Welcome back to Fraud Files. My name is Simon, and I'm the interviewer on this podcast, which brings you real life case files and forensic insights into a number of white collar frauds, financial crimes and misdemeanours that your host Edward has personally encountered, and in some cases brought to light, during his financial, corporate and business career. He shines the spotlight on both the frauds and the perpetrators. In this episode, entitled White Collar, Brass Neck, a brass neck is a British phrase for supreme confidence, audacity, or shamelessness, describing someone who acts brazenly, without without feeling shame, even when their behaviour is unacceptable. It describes someone with immense cheek or verve, often taking crazy risks. So Edward, have you come across some white collar, brass neck frauds in your time as an accountant? Yes, Simon. White collar fraud tends to be opportunistic but when that opportunity presents itself, often the actual, packaging of the fraud, the mechanics of the fraud, are relatively straightforward. And during my career, a number of the frauds I've seen. Amaze me because really, it's like the sheer audacity, of the employee who's committing the offense. And they're defrauding the company. And often the manner in which they do that is, is really quite, um, it's quite simple. It's not a convoluted, elaborate fraud, often. It's very simple. And because the opportunity has presented itself, the employee just goes for it type of thing. You know, if they see it, if they see the opportunity, uh and they have it in their makeup to, to enrich themselves. Um, they just do it and they don't often think about, creating a complex layer or web of deceit. And as I'm gonna explain in some of the examples I'm gonna give shortly, um, you'll see how it's brazen. So does white collar fraud always take place on the premises or can it take place off-site? Yes, I mean, there's no defining attribute of a fraud as to whether it's conducted in plain sight or if it happens at a remote location, offsite. Um, typically the, the head office is where the accounting function resides, in a company. But I've seen frauds in the head office and I've seen them, committed remotely. Can you explain what you mean by remotely? Sure. In terms of the remote, uh, frauds, I think that, the audacious play happens, you know, just out of reach, in a remote, satellite office or, offsite, location. So you've got companies that provide goods and services. They have, uh, multiple offices, or they might have, uh, service centers depending on the type of business, uh, where clients interact with the company. I think the psychology is fascinating because when a fraudster is miles away from the head office, the brass neck, uh, you know, really comes into play. The perpetrator relies on a distance, delusion. The idea they have that if you can't see me, you can't. Spot my crime. And often they'll remain cool, calm and collected on the other end, when they're reporting, with head office, dealing with the, uh, the accountants back at base and they've mastered the art of the remote smoke screen. Uh, and they use the physical gap between the service being performed and the office paying the bill as a, uh, a playground for deception. So often they're, uh, they're just filing fake invoices or skimming off the top. But they're betting on the hesitation, lack of, uh, procedures, lack of of internal controls back at head office. And, they're also betting that, people aren't going to travel out. You know, people from head office aren't going to travel out to their location, ask them questions, sniff around the place. So they've sort of deluded themselves, if you like, that, uh, that they're safe in carrying out the fraud and that the gap is too large to be found out. But of course, they might be out of sight, but it doesn't mean they're out of reach, because eventually the, audit trail, catches up with them. So can you but meat on the bones for us about some of the brazen white collar frauds you encountered? Yeah. So, in one particular instance, uh, that I came across when I was working as an accountant, uh, in senior finance for a company, um. The, uh, the fraud was, perpetrated by a employee who had a position of authority at that remote location. And they were, uh, submitting invoices back to head office for payment for goods and services that were being consumed at that remote location. And what they did was very simple. They, they just created dummy invoices for goods and services that didn't exist, that weren't supplied to the company. They created some false companies. Uh, so they had the letterhead, they had the, they had the paperwork, uh, looking good. Providing a service often then difficult to track and to, and to verify back at head office because the remote location is, is far away. And of course they're submitting, on a regular basis. Invoices for approval, and back at head office. The accounts payable function typically is under a lot of pressure. In growing companies. There's lots of bills being paid and often there could be multiple remote locations. So any one particular remote location is just forming part of a, of a processing, uh, train that's taking place. And invoices are being essentially, uh, collated by the accounts payable clerk. And, uh, they give it a look over where they might seek out some evidence, but often not a lot of evidence that the goods and services were actually supplied. Uh, that information is then typically passed to a senior accountant to, uh, to press the button, uh, on the payment, uh, the payment that is made by, uh, bank transfer. To the account details, that are given on the invoice. And, uh, and once the perpetrators got away with it, then they can start to replicate it with, the same company providing the same. Uh, service, or create some new companies from time to time just to, keep the fraud moving. But really it's very straightforward. There, there isn't a lot of thought goes into it and I, I really think the brass neck of it all is how do these people think they're gonna get away with it? And, this particular case, the individual was found out and criminal charges were were brought against him. In another case, I came across a situation where, an individual, was using her own bank account, her personal bank account to flow monies through. So. Instead of using the divisional bank account associated with the offsite location, they were using their own bank account to collect revenues from the services being provided at that offsite location. And then. Actually, making payments out from their own bank account, to discharge, fictitious goods and services that, were never being supplied. So you have a situation where there was legitimate expenditure that were flowing through the, divisional, bank