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you you good morning I'm Chrissy simmer arrows senior vice president operations manager for nevada state bank on behalf of nevada state bank i'd like to welcome you to today's webinar which is presented through nevada small business com I've been with nevada state bank for more than 19 years serving and roles ranging from branch service manager to loss prevention manager to quality assurance officer now as operations manager i oversee several departments providing legal and operational support to all areas of the bank my experience in loss prevention taught me valuable lessons in fraud which I'm happy to share with you today now I'd like to introduce our special guests detective Tyler Clark who's been with the Reno Police Department for 23 years for the last seven years he's been a detective in the Financial Crimes Unit assigned to the Northern Nevada fraud and identity theft Task Force Dennis came a survey CPA is a sole proprietor of Dennis quema serve a CPA in Las Vegas he has been a certified fraud examiner for more than 14 years and is certified in financial forensics he currently serves as the Secretary of the Las Vegas chapter a Certified Fraud examiner's welcome gentlemen thank you thank you the topic today is protecting your business from internal fraud which costs us businesses millions of dollars each year to help minimize your risk of becoming a victim the webinar will cover several key points including what types of fraud are most prevalent how financial checks and balances can make embezzlement more difficult and what to do if you suspect internal fraud will also have a discussion about external fraud and internet fraud if you have questions for the panel please submit them on twitter using the hashtag NSB webinar without further delay let's get started before we go into the different types of fraud that are most prevalent to a business we thought it would be best to understand first the three factors that cause someone to commit internal fraud these three factors are pressure opportunity and rationalization and make up what's called the fraud triangle Dennis you want to tell us a little bit more about that well yes you know when we have a this triangle it's actually a doctor Donald cressey who actually developed that and basically every fraud basically is comes out from when somebody has a problem with the opportunity or retaliation or pressure you know this rationalization usually becomes the the big area usually say somebody has a problem with gambling or they have several issues where they have their living beyond their means and usually people are have this perception that they've been treated unfairly and that's usually where that comes on the retaliation one way to avoid that is to give them good incentives and awards and those types of things opportunity you know basically if they're have a fear that they're going to be you know prosecuted if they're caught I think that deters that but basically it's a bad behavior you know that you know if I do this am I going to get caught and the interesting thing with rationalization is most people don't look at themselves as a criminal they just see themselves as an honest person in bad circumstances and so that kind of makes it okay yeah it's it's really just a perception mm-hmm and that again is where the rationalization comes exactly and it can go way up the scale I mean there's so many reasons why people would do that another area is pressure you know some unrealistic you know objective say you have a requirement that you have to do this you'll get this on a financial statement to make sure it shows a profit every single quarter sir sometimes that creates an issue and again one way to go against that would be to have a lot of ethics in the training and then the you know the on the top down yes sure so now that we understand why someone may commit fraud let's talk a little bit about the different types of fraud that can come to a business so Tyler you want to tell us a little bit more about the common internal fraud schemes a lot of times the bookkeepers people that handle the money have have access to the different avenues such as maybe the credit accounts the checkbook the credit cards and typically what they'll do is they start out small it might be paying a grocery bill or something that was just an emergency that came up with with something in their life and they had no yep they had no other means of taking care of it and they threw it on the company credit card and then after they threw it on the company credit card they realize I have to cover this up somehow or find a way if you get get through it they might change something in the books make it a different different title and once they get away with it one time then it starts to become a little bit easier and then they might start paying for their groceries or paying their own bills with a credit card and then just changing changing it on the expense report or handling it through their own expense reports checks if you are involved in payroll a lot of times they will cut they'll start to cut themselves their own payroll checks and if there's no checks and balances there with that and nobody is overseeing that it becomes rather easy and after they get away with it once or twice that's the fraud will start to grow and they'll get more brazen and the checks will get bigger and eventually if nobody is looking into this I've seen hundreds of thousands of dollars taken from businesses by people who are trusted who are in those positions and have the knowledge to change you know Tyler's expense report and I could fix it and an alter it to make it look like I was on a business trip and then cover some of my groceries or my gas bill or my power bill or my phone bill things like that the front the fraud related or forgery related issues forging checks counterfeit checks it's sometimes it gets confusing between the two the forgery side of it it would be you know signing the the controller's name to the checks if if the check needs to be signed by two different people a lot of times business accounts require those types of checks and balances so I'll sign and then I'll get a sample of your signature and then i'll use that to sign your name basically to the checks and I've forged your name both your victim as well as the business as a victim the counterfeiting side of it would just be simply printing your own checks printing your own documents that that are fraudulent how do people get those documents well the checks are very easy to come by I mean you can go out to office depot or staples or any one of the businesses that sell office supplies and by programs such as first a check or QuickBooks and they come with check writing software that you put on your laptop and then you take the check stock that comes with it and you can start printing your own your own checks right now for their company but typically small businesses which is what we're hopefully addressing today they have those programs and that's what they use to generate their payroll sometimes they generate