Risk Insider: Erin O'Brien Link

Combating External Fraud Scams

By: | October 28, 2014 • 2 min read
Erin O'Brien Link is the vice president of risk management for CGG, a geophysical services company. She is responsible for enterprise risk management, group insurance globally, special projects and guidance in contract reviews. She can be reached at [email protected]

The risk of fraud cannot be eliminated completely, but the opportunities to commit fraud can be reduced through effective awareness and internal training initiatives by risk managers.

Multiple surveys have highlighted that companies may be losing as much as 7 percent of their annual turnover as a result of fraud. There have been multiple “false CEO/President scams” and other attempts to defraud multinational companies.

In France, over 160 companies were victims of fraud scams in 2013. Some examples of successful frauds scams are:

• Payment by one company of over $2M to a fraudulent international transport company.

• Another company was targeted to transfer money “to buy urgent raw materials for business needs” resulting in a loss of $14M!

By training managers to be aware of the scams, avoidance of the risk can be achieved. Having better awareness and training in place can also help a company decrease insurance premiums for financial risk insurance.

These are red flags of the risk:

• Frequent calls: One international company was called 33 times by the same supplier in four days.

• Demands for payment are always urgent.

• Demands are exceptions outside of normal business procedures.

Fraudsters have developed creative schemes in order to obtain unjust enrichment. The external fraud success is the professional and legitimate appearance of the demand.

The most typical external fraud scams involve four steps:

• The fraudster obtains information about Company Y via the Internet or a publicly advertised conference.

• The fraudster calls Company Y pretending to be a supplier.  The fraudster, acting as Supplier Z demands payment, stating that they are upset, and that Company Y owes them past due money. Often, multiple managers are targeted at the same time within Company Y.

• The fraudster obtains the logo and letterhead of the Supplier Z.  Using this, the fraudster writes a demand for payment and sends it to Company Y.

• The fraudster then pretends to work in Company Y’s finance department and targets an actual financial controller within Company Y by emailing the forged supplier Z letter.  An urgent wire transfer is requested to wire funds to countries like Switzerland, the Far East (China, India, Hong Kong), or Israel. When the funds are wired, the fraud scam is successful.

Preventing the wire transfer is the key to risk prevention. Prevention focuses on the elimination of one of the following:

• Pressure – Where the pressure felt by individuals is greater, the risk of fraud occurring is increased.

• Opportunity – If opportunity is removed altogether, there will be no fraud.

• Rationalization – Rationalization can generally be linked to a lack of ethical leadership within the organization.

If strict controls are not in place, increasing awareness of the risk is essential. Risk managers should consider adapting and applying practices used by global corporations in promoting awareness. These good practices are successful.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]