If history is any guide, corporations can expect a serious increase in internal fraud, legal disputes and regulatory action ahead as a result of the current U.S. economic crisis. Now more than ever, CFOs and compliance officers must take careful measures to strictly follow financial risk management standards and ensure new employees have spanking clean records. So says Peter Turecek, senior managing director of New York City-based fraud and litigation consultant Kroll Inc, which has released a new report citing sharp increases in arbitration claims by investors seeking to recoup losses after Black Monday, Oct. 19, 1987, and following the market downturns of 1991 and 1992.

Demand for litigation support and asset tracing work for companies with failed investments has increased, and so has white-collar crime enforcement, says Turecek. The Securities and Exchange Commission (SEC) pursued 115 enforcement actions related to securities offering frauds compared with 68 in 2007 and 61 in 2006. An FBI official recently told Congress the agency expects fraud investigations at major corporations to jump from 38 cases to hundreds as the crisis deepens.

Internal fraud is more prevalent than many expect, Turecek says. "Often we'll get a call from the CFO or compliance person saying our bookkeeper was terminated and something looks off," he says. More of these cases– perpetrated by those who are usually first in and last out, and don't go on vacations–are discovered during massive layoffs.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.