their their accounts payable things stuff like that and if you have access to that it's it's relatively easy to print your own checks and and kind of get a little crazy with the technology that we have today just seems like there's so many ways to get information so many ways to learn how to commit fraud I mean you can go online and learn how to wash checks and just crazy things you're still why do you think that it happens more often to small businesses well usually they don't have all the controls that they need to in place and then you know there there's only a handful of people who might not want to take a lot of time in that area because there's so many other areas that a small business owner would have to deal with and and they have a handful of employees that they trusted for years and usually that's the individual that you would never suspect it committing fraud but unfortunately we found that a lot of these people that were trusted when they had the occasion and maybe some spending problems or some issues with divorce or whatever it might be sometimes they get themselves in a predicament where they almost can't get out they seem like too that there's a reason that they should commit this broad and if it's available and they don't think cut and some after a while maybe they do think they'll get cut but they still do this for quite a while I've seen where you have trusted employees that will figure out a way to you know support their gambling habits or whatnot here in Las Vegas so it's tough so good I think with I think with small businesses versus the big businesses it comes down to money as well they don't have the resources you know they can't have somebody who is completely in charge of the accounts and somebody who oversees who's in charge of accounts and there's no division there okay it comes down to I have my secretary that works for me and she's also my bookkeeper she also handles all my all my bills she may even take in all the mail that comes in so so she's in total control of that and and the other side of it is education they don't they don't take the time I don't think to educate themselves into how how things can happen I think they look at it like oh that only happens to this business or that only happens to that business it would never happen to me well it will happen to you if you're not careful and and like he pointed out the technology has has given us a great knowledge base these people can go online and simply go on youtube or one of those one of those sites and look it up how to commit fraud just google it and it will it will tell you the steps to take I mean you can you to learn how to counterfeit currency you can learn everything on the internet now it's basically cyclopedia in a box right right so from an education standpoint hopefully we're helping with that today but we have these small businesses that maybe don't know what to do in order to put these controls in place so what are some steps that they can take in order to limit their risk of internal fraud well I mean there's lots of different things that can be done I mean on a general basis there's several different controls I mean what we found is that depends on the size usually the smaller first of all five percent of all fraud all companies actually have five percent of their toll revenues is taken through fraud fraud and maybe they don't even know it and they don't realize it and and on a smaller business they usually are hit harder percentage wise than a larger company but there's several different things that can be done I mean a lot of people consider that you know the typical things oh let's have an external audit and that that does a lot of good but you have to have these controls in place some of the controls might be working on a code of conduct you might want to have make sure you have internal auditors if you have a big enough staff or that if it's the large enough company you might want to consider a hotline and you want to have a code of ethics that basically doesn't show that you're going to be retaliated for calling in on something or talking to I read an interesting statistic that forty percent of all fraud it's more likely to be detected by a tip than any other method so if you have an ethics hotline where someone can report something by a tip and I even have outside vendors that you can hire this you can use if you have a small business that you can't have something dedicated just for that so if you can you know improve your chances by forty percent just by having this tip line that could be really helpful that is the number one way at the other would be management reporting that to fraud but you know that you need to have an anti-fraud policy and you need to you know show some fraud training would be helpful and let people know probably job rotation mandatory vacations those things you know usually when you have a vacation you find out a lot of new things that are happening in your office I just had an employee last week leave and wow I didn't know he was a penis on that I didn't find fraud thank goodness but it still is a good way to let the company know what is going on and that recurring transactions you make sure that others are trained to so that you can find out what's going there you want to reward people for whistleblowing you know for telling about things you don't want to make it judgmental or detrimental to these people who are reporting these things I'd say you need to have some support programs you need to maybe have some surprise the audits or testing there's a lot of areas what about checks and balances as far as maybe who writes the checks isn't the person who signs the checks yeah I mean there should be some controls you know I think when we mentioned about different types of fraud there's fraud such as asset misappropriation is usually where most the fraud is now the largest dollar amounts come from financial statement fraud but corruptions right up there you know with a lot too but i would say for the small business owner that's the area of most concern is where's the cash you know where's it going and it seems like you know when we do that there needs to be some controls you know we probably should have a open mill you know it should be a separation of duties some of the opens mill or check you know copies when they received and who prepares the deposits the same guy that creates the books on the records you know who reconciles a bank account sometimes the same guy that our individual prepares the reconciliations is the same person that makes the deposit and does the county where's the control too often that's what I have seen when we're working a case involving a small business is that the same person who was doing the forging of the items or you know counterfeiting of the items was also person who balanced the checkbook and so every month they say yes it balances when of course it did because they're the ones who are manipulating the figures mm-hmm some of the other stuff they done that I know to a small business might seem expensive or extravagant to go into but background checks on people is huge