account. So that was going, being processed through head office in the normal manner. But then there was this whole other chunk of, revenue and expenses. Uh, that the individual was not, uh, declaring back at head office. This situation went on for a while and it was in place by the time I arrived at the company. And my job was then to investigate what was going on. That was, that was my brief, uh, in this case. And the individual who perpetrated. The fraud. Certainly in the explanations and and reasoning that was provided to me as to why they had conducted themselves in this particular manner of using a personal bank account. Uh, they had said that, oh, that had been approved previously. And, uh, it was because it was in order to facilitate, very local payments that were being made for services. And it was just a facilitation of the operation, uh, rather than things having to flow back through head office. And I got very elaborate explanations, very long-winded justifications as to why. Uh, this had happened and how, uh, as to why, uh, everything had been accounted for correctly. But when I delved into it, when I went to look at the actual goods and services, I mean, I could see that there was, uh, something untoward, that, that wasn't right about it. Clearly the individual was, taking goods from the company, having them delivered to her home address and making out that those goods had been provided, goods and equipment had been provided. To the offsite location, uh, for the company's use. But actually it was, it was for her personal use. Uh, and so they were putting through, those type of expenditures were going through. And, and in some cases we, there was just no, there was no supporting documentation available to support the, uh, this sort of second set of books that this individual had been maintaining. So you had the revenues coming in and, and in some cases they actually. You could see when the information was provided by the individual, you could see that they were putting personal money into the bank account to keep, the system going. Um. And then they try to justify as to why they did that. Because they said, well, we don't have to bother head office. I, I'm putting my money in. And of course, ultimately they got that money back from the revenues. So it was like teaming and lading and it was just getting over timing differences in order to keep those services and the whole scheme going. Um, so it was a, it was a bit bizarre. And, the investigations, continued and more suspicions were aroused. And again, just, the, ultimate brass neck. I, I would've to say, uh, you know, in that particular case. The third example, uh, I'm going to give of a fraud that took place outside of the head office building was, uh, when I was working as an accountant for a, property, rental company. So they were renting out, accommodation in the residential sector. And they had, in this particular case, the company had an external agent who was assisting them with the properties, helping them to find tenants, helping them to make sure everything was sorted for the, occupancy. And actually. Facilitating and collecting the rent to some extent as well from the tenants. So, while some rents were paid directly by bank transfers from tenants, uh, over a period of time, let's say over a period of years even. It seemed that this agent was saying that, the monies were being paid to him directly, and that this was something that was sort of facilitating the arrangements for the tenants. Uh, and, what The agent, once he had his foot in the door and was actually. Collecting rents from a number of the tenants. Well, that's when the opportunistic, situation arose and presented itself because, uh, what the individual started to do was siphon off money. Because it was outside of the head office. He was an external agent and, um, there was a lack of checks and balances and a lack of verification. And I think he would've sniffed that out. You know, that's what, that's what they do. They, they test the water. They see where the weaknesses might be that, that they could then expose. You've got a small business environment. You've got a busy management team. They take their eye off the ball and, and third parties like this particular, property agent, they're then able to exploit the weaknesses. And you've got the rent, often in the form of cash. And the agent, skimming off the top, when he was found out and I was involved in the uncovering of his fraud, uh, the excuses, the explanations. You know, where they became more and more outrageous. And in this particular case, criminal proceedings were not taken against the individual. But clearly the, uh, the service arrangement, was obviously terminated immediately. And, there was a parting of the ways. And again, it's brazen and, there was nothing clever about it. I uncovered it by, uh, one particular occasion, uh, going to one of the properties to have a look at the, uh, have a look at the property to check out any dilapidations. And I happened to get speaking to the tenant, there. And, the agent had had said that the tenant had left without giving notice. Um, and when I turned up at the property, obviously, the company had its own second set of keys. Uh, I turned up at the property just to have a look around and see it, with another colleague. Uh, and the tenant happened to be there and, so, the tenant had continued to pay rent. To the agent, uh, and the agent had said the head office and to the accountant who was, uh, overseeing this whole area that, the individual had left and that the apartment was vacant. When, when, of course it wasn't vacant, rent was still being paid. Uh, and, and basically the agent was pocketing the money. So if that's not brazen, I dunno what is Can you give our listeners some red flags to watch out for? In terms of red flags, I think it's, fair to say that. Once the fraud is taking place because obviously prior to a fraud taking place, all you can do is make sure you've got the correct accounting procedures and internal controls in place. There's checks and balances in the system and a good accounts department. Will, have a setup and a structure that goes a long way to preventing fraud taking place. But, you know, red flags once the fraud is in play, and once I started to get a feeling that there might be something, not right, uh, when you, confront. At that point alleged perpetrator. Um, I think when they start to give their explanations. That's when you really get to see the cracks early on. They will often state that there's something going on locally that, you wouldn't understand. They might try and bamboozle a little bit. Saying things operate a little differently but everything's okay. And, uh, they try and obviously put your mind at ease very quickly. Um, but the manner in which