What does ‘global’ mean for educators? For those of us teaching tomorrow’s fraud fighters, it means that fraudsters ignore country boundaries, and therefore so should we when covering anti-fraud topics in our classrooms.

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Fraud EDge
Defining ‘Global’ for Educators
Preparing Students for a Global Future
BY HALUK F. GURSEL, PH.D., CFE, CGFM, CPA, AND RICHARD “DICK” A. RILEY JR., PH.D., CFE, CPA
November/December 2010
What does “global” mean for educators? For those of us teaching tomorrow’s fraud fighters, it means that
fraudsters ignore country boundaries, and therefore so should we when covering anti-fraud topics in our
classrooms.
“Fraud is becoming an international crime,” said Dr. Joseph T. Wells, CFE, CPA, founder and Chairman of
the ACFE. “Most Fortune 1000 companies have international subsidiaries. Individual fraud schemes
frequently involve the fraud occurring in one country and the proceeds of the crime being hidden in
another.” (Dr. Wells was quoted in “An Interview with Eva Romatzeck,” Fraud Magazine, March/April
2005.)
The ACFE, in its 2010 “Report to The Nations on Occupational Fraud and Abuse,” (RTN) recognizes the
absence of country barriers by extending its coverage of the incidence and commonalities between
countries, cultures, and behaviors. The fraud cases in the 2010 RTN came from 106 nations, with more
than 40 percent of cases occurring in countries outside the United States, which provides evidence of the
global fraud phenomenon.
The scope of the research allowed the ACFE to more fully explore the global nature of occupational fraud
and abuse, providing an enhanced view into the severity and impact of these crimes. Additionally, the
ACFE was able to compare worldwide entities’ anti-fraud measures to give fraud fighters everywhere the
most applicable and useful information to help them in their fraud prevention and detection efforts.
The consistent patterns of fraud around the globe, as discussed in the report, were striking. Some regional
differences exist, but occupational fraud and abuse seems to operate similarly whether it occurs in Europe,
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2. Asia, South America, or the United States.
To further illustrate the global nature of fraud, consider the Parmalat, Oil-for-Food, Siemens AG, and
Satyam Computer Services Limited cases:
Parmalat, Europe’s biggest corporate failure – its Enron – collapsed in 2003 with debts of €14
billion (US$17 billion). Parmalat allegedly committed financial statement fraud in every conceivable
form: asset/revenue overstatements, timing differences, fictitious revenues, concealed liabilities and
expenses, improper disclosures, and improper asset valuations. The evidence suggests that the
Tanzi family created – out of thin air – billions of dollars of financial transactions because it
controlled the internal workings of the company.
•
Oil-for-Food was a $64 billion program established by the United Nations in the wake of the 1991
U.S.-Iraq War to allow Iraq to sell oil on the world market in exchange for food, medicine, and other
humanitarian needs for its people, and to repay war reparations. The program was designed for the
benefit of ordinary Iraqi citizens who were unintended victims of the international economic
sanctions aimed at Saddam Hussein’s military. It’s alleged that Saddam Hussein siphoned off at
least $2 billion in illegal kickbacks. Subsequent investigations resulted in 14 persons being
indicted.1
•
Siemens AG officials traveled the globe with suitcases full of cash to pay more than $1 billion in
bribes to win lucrative public works contracts in countries such as Argentina, Bangladesh, and
Venezuela.2
•
Satyam Computer Services LTD, with 53,000 employees, was one of India’s largest outsource-
service providers, claiming one-third of Fortune 500 companies as customers. In early January
2009, founder and CEO Ramalinga Raju wrote a letter to the Satyam board of directors outlining a
massive fraud. According to blogger Lawrence Cunningham, cash was reported to exceed $1 billion
but less than $100 million existed in the Satyam bank accounts.3
•
THE WORLD IS BECOMING SMALLER AND INTERRELATED
Imagine a professional practice located in Germany and led by a South African – staffed with auditors from
the United States, Europe, and other countries – assigned to examine intellectual property rights issues in
Asia. Consider another anti-fraud practice located in Western Europe, headed by a person of British
nationality, that examines a broad range of frauds and corruption around the globe including asset
misappropriation, tax evasion, and embezzlement. Both these groups are real examples of international
anti-fraud organizations.
Driving forces behind globalization are mobility, technology, and demographics. Integration of economies
has benefited from efforts to lower barriers to the mobility of goods, services, financing, and labor. Mobility
renders the world more connected, so distance seems to be minimized or even nonexistent. For example,
in recent years, China and India have become more open to international business, trade, and cooperation.
The New York Times foreign affairs columnist Thomas Friedman in his book, “The World is Flat,” highlights
the role of technology in global integration. Technology permits access to high-growth markets while
maintaining low costs by locating manufacturing and support services in low-labor-cost countries because
technology facilitates real-time interactions, Friedman wrote. The impact on fraud examination is that bad
actors, organized into small, temporary, dispersed groups, agree to work together for a common cause or
purpose. The participants might or might not know each other, and most might have only “met” through
cyberspace.