in this day and age you don't know who you're hiring absolutely calm and and the background checks need to not just be criminal background checks to see what they've what they've done in the past but it's also important to know what their credit history is how they deal with things you know if you've got somebody who has a bad credit history has gambling problems has has problems like that they fall into that category of going back to the fraud triangle of pressure night you know if you have horrible credit and you can't get a car to get to work or you can't get a house or it might find an easier way by taking out of the till you might supplement your pay that way you might supplement your house payment that way so so background checks are super important I think and it's not all that expensive you can do a background check between fifty and a hundred and fifty dollars so if you're a small business you're probably not hiring people all that often so that's not a big investment and the amount of money it'll save you if it is someone who's going to commit fraud it's it's money well spent down the road yes definitely and a lot of people have criminal histories it's and that's not a bad thing that they have a criminal history but you need to look at what their criminal history was I mean you need to see what type of crimes that they've been arrested for in the past and and that'll show up and if it's anything fraud-related non-sufficient check related anything to do with money or the channeling of money or breach of trust and that type of thing you want to try and steer clear of those those people just yeah it seems like all these employees they're the most likely to be the one that's going to go after the cash it's not going to be the outsiders usually so that's a very important area for small businesses now when these people seems like the when you don't report a fraud it's not going to be on the system so one thing I would encourage every owner is to make sure that if you have had fraud in your office make sure you file it charges see if you can get a pros
cution because otherwise this next person will just move on to the next location and they'll commit similar frauds and just keep at it I'm sorry that I see that all the time you start digging into these people when you have finally somebody says enough's enough and I'm going to go forward with the prosecution or or make a crime report and then we start looking into that person as a suspect and we find out that they worked at this business and they worked at that business and you go back and start talking to these people they say well you know some was really never right with this person and it was just strange things kept popping up missing and stuff but we never really thought that anything would happen well you know yeah maybe nothing will happen but you know you're also looking out for the for the other guy you need to we need to make a paper trail I mean it was just two hundred dollars the first time exactly and and you know the cutoff for for felony crimes in the state of Nevada now is six hundred fifty dollars and that's that's quite a quite a chunk of money but it used to only be two hundred fifty dollars the the legislature moved it up to six hundred fifty dollars so now that's that's quite a bit for somebody to be able to get away with and it still just be a misdemeanor and so people look at that and say well nothing's ever going to happen anyway it's just a waste of time I don't want to waste the police department's time you're not you can file these reports online you could file them at the front desk you don't have to call a police officer to come out to your business and take that time to do that so but at least there's something there's a paper trail right and talking about employees another thing that we should probably look at is is there anything unusual about what this individual is doing are they driving this really fancy car they talk about the yacht and these long trips that they're having or extravagant spending or some very unusual areas and they're only getting like 30,000 a year or something is there a job you might want to keep an eye on these things because often those are the people absolutely create issues and by the way who is that typical person well unfortunately it could be mad or woman it could be at various ages I think on a report that was done nationally with by the Certified Fraud examiner's a national organization they they said that probably about sixty-five percent or mel and and 35 female however in the united states it's a little closer fifty-five percent milk email and in canada more women than men commit fret so it could be a lot of in different areas and it crosses all different cultures all different age groups and so we talked a little bit about someone leaving and going on vacation and things like that and one of the red flags is someone who never wants to leave and is just this dedicated worker you know that's that is one of them that's a way that that the people hide it as well you know I I give my life for this business I'm here all the time I am constantly at the office it's the person who's staying late at night the person who comes to work sick constantly and and it's not I don't want to paint a broad picture of that person but it's the one who's the suspect who is actually taking the money they have their checks and balances in their own mind and they're keeping track of that so if I'm if I'm cooking the books will say and you come in to fill my spot while I'm sick you may find that so I don't want to take the chance of doing that so you know it I don't want people to get freaked out about being dedicated their jobs and being dedicated to their employer because I fit that mold I am there five six seven days a week and I really only need to be there for but you know I don't want people to think that the dedication side of it is what what causes people to commit the fraud but this is high and typically when you find your suspect and you find that person you start looking into their into their work history and how they are and you'll start to interview you know other employees and they're like oh no Tyler would never do that he's so dedicated his job and he is there every single day I've seen him here sick he's on his deathbed and he's still in here getting his work done oh yeah he is because he scared that yeah exactly somebody's going to find out that temporary employee is going to be brought in from a temp company and go why is that this doesn't make sense right and when we pre sign checks we don't lock up the checkbooks we were just setting people up for problems these you're the I mean in you being in the banking industry know this the easier we make it to spend money the easier we make it to take money right simple as that that's true so we talked about some of these steps that can that people can put in place in order to you know limit their risk of internal fraud but how do these steps make embezzlement more difficult well I mean it just detours it really if they're really desire is to commit fraud i think most people