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Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved Treasury Management Essentials Sponsored by:

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Presentation on theme: "Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved Treasury Management Essentials Sponsored by:"— Presentation transcript:

1 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved Treasury Management Essentials Sponsored by: Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved BEYOND INTERNAL CONTROLS: THE ROLE OF YOUR TRUSTED ADVISORS IN PREVENTING FRAUD Arlen S. Lasinsky, CPA/CFE/CFF/CTP – Frost, Ruttenberg & Rothblatt, P.C. Kristen Saranteas, CTP – Wintrust Commercial Banking

2 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 2 Treasury Management Essentials sponsored by Wintrust Commercial Banking Arlen S. Lasinsky, CPA, CFE, CFF, CTP, has more than 34 years experience as an auditor, controller, CFO and treasurer, consultant and fraud investigator. As director of Frost, Ruttenberg & Rothblatt’s litigation and forensic services, he uses his expertise to support legal counsel and their clients through contentious situations such as civil and criminal litigation and fraud investigations. In addition to being a certified public accountant, Arlen is a certified fraud examiner, certified in financial forensics and certified treasury professional. He is widely recognized as a trusted adviser on preventative maintenance, implementing new procedures, and uncovering and assessing damages. He also has provided pre-litigation investigations of damages, as well as consultation and testimony on behalf of both plaintiff and defendant clients for dozens of litigation matters. Arlen’s investigations and testifying experience have served to uncover and prove fraudulent activity, facilitate settlements of lawsuits and shareholder disputes, and present how defendant clients were innocent of allegations of offenses and charges. A frequent speaker on the topic of fraud and cash management, Arlen has authored articles pertaining to cash management, safeguards and warning signs of embezzlement and check fraud and has also been interviewed and quoted as an expert for periodicals, radio and television. He earned a Bachelor of Science degree in accounting with honors and distinction from the University of Illinois. He is a member of the AICPA, the Illinois CPA Society, the Association of Certified Fraud Examiners, the Association for Financial Professionals and American Society of Appraisers, and an associate member of the ABA. SPEAKER BIOGRAPHY

3 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 3 Treasury Management Essentials sponsored by Wintrust Commercial Banking Kristen L. Saranteas, CTP, Senior Manager – Treasury Sales, Solutions & Support, has more than 20 years in sales and management experience in the treasury management industry. At Wintrust, Kristen leads the Treasury Management Sales, Solutions & Support teams, bringing solid expertise and unique skills well-suited for a sales and service discipline. With this role, she is responsible for the entire sales cycle and on-going support of the bank’s prospects’ and clients’ day-to-day experience. Kristen’s educational background includes a Bachelor of Arts degree in International Studies and a Bachelor of Arts degree in Spanish from Miami University in Oxford, OH. In addition to her membership in the AFP and a frequent speaker at the Windy City Summit, Kristen has also been a speaker at several other industry conferences across the country, including the National Automated Clearing House association, Payments Authority, Northeast OH Treasury Management Association, Treasury Management Association of New England, Ohio GFOA TEXPO, and Windy City Summit. SPEAKER BIOGRAPHY

4 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 4 Treasury Management Essentials sponsored by Wintrust Commercial Banking What’s been taken? Cash Inventory Trade secrets Other intangibles Quantified? Method? Who is the perpetrator? How can you recover? YOUR ARE A VICTIM OF FRAUD (TRUE FOR ALL OF US). SO, NOW WHAT…?

5 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 5 Treasury Management Essentials sponsored by Wintrust Commercial Banking Notify fraud management team, internal audit and security, where appropriate Contact law enforcement Most insurance policies require it Contact in-house counsel and outside counsel, if appropriate Attorney may have court intervention Freeze perpetrator’s assets Seek other remedies DO YOU KNOW WHAT TO DO?