that is done, can set, alarm bells ringing, I think. And, uh, and it's a reason not to stop asking questions, but actually to start digging a little bit deeper. I think where documentation is lacking, where invoices are consistently vague or services that always seem to fall just outside of the standard. But maybe the biggest red flag of all is when an individual is approached you get this defensive flare, you get a sudden aggressive reaction to a simple routine inquiry. And, that aggression can, come through with copious amounts of explanations and information and just way over the top, and trying to swamp the whole fraud in a quagmire of paperwork and explanations. Uh, and then you can also get the other side of it, which is simply you get told to back off a little bit if you like. Um, a brass neck often uses offense as their best defense. In another situation where, in another company that I worked for, yeah, believe it or not, another fraud or potential fraud, let's call it, in this case, uh, where I was, I was an accountant on a temporary assignment and it was within the head office. And, whilst I was doing the job that I was supposed to be doing around the year end, uh, closing of the accounts, dealing with the auditors and whatever, uh, through that I started to get a feeling about something untoward going on in the IT department. Um, this was a large company. There was a lot of throughput, there was a lot of computer equipment, a lot of, it, monies being the expenditure on it was, was significant. And, then I started to, engage a little bit with the IT department and some of the individuals there in terms of asking questions, in terms of, equipment and record keeping and, invoicing. And I could see, you know, the shutters sort of coming down. And I knew that, certain bits of information and some of the purchasing processes and some of the control of inventory. The control of equipment, was being obscured from me. I wasn't being allowed to investigate it properly. It was as if that they, were too busy. To deal with me a busy time of year. Don't bother me now. You know, go back and do whatever you're supposed to do, but don't bother me now. And I think they would've started to create waves, for me in order to sort of scare me off a little bit. And I think they didn't like me prying into what probably had been a cozy little, uh, area for them for fraud. My sense, became that equipment that was being purchased by the IT department for this very large company,, that might have been, iPhones, laptops, and so on and so forth, that the control over those purchases was lax, in terms of which individuals, which employees were being provided with that equipment, in this company, a very modern, company in terms of the manner in which it did business. All employees were provided with a company phone, a company iPad. Company, remote, equipment, screens, et cetera, uh, for access remotely. But anyway, there was a lot of money being spent and I couldn't see proper control. Um, uh when questions were asked, it was like, oh, that, that employee lost their phone, so they had to get a replacement. Um, but who was that employee? And did they really lose the phone or was this just a, another manner in which the IT department. Um, because it was happening on numerous occasions and numerous different approaches were being taken. And also the equipment would come back. So obviously phones, uh, become obsolete, equipment becomes obsolete or semi obsolete and new, newer versions of equipment are given out to employees. But what happened? What happened to the, uh, to the old equipment? And when you start getting stories that it was given away to charity or given or dumped because it had no realizable value. You knew that wasn't the case. You knew there was value and it sort of came to my mind. And there was a point at which I stopped investigating that and I was actually, in this particular case, I was removed from the company. Whether the IT departments were, were part of that process. Um, yeah. Well, you know, viewers can consider that themselves. But in this particular case, I felt that maybe some of the secondhand equipment that was coming back to the IT department was being sold off on other sites like eBay or where or elsewhere. Uh, and that the money was being pocketed by, 1 individual, but it probably would need a collusion. So one or two individuals, uh, high ranking individuals in the IT department, I felt were, not doing things correctly. So there, you've got a blatant thing right under the head office, right? The IT department right next to the accounting department. Again, a busy accounting department, prioritizing other work streams and therefore turning a blind eye from a company perspective, was not a material amount of money, but from an individual personal perspective, of course, these individuals were making significant additional amounts of money, and lining their own pockets. Um, and of course, if left unchecked, you then have to ask the question, it's opportunistic and if left unchecked. How much more sophisticated would those frauds become? Uh, you know, frauds that start out small, they grow bigger and bigger once the, uh, perpetrator or perpetrators, feel that they can get away with it, they have the brass neck, if they can do it, they will. Can you sum up for our listeners about the interplay between brass necks and white collar fraud? In the final analysis, the white collar brows neck is, is more than just an individual's audacity. It's a failure of the professional business and accounting environments, and it thrives in the gap between what we are told and what we choose to verify. For those of us in the accounting and business community, we must realize that these frauds don't just deplete bank accounts, but they dismantle the very foundation of corporate trust. The individual operating from a remote site isn't just betting on your distance, they're betting on your professional complacency. They are counting on the fact that your desire to maintain a, a smooth relationship, um, not to rock the boat, will outweigh your duty to maintain rigorous oversight. And as we conclude, I'll leave you with this, thought. The red flags are rarely invisible. They are usually just inconvenient. The brass neck relies on your willingness to look the other way for the sake of the status quo. But in our profession, silence isn't just a courtesy, it's a liability. The question isn't whether these frauds are happening because of course they are. It's whether you have the professional courage to challenge the audacity of the person sitting across the screen from you, from a remote location oR sitting in the department right next to you in the head office building. I'm Edward, and this is Fraud Files. Let the audit trail lead where it may.