can get around it i mean collusion is often a good way to do it if they find a buddy that works together and it's a lot tougher to discover those types of crimes I think that we if we make it more of a we're not going to tolerate that and we expect you to be ethical and do that type of training and that we will prosecute if you do these types of things I think if you have that type of an attitude you're less likely to see as much fraud no over how many billion dollars i think it's about 3.5 trillion sorry dollars in the world is through just occupational type fraud okay that's all I means it's a terrible issue that over five percent every company can expect they're losing its right so we're all paying for it so it's it's a really amazing thing that every company you can expect over 140 thousand dollars on in some mom and pop shop you lose a lot of money first mother I agree i think i think education is the key and and being educated being an educated business owner knowing what your employees are doing not a micromanager you're not standing over their shoulder the whole entire time tapping them but knowing what's going on and having that air about you that you know everything that's happening will will help curb a lot of internal theft if if I just take my books and say here you go and I don't like messing with that money stuff you're you're in charge of that have a good time then you sit back and say okay you're not in charge of that I'm in charge of that and then you get that feeling that you have control of it as a suspect and then you take control of it and if I'm not asking you or are inquiring about things it just goes unnoticed and you feel that you can get away with it and eventually you'll start to get just one or two surprise checks and they're going to know oh they come and check everything right from the get go right from hiring that employee and it sounds silly at times but you have to you have to sit him down and tell them you know like he said we will not tolerate this I will be checking on things and we have we have our ways of knowing you don't need to know what our ways are but we have our ways of knowing put it in your policy yeah exactly right there can I bet you most people who have been victims now do this and the ones that have it maybe don't have that in place thinking it's not going to happen I I think you're if you're a small business owner it's your money treat it like it's your money that's coming out of your pocket treat all the equipment that's there as your personal equipment and and how are you going to leave it laying around your house are you going to leave in laying around your house treat your business just like your you would secure in your own residence right yeah I think the problem we have with most small businesses is they're totally unorganized they have no feel how they should put their accounting system yet alone you know these type of fraud resistance programs together and so they need to spend some time maybe get online and find out some ways there and you know talk to professionals about that but I I think too many just do it by the seat of their pants and they you know keep their checks they write them out of sequence they have them all over the place or they have invoices that are all out of order they they take they don't really have a control system with segregation of duties they just seem to have well let's hope with those that that may be in that situation with this advice that they establish those types of things and then what if they do detect that they think that something is going on that there may be some type of internal fraud where do they go from there well get help outside help too and some people you can rely I mean if you can suspect fraud obviously if you know frauds there authorities then you know the local law enforcement would be the best place to go most of the problems you have with that is if you haven't found enough evidence they might not be prosecuted so you probably need to hire some outside professionals to look and there's various ones including fraud examiners and pis and CPAs and lots of different variety of individuals but I think you need to stop that fraud immediately so get this person out of that area or firearm whatever you think you need to do but I do think you better get some help in that regard I'm sure officer Tylar here detective town he'll build it yeah that's good that's one of the things with small businesses that they may not be able to afford to go outside and order something up right away I would definitely definitely make a report that's the first step make the report have have your information that that you believe leads you to the suspect who the suspect is e how long they've worked with you what is your evidence and this stuff will all be put in your statement to the police department when you're making your initial report be as detailed as possible in it I see too many statements that are a paragraph long says hey I think Joe's taking money you know and I think Joe's taken 150 thousand dollars end of statement you're like you look at that as a detective and if if the small business owner or the reporting person isn't willing to put detail into it a lot of times they don't get investigated and if they won't have followed up yeah they won't get followed up on I would I would be as detailed as possible in your initial report lay out all the information about this is a suspected employee any background history that you might have on them any information that you might have your bank records that show this is where the funny loss is coming from or if it's equipment if its invoices that are not getting paid or getting paid to to their friends or whatever there's there's all those kinds of of crimes as well materials that are disappearing in that comes all the way back to the embezzlement side of it embezzlement is basically converting converting company's assets to your own personal use or profit from those so that could be as simple as you know if you sell widgets and I take 15 widgets at a time and I sell them on the side to make my own money that's going to be an embezzlement thing if I'm entrusted with those widgets our businesses by the way are notorious do not keep track of their inventory especially if you have a lot of small items it's who's going to miss it the employee will say but the reality of it is most small businesses don't do regular counts they don't keep a some sort of a tracking system for their inventory items and it adds up so if you have that document plate documentation in place at the beginning of the report when the detective gets that then they will go make contact with you and say okay I need this this in this as well okay what other do you have video do you have video in your office or your warehouse or whatever it might be that can support this what other information you have they may require there they may ask you if you've seeked out a forensic accountant to go through the books and look at the books they may ask for your tax records things like that to show a pattern or to show where the money is