Computer Fraud at Plutonium

By:

Marina Morgan

March 20, 2011

Computer fraud at Plutonium 2 To successfully identify and prevent fraud you need to understand what motivates fraudsters to commit these schemes. Three necessary elements are common to all types of fraud schemes: opportunity, pressure, and rationalization. These three elements consist of the fraud triangle. The first and most critical element of the fraud triangle is opportunity. Many organizations innocently and recklessly provide their employees with a range of opportunities to commit fraud. The most widespread factor of opportunity in a company that allows a thief to run off with data and assets is typically a weakness in the system. Poor controls can lead to theft. While we can't watch all employees all the time, and some frauds will occur just because we're not watching, there are others that occur because a company has bad control procedures in place. In our case opportunity came with providing live non monitored credit card to Plutonium with reason to test the functionality and reliability of the Gateway system. Secondary, phony credit card number was kept by Jonathan, manager of the operation, in his drawer. It was an easy accessible to anyone with the intent to commit fraud. Chris, operations team member, quickly

become a trusted person and got access to the phony credit card as well other member of his team. The second element of the fraud triangle is pressure. Financial pressure can come from a variety of causes including: lifestyle, personal debt, business losses. Employees loaded with financial pressure may look for ways to ease that pressure. Pressure is difficult to deal with because it is often completely on ones self. Management may not be aware that an employee has a risk factor such as high debts, or that the employee feels unfairly treated. On the other hand, when management does see warning signs, such as

Computer fraud at Plutonium 3 the employee, who often complains about disparities on the job, these should be taken seriously. Chris has responsibility for his family and has an unpaid school loan. He hasnt had a raise for more than a year. The third and final element of the fraud triangle is rationalization, the means by which the fraudsters give good reason for the fraud. His rationalizations could include the following:

I am smarter that any one in my team even my manager, Jonathan. I deserve to get paid more.

Nobody will know. Im using a phony credit card. I am a trusted employee and no one will suspect me.

Chris has low integrity and he has little trouble coming up with rationalizations for defrauding his employers. Most people who commit fraud are under financial pressure. Sometimes the pressures are real; sometimes they represent sheer greed. Once perpetrators meet their financial needs, they usually continue to steal, using the embezzled funds to improve their lifestyles. They buy new cars or other expensive assets, take vacations, remodel their homes or move into more expensive houses, buy expensive jewelry or clothes, or just start spending more money on food and other day-to-day living expenses. Very few perpetrators steal and save. In fact, most immediately spend everything they embezzle. And, as they become more and more confident in their fraud schemes, they steal and spend increasingly larger amounts. Soon they are living lifestyles far beyond what they can practically afford. In the Plutonium case, Chris operated on the small scale. He

Computer fraud at Plutonium 4 bought new technologies equipments such as: Palm Pilot, MP3 Player, PlayStation, laptop, car stereo system. He also starts to spend money on the eating out at lunch. Another symptom of his fraudulent activity was a change in behavior. Some researches make known that when a first-time offender commit a crime, he or she becomes overwhelmed by emotions of fear and guilt. Some recognizable behavior changes are failure to relax, lack of pleasure in things usually enjoyed, fear of getting caught, lack of ability to look people in the eye, visible embarrassment around friends and others and tendency to work standing up. People who are normally nice may become nerve-racking and confrontational; people who are normally aggressive may suddenly become nice. Chriss behavior show symptoms of hiding his progress of work from coworkers and despite he had not been a major player in the piracy; he is showing a very suspicious attitude. Three major factors in fraud prevention related to creating culture of honesty, openness, and assistance. These three factors are: hiring honest people and providing fraud awareness training; creating a positive work environment; and providing an employee assistance program (Albrecht, Albrecht, Albrecht, & Zimbelman, 2009). There can be many opportunities in companies, from negligent security to lack of authorization controls to computer systems that don't restrict access via passwords. Effectively preventing fraud means that companies must have policies and procedures in place to take away the opportunities to commit fraud. This includes security of both the physical type (locked doors, security cameras, employee badges) and the digital type (passwords, Internet firewalls, encrypted data). In addition to security, companies must

Computer fraud at Plutonium 5 have policies which define ethical behavior and outline consequences for violation of the policies. He should sign in an agreement with all team members that usage of the phony credit card number is for installation systems only and future punishments for violations. A company must also have management and executives who are committed to leading by example while enforcing the policies and procedures. Jonathan shouldnt keep the credit card number unsecured in his draw. Its the first violation of security procedures at any organization. Companies can help reduce the motivation for fraud by ensuring that they are paying employees market rates for the jobs they do. Chris hasnt had a raise in more that year despite that he is a very competent employee with big potentials and knowledgeable in his area. Management must also strive to treat employees equally and fairly, to the extent that is possible. They should also be on the lookout for warning signs that might indicate a personal drive, such as financial problems, legal problems, or addiction problems. Jonathan knows about Chriss financial problems and his responsibility to his family. Employees must be made aware that their activities are being monitored and corrective action will be taken. Using procedures like surprise audits and random checkups will help keep them on their toes. If employees perceive that management is not really keeping an eye on them or the money, a golden opportunity for fraud is before them. Companies must first focus on reducing opportunities through better security, procedures, and supervision. If Jonathan had randomly checked activity on the phony card he could have prevented unauthorized use of it and prevented piracy actions of his employees. The next step is working toward a fair and friendly workplace that doesn't give anyone a "reason" to harm the company. Finally, companies must also take action against those who commit

Computer fraud at Plutonium 6 fraud. Punishment sends a message that bad behavior is not accepted or tolerated. Chris found a way how to create an extra income in work place. He doesnt stop after his encounter with the FBI. That tells me, he doesnt want to stop, he likes what he is doing and he has to be fired. It is the responsibility of senior management to ensure the organization is protected against fraud. Having good internal controls can help to eliminate the opportunity of fraud within organization.

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References. Albrecht, S, Albrecht, C, Albrecht, Ch, & Zimbelman, M. (2009). Fraud examination. Mason: South_Western Cengage Learning. Buckhoff, Th. (2001, November). Employee fraud: perpetrators and their motivations. Retrieved from http://www.nysscpa.org