Fraud Awareness at ESDC: How to Prevent, Detect, and Address Fraud

Integrity Services Branch March 2018

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Overview

  • The intended outcome of this document is for ESDC employees to gain the capacity to prevent fraud from happening, detect fraud when it does happen, and address fraud appropriately.
  • This document will inform you about:
    • The Public Servants Disclosure Protection Act (PSDPA),
    • The definition of fraud,
    • How fraud happens,
    • How often fraud happens,
    • Red flags of fraud, and
    • Fraud prevention processes and controls.

What is the Public Servants Disclosure Protection Act (PSDPA)?

  • The PSDPA encourages public sector employees to come forward if they believe that wrongdoing and fraud has occurred or is about to occur in the workplace.
  • What you need to know:
    • Be familiar with the main provisions of the Act – its mechanisms for disclosure, its confidentiality provisions, and its reprisal protection measures.
    • Know what constitutes wrongdoing under the Act.
    • Understand your choices in making a protected disclosure.
    • Know what to do if you believe you are the target of a reprisal.
    • Know where to get related information and advice.

What is Fraud?

  • By law, fraud is a deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.
  • ESDC Senior Management agreed that the definition of fraud should not be limited to its legal definition. The concept of fraud therefore includes all activities involving wrongdoing by an individual or organization resulting in financial loss and/or reputational harm, misrepresentation, and/or abuse/threats to the security of information and personal security.
  • Relative to fraud, the PSDPA suggests that wrongdoing may or may not include fraudulent events.

What is Wrongdoing?

  • Wrongdoing refers to actions taken by ESDC employees or third parties under contractual obligations, which due to their nature could potentially incur severe consequences, such as suspension or termination of employment/contract, and/or criminal referral.
  • The PSDPA defines the following incidents as wrongdoing in the public sector:
    • Violating any act of Parliament or any act of the legislatures of Canada's provinces and territories, including any regulations made under these acts,
    • Misusing public funds or public assets,
    • Gross mismanagement,
    • Doing something or failing to do something the creates a substantial and specific danger to the health, safety, or life of persons, or to the environment,
    • Seriously breaching the Values and Ethics Code for the Public Sector, the organization's Code of Conduct, and/or
    • Knowingly directing or counselling a person to commit wrongdoing, as defined above.

How Common is Fraud?

  • Globally, fraud is widely recognized as a key concern and is common in both the public and private sector.
  • The Canadian Anti-Fraud Centre (2018) estimated that from January 2014 to December 2017, Canadians lost over $400 million to fraudsters from mass marketing and identification fraud alone.
  • At ESDC? It happens! However, the majority of people do not and will not commit fraud.

How Does Fraud Happen?

The Fraud Triangle

  • The fraud triangle is built on the premise that fraud is likely to result from a combination of three factors: pressure, opportunity and rationalization.
  • All three components must be present at the same time for someone to commit fraud.

Long description

1. Pressure

Financial
Major bills, debt, or simple greed
Personal
gambling, addiction
Work-related
Feeling overworked and underpaid, passed over for a promotion

2. Opportunity

Trust
Person has reached a certain level within the organization
Internal Controls
either weak or nonexistent

3. Rationalization

Justification
"I'm only borrowing the money. I'll give it back when my financil situation improves"
Lack of ethics
"Everyone is doing it, so why shouldn't I be?"

Who Commits Fraud?

  • Citizens
  • Employees from all organizational levels
  • All ages, ethnicities, religions, abilities, education level, and income statuses
  • All geographical locations

Behavioural Red Flags for Fraud

  • Red flags do not indicate guilt or innocence, but merely provide possible warning signs of fraud. Red flags may vary from normal activity, be unusual in nature, and signal that further investigation may be required.
  • Common indicators include:
    • Unwillingness to share duties
    • Refusal to take leave
    • Refusal to implement internal controls
    • Unusually close association with a vendor or customer
    • Excessive control issues
    • Failure to keep records or provide receipts
    • A lifestyle above apparent financial means
    • Addiction issues

What Does Fraud Look Like?

Fraud can take many forms:

  • Making false travel claims (e.g. claiming a meal provided as a part of the conference).
  • Scanning obituaries to use the identity of a deceased individual to obtain benefits.
  • Cashing a deceased person's benefit cheque(s).
  • Installing a virus on ESDC servers to generate false claims and pay out false benefits.
  • Requesting information beyond what is required and using it for wrongdoing.

Individual Consequences of Committing Fraud and Wrongdoing at ESDC

An ESDC Example:

  • Over several years, an ESDC employee repeatedly and deliberately accessed work databases for his personal and his friends gain.
  • Consequences: The employee's security status (reliability) was revoked. He was suspended and then terminated from his employment.

The Consequences of Fraud for an Organization

  • The organization's reputation could be damaged;
  • Employees' morale is affected, decreasing engagement and productivity;
  • The organization's ability to continue meeting business objectives, maintaining partnerships, and upholding public trust is compromised;
  • The organization suffers direct financial loss;
  • Additional costs are incurred for investigation/remediating fraud.

Your Role in Fraud Prevention

  • Raise awareness! Demystify fraud: Talk about fraud and wrongdoing, challenges, and successes.
  • Know your roles and responsibilities, including expected behaviour on a daily basis. Refer to the ESDC Code of Conduct, Values and Ethics Code for the Public Sector, team policies and procedures, your job description, and your yearly performance objectives.
  • Know how to prevent and detect fraud by knowing what internal fraud could look like and how fraud could be committed in your work environment (e.g. program/service/policy processes and controls). Refer back to Behavioural Red Flags for Fraud and Examples of Fraud at ESDC.
  • Know how to address fraud if you suspect it. The #1 Fraud Detection Method is a TIP. Refer to the Disclosure Processes to report suspected fraud.

Disclosing Possible Fraud and Wrongdoing: Step-by-Step at ESDC

Step 1: Research

Step 2: Form Completion

Step 3: Form Submission

For more information, please visit our iService page: Wrongdoing and Fraud