going to help them so if they find just let's say one thing would it be best for them to file the police report right then and then continue their investigation and add to it yes start as start as soon as possible so we have a jump-off point so we know we know where this began to many times we get well over the past three years sandy has been taking money out of the till well you have to look into statute of limitations in Nevada and typically on most of these fraud cases it's three years okay and and there's nothing we could do past that we find that at the bank quite a bit especially when somebody has a balance their statement and they'll come to us and say that they've been you know 14 checks for the last three years which you know you can create a certain things when you open an account that's why it's so important to read your disclosure and it says that you have 30 days in order to balance your statement and so then there's nothing we can do for them so some of those things are so important when it comes to timing so he's good to know to do a review and timely reconcile your account regularly would help to on that how do you actually find the fraud right away so yeah every company owner should definitely reckon sell a lot of times you might want to have the statement sent to your home versus exactly office exactly look that over before it even gets to or even duplicate statements you know you have your statements that go to your bookkeeper but you also have your own statements and come to you and and take the time to look through that I I know running a business can become very time consuming but this is part of it you got to protect yourself because if you don't if you're not looking out for yourself nobody else out there is going to and you know if you're passionate about your business sometimes the accounting side is not the fun side that you want to be participating in but you know that's your bread and butter so that's where you need to keep your eye on things and it just seems like the with the electronic age there's so many more opportunities for these frauds as well as to not be aware and for people to change and and do things there's so many schemes out there that confuse and distort figures and I boy there's a lot of areas I mean we can go hours on just talking about computer fraud issues but when we talk about employees for example we might want to have policies related to what they put and don't put on their own social media type of sites and we also you know recommend that when you get into these areas of controls that that only certain things are able to be seen by certain employees at certain times so it's really complicated though it's not easy to do and that touches on background checks a little bit to go social about social media social media the background checks policies like he touched on have a policy in place to deal with internal theft have it written out so that the employees see it and they know that there's a policy that that states you know you might put them on some type of unpaid leave pending an investigation or or any any suspect fraud or theft or employee dishonesty or anything like that have that stuff lined out in your employee policies because sometimes that's the only teeth that anybody has there may not be enough evidence there may not be enough things to point to this person and and it may even become a civil type of issue where where we can't as law enforcement take any type of action we can't arrest the person but they have more teeth in their policies within their company to where they can say I suspect I suspect you're a thief and this is what I think you did and I don't like it you're fired done because this is what you agreed to write when you hired you sign this document saying that if we suspect you're doing something wrong within the department whatever you your subject determination and and have that laid out in advance so that when when the person is being hired they read that they sign off on it and you can fall back on that because a lot of times businesses will come to us and say well what do we do I
think Joe's stealing money and I think Joe's been stealing money for a long time but I really can't prove it and I can't do anything for you I'm sorry I can't be the one that comes in and fires him if you have a strong policy with your within your company that you could deal with it then the deal with it typically say staged rollout yeah well it's all right yeah well yeah when you go home tonight pick up your hair dryer pull down to the end of that cord and says don't use in the bathtub that's because somebody did it yep exactly did you surprised at how many owners give their employees more than one chance and turn to their detriment six months down the road now there are three hundred thousand dollars in debt or in Los when they could have stopped it at a hundred thousand so that's that's where you have to have that strong all along with these policies to make sure that you bond your people who handle a lot of cash that way you can with your background check it also gives you some insurance coverage if that ever happens that that would help a little and another thing inside your disclosed at the disclosure for nevada state bank is it talks about when fraud is committed by the same perpetrator ongoing because you know once exactly exactly so it's the same person again you can't get reimbursed by the bank you can go back to the thief but more than likely they're not going to happen well that's it restitution is immutable word everybody loves the word restitution and you hear it in court all the time or the gavel hits they say restitution well honestly when the person if the person goes to prison how are they going to thank give you restitution they don't make any money there they have no assets in the beginning or they probably wouldn't be stealing we process restitution checks because we receive them as well and they're about twelve dollars it's going to take you a long time gray somebody bad less than fifty percent has ever recovered on all frauds that are discovered okay well quickly i know that you know we've got into a great discussion about internal fraud but i want to touch on external fraud very quickly before we go to questions so what are some of the most common external fraud schemes and how do fraudsters obtain client information there's a myriad of ways the dumpster diving seems to be one of the biggest ones that i see a lot of these people are going into the trash cans and finding information in the trash cans from businesses they'll find avoided checks don't find thrown away statements that have account numbers on them they'll find all that stuff number one is if you invest in anything invest in a shredder that actually shreds things it's not the straight-line shredder I can finally you can tape it all back together and make it pretty it the crisscross ones or the better ones shred everything that you have be careful what you're throwing away I've seen and it's is dating myself a little bit old school stuff but the plates that have the account information that