6 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 6 Treasury Management Essentials sponsored by Wintrust Commercial Banking Insurance broker aware of theft Contact insurance company Notification is extremely important Engage forensic accountant In-house auditors Must have forensic experience Engage computer forensic experts IT personnel should have limited involvement Secure computers involved Maintain integrity of documents Chain of custody DO YOU KNOW WHAT TO DO?...CONTINUED

7 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 7 Treasury Management Essentials sponsored by Wintrust Commercial Banking Notify all financial institutions May be instructed to close accounts and open new that will shadow activity of the old Limit users of online systems Ensure overall workflow has appropriate checks and balances, with appropriate oversight Discover return recourse / timeframes that may be possible to enlist DO YOU KNOW WHAT TO DO?...CONTINUED

8 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 8 Treasury Management Essentials sponsored by Wintrust Commercial Banking Insurance coverage Type of insurance Cyber crime coverage Proof of loss Types of losses Procedures Restitution from perpetrator Criminal prosecution Law suit-civil tort Restitution from others RECOVERY SOURCES

9 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 9 Treasury Management Essentials sponsored by Wintrust Commercial Banking Insurance coverage Review all relevant insurance policies Be certain to follow proper procedures for each policy Fidelity policy Dishonesty policy Commercial crime policy All-risk policy Cyber crime coverage Notification required within 30 days of discovery; shorter on some policies Notice is critical If notice is later, insurance company will contest coverage INSURANCE COVERAGE

10 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 10 Treasury Management Essentials sponsored by Wintrust Commercial Banking Proof of loss Usually within six months; shorter on some policies Describe the facts accurately Gather appropriate supporting documentation Story to explain scheme to insurance company Clear and concise Insured must have arguments to support the coverage and the damages sustained Be certain to reference documents, affidavits and other analyses and worksheets Insurance company must be able to trace If litigation, a concise and easily to follow proof of loss INSURANCE COVERAGE…CONTINUED

11 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 11 Treasury Management Essentials sponsored by Wintrust Commercial Banking Types of losses Fidelity insurance - Loss arising form dishonest or fraudulent acts committed by employee “On Premises” insurance - Loss of property that was located on insured’s premises “In-Transit” insurance - Loss of property while in transit with a messenger of armored car “Forgery or Alteration” insurance - Forgery or alteration of negotiable instruments including forged delivery instructions “Securities” insurance - Covers, forged, altered, lost or stolen securities, titles, mortgages, etc. “Counterfeit Currency” insurance - Covers loss arising from receipt of counterfeit currency INSURANCE COVERAGE…CONTINUED

12 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 12 Treasury Management Essentials sponsored by Wintrust Commercial Banking Steps to include regarding insurance recovery Timely notification Receive dated written or electronic confirmation that insurance company has been properly notified Proper investigation Forensic accountant Computer forensics Attorney Notify law enforcement INSURANCE COVERAGE…CONTINUED

13 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 13 Treasury Management Essentials sponsored by Wintrust Commercial Banking Steps to include regarding insurance recovery, continued Maybe necessary to notify: U.S. Attorney office U.S. Department of Justice State’s Attorney office Other regulatory agencies INSURANCE COVERAGE…CONTINUED

14 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 14 Treasury Management Essentials sponsored by Wintrust Commercial Banking Steps to include regarding insurance recovery, continued Costs of investigation Policy may cover costs - keep proper recordkeeping Insured educates insurance company; better the results Continued communication Insurance company can properly position themselves Insurance company can set proper reserves Can result in easier settlement discussions Discuss complex issues as they come to light INSURANCE COVERAGE…CONTINUED

15 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 15 Treasury Management Essentials sponsored by Wintrust Commercial Banking Very few perpetrators actually pay restitution Perpetrators may rather pay more in costs against extradition than paying back victim Criminal prosecution United States Attorney State’s Attorney District Attorney Seek own counsel for assistance RESTITUTION FROM PERPETRATOR

16 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 16 Treasury Management Essentials sponsored by Wintrust Commercial Banking Civil Recovery Also difficult to get restitution Funds in off-shore trust May have to re-litigate in trust location Does not preclude criminal prosecution Third-party subpoenas Records Depositions Perpetrator civilly liable for loss sustained by victim Small claims court RESTITUTION FROM PERPETRATOR …CONTINUED

