation takes place with clear
4.3 The Definition and Theories of Criminal Investigation e
role of an
investigator

4.3.1 Criminal investigation is a systematic search for the truth with the
primary purpose of finding a positive solution to the crime with
the help of objective and subjective clues. Van Heerden (1986:188)
describes the objective clues as the factual proof and objective
explanation of these, that is the so-called mute, indirect or
circumstantial evidence. Subjective clues, on the other hand , are
defined by Van Heerden as the evidence offered by witnesses and
villains) who are directly or indirectly involved in the crime.
Collecting evidence or facts is according to this definition the
fundamental character of criminal investigation. These facts can
therefore be subjective, that is, verbal evidence, or objective, that
is, physical clues. [Also see definition by Caldwell
(1965:317)….cont./
…………………………………………………………………….
…………………………………………………………………….
…/
4.4 Key investigatory skills and techniques
4.4.1. Criminal investigation is a process of collecting information during
different stages. Marais (1988:3) distinguishes for example, between the
following phases:

◘ Identification, and or, Notification – (reporting)

◘ Collecting information / (evidence gathering and evaluation
◘ Arrest and documentation / interviews & statement writing
◘ Prosecution

In this process information originates mainly from two sources,

namely people (a direct source of information) and objects/ (an indirect source
of
information), and the emphasis is on both these sources. Since people and
objects are the common factor in the different phases and as information must
be gathered according to legal directions it follows that nothing in the
investigation process can be undertaken in a random and unplanned manner.
Bozza (1978:1) concurring states that a systematic plan arranges and directs
the
investigative procedures and can therefore assist the investigator in
determining whether a crime has in actual fact been committed who the
perpetrator is, and in proving conclusively his/her guilt or innocence.

Fraud : In fraud the process of investigation is no different except that the

investigatory process information also originates from two other key sources
i.e.
documents and technology (financial books /records ).
4.5 Investigations, regulation and legislation

4.5.1 Proving guilty conclusively implies that the

perpetrator say in a Fraud Case, will be brought to justice
to account for his criminal action. This means that the
factual and legalguilt of the accused must be determined .
Van Heerden (1986:187) states this requires that the
gathering of information and facts must be conducted in a
lawful manner so that the evidence which is being
presented will indeed be admissible as evidence. The
evidence presented must also be of such a nature that the
unlawful act of the accused is demonstrated beyond any
reasonable doubt. For this reason systematic and planned
action is an essential component of fraud crime
investigation.
4.6 Handling evidence
4.6.1 Gathering and preservation of information:
The relevant information must be carefully collected and preserved in such a
way that its physical and legal integrity is maintained. Maintenance of
continuity of possession is according to Van Heerden (1986). Of vital
importance in the evidential process and this simply means the continuous
safekeeping and identification of physical evidence. The same applies to
preservation and safe keep of documentary and electronic designed and
stored evidence.
4.6.2. Evaluation :
According to (Marais 1988 all information gathered during an investigation of
a crime must be properly evaluated not only to determine whether it is
relevant and conclusive, but also whether it has any positive potential to
reveal the whole truth of the event. Ward (1975) concurs and adds that it is
desirable in this regard to evaluate for instance the information provided by
eyewitnesses on the basis of information already gathered in order to
determine its reliability. It must be remembered not all information collected
during the investigation of a crime will be necessarily be acceptable or
presented as evidence (Van Heerden 1986). The evidence eventually offered
at the trial is in fact the end-product of the sifting process of discovering,
tracing, evaluating & selecting relevant information. The requirement to meet
the legal standards regarding proof and the drawing of inferences in a
manner that will not preclude their admissability as evidence (not
presumptions), puts a high premium on the knowledge & ability of the
criminal investigator because he/she is responsible for gathering facts which
4.7 Recoveries (of stolen property)

4.7.1 This objective of criminal investigation is of a two-fold

nature :

◘ To restrict the victim’s losses to a minimum

◘ To present the recovered property as evidential material at the trial.
4.8 Prosecution (Criminal/Civil):
4.8.1 Involvement in the prosecution process:
This objective is to assist the public prosecutor in the
prosecution process. Underlining the importance of this
objective of criminal investigation, Caldwell (1965) declares
that; ‘The successful prosecution of criminals depends to a
great extent upon the skill and efficiency of those who conduct
the criminal investigation.

The investigator’s involvement here lies mainly in the

presentation of the information gathered and in making sure
that everyone and everything is present in the court on the trial
date. Only on eventual conviction can one talk of positive
individualization. This underscores the fact that individualization
as a process begins at the scene of the crime and only ends
after the presentation of evidence in Court.