used to be put into the credit card sliding yeah those things I don't know what they're called but I I remember seeing them and they make the carbon copies of receipt numbers or of credit card numbers I see that stuff popping up in the trash because it still at x get sent out to people over they have it and they've gone through their boxes and all I don't need this anymore we don't use this machine anymore and they throw it in the garbage well somebody comes along and finds that and these things are like gold checks you know when you're paying with checks really reconcile your accounts and find out where where your checks are being cashed at and to whom they're being cached don't just look at the numbers look at who's cashing them because if if I'm a business owner and I cut a check to you and you take that check and you have a drug problem or you have a gambling problem or you have some kind of problem that needs to be fixed you can easily take that routing number that checking account number that is that is money to to these people who are printing checks or counterfeiting checks all you have to do is give it to me if you give me that routing number you give me that checking account number I'll go on my computer at home and print out first construction is a big construction company in Nevada I will make instruction payroll checks so that I can go in on fridays to the casinos and cash those when payroll comes out and because because construction is known throughout the state of Nevada they're in every casinos computer for good check cashing checks so it's very simple to do that's that is like gold so I'll protect protect your your statements know who you're paying your checks to don't throw things away like that if your business is burglarized don't just look at did they take the petty cash did they grab the you know the art off the walls I things like that people really look at four burglaries look at what records were taken in the back of the checkbook the back of the check book yet go through the checkbooks go through all the checkbooks and see what was taken out of those I'll see thieves coming into businesses and stealing they'll go to a car dealership and they'll steal filing cabinets well inside those filing cabinets are credit histories of every single person who's bought a car well that instantly turns into credit card theft identity theft check counterfeiting all that stuff from small businesses landscaping companies are Natori for when they get a payment they might make a photocopy of the check from you because we're doing your landscaping I'll take your check i'll make a photocopy of it i'll put it in your file and then i have your file Chrissy's file in here and if i'm a good thief I'll go in and steal those files because in that is going to have your address your name your your business if it's a business some of your checks their account numbers some of these things are so easy though you can go online and you know use some ancestry com for example and get some people who have passed away you can get some personal social securities and detonates things of that nature and you can use that so it it's really a place where we need to be very vigilant we need to check our credit reports we need to there's some national fraud hotlines to that unfortunately I don't have the number here but maybe we can get it to your viewers but that you can call that you would want to check and report anything that even anyone using your social security number and it's just suspected of doing that it just seems like there's so many opportunities I know when we were at restaurant one time for example my mother-in-law just let somebody use their credit card and all they did is just go to another room and they worked out their methods of being Elda I mean there's several ways to share I think you can have a whole other webinar yeah when you're talking about the external theft that's that's it small businesses deal with a lot of a lot of computer stuff internet things wireless they put out their website they have sales through their computers they have point-of-sale machines those types of things a lot of companies those are private companies that offer those point-of-sale programs and they'll come into a small business and set up that program and if they come to my business and they set it up I don't know anything about computers and I don't really want to know anything about computers because it's all foreign to me well they rely on that point of sale person who's setting up that equipment and out of times people leave things that their default they leave the default login they leave the default password and now it's very easy to break into that point of sale if you're running say a small pizza business and you have a point-of-sale machine up front and your server in the back and your point-of-sale machine is is Wireless and you don't change your firewalls you don't set up anything different than a default password and a default login it's very easy for me to sniff around basically right or we're driving your system and I'll sit outside with my computer and I will find your wireless in your point-of-sale machine and then I will bombard it with wit which is out there lists of passwords that are default passwords and default logins and I'll just bombard your system with those until it gets a match and it opened your system and now I have a back door into your system so everybody that comes in and buys a pizza and use a credit card I get their information so that's your external theft and and the small businesses think about it they're like well yeah they're stealing John's credit card number and Dave's credit card number but you know as well as I do now from the banking side of it they go in and when you develop a pattern at joe's pizza and joe's pizza is the jump off point for all this credit card plaintiff continent right by kind of compromise for all this credit card fraud now in this small business owner has to do their own audit and their own forensic audit and those can be forty thousand dollars to have an outside company come in and audit them in order for them to still be able to use the visa logo or the discover logo or any of that stuff so that can crush a small business so if you don't protect yourself from external stuff you're done I mean if the bank comes in and says sorry you can't take credit cards anymore and that's part of your disclosure I believe in even in your disclosures it says if you're going to use our credit card system or a system that gives us money through credit cards you are opening yourself up to external audits and you had great to a security exactly and if you don't it can burn a business to the ground in a matter of days if they're compromising Ivan atms people can set up gadgets so if you see anything like that reported immediate right to the banks can tell there's you know I know the casinos are good at suspected activity reports and there's a lot of opportunity to report whenever you have something that is very spacious absolutely so we should keep our eyes open but on the internet again I'm saying