17 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 17 Treasury Management Essentials sponsored by Wintrust Commercial Banking Lessons learned Look for fraud Warning signs Fraud management program RECOVERY - PREVENTING FUTURE DISASTERS

18 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 18 Treasury Management Essentials sponsored by Wintrust Commercial Banking Weaknesses in system Prevention in the future Mistakes made in the past Review internal controls Strengths Improve various areas (workflow processes) Evaluate bank products Determine strength of systems (anti-virus software, etc.) Insurance Coverage Supplemental insurance Increase coverage Deductibles LESSONS LEARNED

19 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 19 Treasury Management Essentials sponsored by Wintrust Commercial Banking Internal audit department Separate security department In-house forensic accountants Positions of trust Listen, observe and act upon Fraud risk assessment LOOK FOR FRAUD

20 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 20 Treasury Management Essentials sponsored by Wintrust Commercial Banking Most common Life style No vacations or vacations coordinated Individual against cross training Messy office or workstation Fire drills Many, many more Think outside the box What could be happening that is not known That is exactly what is “thinking outside the box” Don’t be too busy expanding your business WARNING SIGNS

21 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 21 Treasury Management Essentials sponsored by Wintrust Commercial Banking Put together a team Inherent risks identified Assess each risk Likelihood? What is the impact? What are the current internal controls? Are they doing what they are supposed to do? Residual risk after everything is in place Actions to take for that residual risk FRAUD MANAGEMENT PROGRAM

22 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 22 Treasury Management Essentials sponsored by Wintrust Commercial Banking Accounting department Outside counsel General counsel Banker / Treasury Management Representative Insurance broker Internal audit Human resources Security Outside forensic accountants CONSTRUCT THE TEAM

23 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 23 Treasury Management Essentials sponsored by Wintrust Commercial Banking How can the controls be overridden? What types of fraud can be perpetrated? Fraud triangle Opportunity Motivation Rationalization Where are the pressures in the company? Who has the opportunity? IT Risks Outside risks INHERENT RISKS IDENTIFIED

24 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 24 Treasury Management Essentials sponsored by Wintrust Commercial Banking Type of industry Economic assessment Past occurrences How many times in the past? Methodology Experiences in the profession ASSESS EACH RISK

25 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 25 Treasury Management Essentials sponsored by Wintrust Commercial Banking Fraud schemes occurring presently Complaints Customers Employees Competitors Worst case scenarios Economic impact Lost contracts Reputation Lost customers Lost vendors ASSESS EACH RISK…CONTINUED

26 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 26 Treasury Management Essentials sponsored by Wintrust Commercial Banking Government/Criminal issues Department of Justice Fines Survival of the company ASSESS EACH RISK…CONTINUED

27 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 27 Treasury Management Essentials sponsored by Wintrust Commercial Banking Controls currently existing Walk-through of controls Interviews Staff Exit interviews Testing Results Trends from testing WHAT ARE THE CURRENT INTERNAL CONTROLS?

28 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 28 Treasury Management Essentials sponsored by Wintrust Commercial Banking Residual risk is the risk that still exists after controls in place are considered (the net risk or risk after controls) What can still occur after all of this work? What is the vulnerability and costs of residual risks? RESIDUAL RISK REMAINING AFTER EVERYTHING IS IN PLACE

29 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved 29 Treasury Management Essentials sponsored by Wintrust Commercial Banking Risks not mitigated by internal controls Additional controls Aggressive in pursuing other testing Stop the activity Outsource activity Do nothing-observe the activity for fraud Evaluate if risk becomes greater over time ACTIONS TO TAKE FOR RESIDUAL RISK

30 Copyright 2012 Frost, Ruttenberg & Rothblatt, P.C. and Wintrust Financial Corporation All Rights Reserved Treasury Management Essentials sponsored by Wintrust Commercial Banking QUESTIONS?


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