To realize these identified aims and objectives of criminal

investigation the present-day criminal investigator has no
choice but to urn to scientific methods of criminal investigation.
…/cont
(cont from 4.8 .1 Prosecution (…/)

4.8.2 Scientific methods of criminal investigation – Fraud:

Best practice
Introduction: Theories of Criminal investigation as
component of the process of maintaining order:(Van Heerden 1986,
Jordaan & Jordaan 1987, Schlebusch 1988) …(Refer to Chapter
2 p13 Forensic Criminalistics for detail)
> Information as a medium of individualization
> The format of crime information
> The role of the criminal investigator
> Situation identification
> Deductive argument
> The scene of crime
> The pre-investigative phase - (preliminary exploratory
phase)
> The Investigative phase - (application of knowledge and
concentricity at scene of crime /occurrence)
> Prosecution and Conclusion
Module 1-4
5.0 Establishing Organizational Policy and Procedures

5.1Preamble/Introduction
5.2 Main planks of the policy
5.3 Organizational framework (Organizational chat)
5.4 Internal Disciplinary Action
5.5 Prosecution
5.6 Recovery
5.7 Staff Training and Motivation
5.8 The Reporting of Crime
5.8 Investigational Policy
5.9 Reporting To The Authorities
5.10 Risk Assessments: Risk Assessments Basics / Criteria for Measuring Risk
5.11 Risk Assessments : The BAC system / The threat assessment. schedule Of
weaknesses / list of vulnerable areas / options to close areas of weaknesses
and Action Plan.
5.12 Risk assessments: The British Bankers Association Method- (Computer Aids,
Other Techniques / Who carries the Assessment?

…/cont
(5.0 Establishing Organizational Policy and Procedures …/cont)
5.13 The Crime Response Plan
5.14 Action on Crime Being Discovered Or Suspected.
5.15 Investigation within the Organization
5.16 External Sources of Assistance ……/
5.17 Contact with Media
5.18 Funds Recovery
5.19 Internal Control : Fraud Prevention // Discovery of Fraud
5.20 Preventive and Detective Controls
5.21 Segregation of Duties
5.22 Existence and Accuracy Controls
5.23 Authorization Controls
5.24 Internal Controls Over Computerized Processes
5.25 Safeguard Controls

_____________________________
Explaining why Business General, The Financial World &
Government(s) need(s) to combat Fraud and other forms of
Financial/Economic Crimes

…/cont.
 Vulnerability of Banks and Building Societies to Financial/Economic
Crimes
Considering the various characteristics of organized crime today it is perhaps relatively easy to see
why economic crime is so attractive - ( high reward and law risk). Traditional Fraud can also be
used to facilitate or even further promote more non-traditional criminal activities such as
Bank Card Fraud, Computer Fraud and Money Laundering . There is definitely a link today
between organised crime (other) and Economic and or, Financial crime at both national and
international levels.

The following are reasons why it is important for banks and governments to fight or act against
Financial and Economic Crimes – the bulk of them with a Money Laundering Demand. :

1. Economic Crime directly undermines the stability of society.

2. It can lead to political and
social stability and in extreme cases dissatisfaction with and dissatisfaction within a society that
permits such activities to continue.
3. Economic crime undermines confidence in the integrity , and thus the efficiency of government
mechanisms as may exist for the proper allocation of economic resources.
Remember!!

Effective Fraud Prevention relies heavily on effective Internal Controls within a company .
Internal
Controls are divided into Preventive , Detective, and, Corrective measures. Essentially , the
controls will help a company stop Fraud and detect it when it does occur.

In general, Internal Controls in Companies should focus on safeguarding Assets, segregating

duties, ensuring proper authorization of transactions, in-depth checking, or performance,
allowing
anonymous reporting of fraud, and monitoring the activities of employees.

An effective fraud prevention framework includes three core components:

(1) Fraud Education

(2) Fraud Investigation
(3) Pro-active Fraud Prevention efforts

Firstly; the Educational component offers employees the opportunities to learn about FRAUD,
how to identify fraud, and how to report it.
Secondly: The investigation component is focused on taking action when controls fail and
employees commit and conceal fraud.
Thirdly; the pro-active prevention portion of the framework requires significantly
more effort than
the others and is aimed at assessing a company’s risks and evaluating the control
procedures.
AFTER that has been completed, management must design procedures and policies
tailor made to
address and mitigate the FRAUD risks.
END OF COURSE
The Psychology of White Collar Crime or Economic Crime:

Discussion: The suggestion that White-Collar Crime is no different from

any other type of Financial or Economic Crime, and that the same security
principles applied to counter financial and related threats can be applied to
combat it
The Barings Crisis 1890 - (The first crisis) - how it came about - how
it
was averted. Players – the likes of Edward Charles Baring, Lord
Ravelstock . Russia, France, entanglement with derivatives and Bank of
England Government interventions to save the day. Amounts involved.

BARINGS FINALLY FALLS 1995 (How a rogue dealer lost his

bearings):

Major character : Nick Lesson 1995 (30 Million To 70

Million)lost In Seven Months Period.

M.O. Fraudulent Use Of Volatile Financial /Hoodwinking of superiors

– Trading of large volumes of money on the volatile stock market.
Instruments At Play –
Derivatives And Futures (Insurance Policies)