it is a myriad you can absolutely you can find how to do it how do I at all and you can find ways to prevent it but also you know with fishing and all these other things have been around forever it just seems like we have to be vigilant and get all your anti-virus and right other sovereigns keep them up to date I think we're ready to go to questions question number one is from Edward is it better to have an accountant or bookkeeper on staff or to outsource those functions to another company Dennis wanna take that what it's cheaper always to have mon staff i can tell you that because my rates a lot higher than normal i'm a certified public accountant there are times when you don't have the controls that there are certain things that you need an outside or four so i think no matter even if you do have it inside you know internal i think you should probably hire someone to oversee that you know not doing things out of line and I think especially when it comes to setting up your systems making sure you're paying your taxes and that you look at things regularly from an outside so from a cost-effective standpoint maybe have someone on staff and then have someone from the outside audit couple few times a year it varies depending on the sides and that the needs of the business but I do think you need to be vigilant and probably you can get advise you can get to go to a lot of these professionals and they can give you ways to set up systems and controls I think that's probably more important if you're vigilant now if you're not vigilant boy you know only three percent of auditors find the fried right you know so I mean three percent of the audits so that's not the highest way of finding fraud I think we need to stop it up front and and it starts in in house right and so if you have enough employees I'd like to see that you segregate it and set it up right there okay okay our next questions from Adam as a small business owner what are some resources to help me with best practices as it is related to fraud prevention well the FTC the Federal Trade Commission has has a website okay and we'll have to provide that later on I know I can't tell you it popped it up my hair that's the fraud line but they'll have they have best pack a lot of best practices information there they have things to look for trends they track all the trends just to educate yourself if you if you go like I said go on the internet and and google it how to protect my company how to break into a company you can find all that information out there and just start to educate yourself on how the criminal side of it is working okay how they would think how they would get away with embezzlement it's a it's a wonderful resource to use the internet is great for that kind of information consult your bank's talk to you to talk to your bank's I'm sure that they're more than willing to come out and talk to you about it or or you come into the office and talk to them about what the trends are and how they can how they can better protect themselves if if you have friends that that are involved in accounting we have tools that can help you in order to prevent that positive pay is one fantastic tool where a business can send us a file letting us know what checks they issued and then as those checks clear we match them up so if anything comes through that was not authorized we're automatically going to kick it out send it to the the business to review and if they don't want to pay then we'll return it so that's one way that they could protect themselves very helpful alright next question from John how often should I review my bank account transactions or my financial records I'd do it every day I mean I app I have an app for it and the my iPad on my iPhone I look at my bank statements every day as a business owner you should probably look at them at least twice a month at the most or at the least if you can whenever your quarterly statements come in and that's every statement that that is not only your your bank statement but you're looking at if you have cell phones with the with your company that employs are using you want to look at that you want to look at any type of accounts the house and write a card credit card expense accounts those type of things review them as often as you possibly can but at the minimum you know take a look at them twice a month if you can I say reconcile and monthly but a look at them vigilantly daily seems like they're there's so many opportunities for fraud or miss postings or I mean in this day and age I don't know anyone that hasn't had a problem because of somebody trying to use there and look at the accounts that you don't use as often you know sometimes you have this general account that you use quite a bit your payroll account of course but maybe you have this reserve account that you don't touch as often or not look at us often look at that one as well because that might be the one that they're you know I've had victims I've had victims who would be considered I would confirm a small business you know a doctor or or whatever that has their personal finance person or their their helper that just oversees everything for them handles their mail gets their mail opens their mail does all that because they just aren't they don't have the time to do it one of them was well over three hundred thousand dollars lost I mean this is he's a multi-millionaire but he lost you know three four five hundred thousand dollars in a period of time and the only way he the only reason he caught it was one day when the mail came in a credit card statement came in the mail it fell out of the inbox and landed on the floor and as he was walking through he'd picked that up and he was like no credit card statement gia haven't looked at one of these in a long time rips and open and sees where were his whatever you want to call her financial assistant whatever was taking a family on trips to Disneyland all on his expenses and he had no idea that it was even happening we went into the into the house and found you know easily two hundred thousand dollars worth of sports memorabilia they had all kenmore industrial app
iances installed in this little house they had new vehicles they were making payments for their friends mortgages she was just spending money hand over fist in the sad the saddest thing about it is she was charged with one count of embezzlement and at the time the bail was a whopping two thousand five hundred dollars so she gets to go to jail and then gets the twenty five hundred dollar bail to get out and then goes through the court process and is given probation because she has no criminal history was the first time she ever did it and there's over half a million dollars in a loss and restitution we will he ever see it never hey because a lot of it was on his credit cards and and that and now the battle was with him and his credit card companies in his banks and and going back and forth there this happened her or than we oh absolutely okay Porter so it's crazy by the way when people leave to make sure you change your passwords yes they may have access to get in absolutely and try and keep your your computers with all the data free from other areas and locked and secured I mean it gets aggressive you have a lot of problems next question is from Debbie aside from dedicated workers any other red flags to look for well he brought it up earlier people that look like they they're living outside their means they have more of an extravagant lifestyle you know they're out partying around vacations all the time they're taking trips all the time and you as the business owner know that you're only paying John so much money and how can John drive this fancy BMW he lives in a 4,000 square foot house and he's doing all this and and my business is struggling why is my business struggling well because Jon's taking money from my business and we're not really making what we should be making those kind of red flags come up I've got a list here that shows a living beyond means like 30 six percent then the next one is financial difficulties people have usually the next would be unusually close association with vendor or customer control issues their unwillingness to share their duties you know if your divorce or family problems wheeler-dealer attitude if they're irritable or suspicious or defensive all the time addiction problems past employment related problems you know legal problems instability and life circumstances it just seems like there's a lot of opportunity yeah the very small businesses you know the five or six or ten employee businesses I think that if and I think we said this earlier if the management or the owner of that business is more hands-on with what's going on and and more involved with his employees or her employees knowing knowing more about them getting to know them you know taking having having those company picnics having those get-togethers where everybody's families get together and making that small business a family so you're not so much knowing what everybody's business is but you can get a read on what's going on in their family you'll know what when something is off okay you know I hate to say it will go through a divorce or medical problems or anything like that but just just genuinely caring about your employees and what what's going on in their lives may help you stop something before it happens you see that John's got these medical issues or something's wrong with his kids or anything like that and and you have some type of employee assistance program in place or or even you can refer them to something to help them out that might that might stop something before it gets out of hand in ruins their life and ruined your business the way if they refuse to take a vacation anywhere alright we have another question from Aaron my bar deals with a lot of cash do you think surveillance cameras would be a good investment absolutely I it's a must in a bar yeah we do I open a bar without a surveillance you know in a lot of businesses and we live in the technology age and and you can't get away from it cell phones have cameras everybody has a camera you need to look into your the state's laws regarding recording and things like that but if you're in a public place and you're in that business environment I I would not only say to protect your your own assets but also to protect your employees there's so many things that happen nowadays with workplace violence with with burglaries robberies and I see hair salons being robbed because they're easy pickings and I hate to say it but it's mostly women working in there and so so to protect your employees from the outside as well as protecting yourself but when you do put in a system you need to make sure that it's a high enough quality system and it's not just the generic camera 45 feet away at the door facing the cash register if you're concerned about that in there and there's businesses out there that will put in covert systems so that you can monitor things like that but the details that need to be that need to be in place are full facial views of people that come and go in from your business you know they'll mount a camera high in the ceiling and in the guy will come in with a hat on so you want you want that camera shooting a face shot of the person if they come up to your cash register you want to be I die looking at them so probably best to get a professional to help you pop star yeah do that make sure if you can if you can afford it do some off-site recording and make sure you rotate and you keep the tapes long enough that you can be sure it's recording and make sure its record I know some people I've had where they were suspecting things and they realize that camera just wasn't even on the right area so it wasn't didn't do any channels yeah and have an important and have that monitored by a high level person within the business you know if you if you're the business owner you're the one that has access to that you don't give the bookkeeper access to that and the books and their credit cards and the checks right everything else everything else all right this is the last question where can I get a bat ground check done on an employee hmm there are so many businesses out there we get in for I spent hours talking about them I i personally again I'll throw it back out there google it right I did actually look to see and there is the national association of professional background screeners so if you were to google that then you could look for a company that falls under that and I think that will be good starting area yeah something in your area something within your price range I'm sure that they offer a myriad of different types of background checks on people there's there's private companies out there I would just I would do a keyword search for background check okay and then just watch it populate and then just start working your way through and that's important to do because the problem you have is some people will give a reference and they have some sites who people will actually make up excuses for met doctors to what you know where you worked what degrees you have and a lot of times of their faults and so if you don't go to other sources you'll never know till you have the crisis exactly well thank you what a great discussion that we had today on behalf of nevada state bank i'd like to thank our panelists dennis and tyler for presenting this valuable information and thank you to everyone who participated especially those who submitted questions via twitter if your question was not answered today will make every effort to get you an answer in the next few days if you'd like to see this webinar again or invite others to see it a recorded version will be available within 48 hours on nevada small business com you're also invited to the next insights webinar on sep tember 19th which will focus on how to start a business in Nevada it will give you step-by-step discussion of the decisions paperwork and resources involved in starting a business to help put you on a path to a successful launch you can register today at NS bank calm / webinar as always registration is free thanks again for participating today have a great afternoon you you you you