Developing countries’ population growth is likely to outstrip that of already developed nations. According to
the 2007 U.S. Economic Census, Asian and African countries accounted for 73 percent of the world’s
population, while the United States and Western Europe accounted for about 11 percent. The rate of
population growth in Asian and African countries is expected to outpace the rest of the world. Due to
worldwide population and consequential economic growth, incidents of international fraud are expected to
be more visible and pervasive.
GLOBALIZATION AND FRAUD EXAMINATION IN HIGHER EDUCATION
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3. The world is more integrated culturally and economically, yet significant differences remain. These
differences have implications for undergraduate, graduate, executive, and professional anti-fraud education
and related research and outreach efforts.
As the world shrinks, the demand for anti-fraud higher education is expected to grow throughout the world
but especially in emerging markets and high-growth economies such as India and China. The fraud
problem will likely be exacerbated as change accelerates. Accounting, and information and operations
systems – among others – become more complex. Crises – such as natural disasters, political unrest, and
economic instability – tend to put more stress on complex systems, rather than simpler ones, because
complex systems have more “moving parts,” which are subject to failure (and subsequent fraud
possibilities) during challenging situations.
Successful and converging anti-fraud educational efforts around the globe require five key ingredients:
Collaboration among anti-fraud stakeholders1.
Cultural appreciation2.
Incorporation of technology3.
The right students and faculty4.
Proper topical coverage5.
Collaboration: Like all other business professionals, anti-fraud educators gain competence and acumen
through real-world experiences and exposure to diverse fraud issues. To be successful, these educators
around the world need to partner and interact with fraud examiners in local communities, jurisdictions, and
cultures. (See the July/August Fraud EDge.) Educators must participate in – not just observe – local anti-
fraud efforts to understand an area’s fraud and corruption hazards. Educators in institutions of higher
learning must collaborate with such key players as business, government, and nongovernmental/nonprofit
support organizations.
The challenge is daunting because each locale requires a different kind of collaboration. Effective anti-
fraud education efforts thus necessitate strong and deep relationships among the partners. Anti-fraud
educators who immerse themselves in local issues can identify challenges and opportunities, form
hypotheses and develop possible solutions, devise implementation strategies, and prepare students to be
the next generation of anti-fraud leaders.
Cultural appreciation: Not everyone around the globe shares the same views and reacts similarly to the
same set of facts and circumstances. A few examples:
Historically, Dutch Generally Accepted Accounting Principles (GAAP) have required that some
transactions be posted directly to retained earnings. However, under U.S. GAAP, the same
transactions need to be reflected in the income statement. The facts and circumstances –
transactions, in this case – might be the same, but the two national systems operate under different
rules, choices, and outcomes.
•
Often, an investigation requires a language interpreter not just for verbal communication but for
examination and analysis of written communications such as e-mails, contracts, and invoices.
•
Laws aren’t always associated with just legal systems, but they are intertwined with religious beliefs,
customs, and norms. For example, in the United States, police often allow drivers to exceed posted
speed limits by 5 miles per hour, and even those persons pulled over might not receive a ticket.
Police officers’ discretion can be affected by any number of sociological or cultural reasons. In
Switzerland, the level of tolerance is zero, and you can be sure you’ll get a ticket if you’re caught
speeding.
•
Cultural appreciation also means that educators need to understand business, management, employees,
and challenges – including fraud and corruption – in the contexts of local his-
tories, politics, languages, customs, and norms. Local case examples and data for exploration and
research will help ensure that your curriculum is relevant.
Global anti-fraud education works best with a give-and-take interaction between faculty and students.
Visiting students and professors should have equal participation in the classroom to encourage mutual
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4. sharing and respect.
What if an anti-fraud educational program has a diverse student base or students don’t know where they
might work after graduation? Professors should then consider a broad cross-cultural approach and
immerse students in various selected cultures.
Technology: Global education tends to make extensive use of information technology and
communications for online and distance-learning delivery and testing systems, research collaboration and
databases, mobile connectivity, digital access, and personal interaction.
The benefits of online education delivery include cross-border access and global educational partnerships.
Yet, digital differences can exacerbate problems because access to digital technology and infrastructure
isn’t homogenous within jurisdictions, let alone across jurisdictions.
Fraud is also facilitated by technology. Of course, the Internet has allowed perpetrators to convert
traditional scams into online versions of much greater reach. Cyber fraudsters have created new schemes
such as fraudulent online auctions. Additionally, criminals from various countries can cooperate online for
short periods to victimize banks and persons around the globe.
Students and Faculty: Students will only have professional global success if they develop solid
foundations of knowledge, skills, and abilities (KSAs) and the confidence to apply them. Those KSAs must
include complex problem-solving and “judgment-based” decision making. (Judgment-based means there
isn’t necessarily a “bright-line” right or wrong answer.)
Likewise, faculty must take the time to understand and appreciate local fraud examination challenges such
as resistance to external standards especially when practice is rooted in custom. For example, in some
cultures, bribes and “facilitation payments” are the norm, even if they’re illegal. Educators must recognize
and address the reality of practices, which might differ from proscribed policies, procedures, and
regulations as well as norms in the professional’s country of origin. Finally, global anti-fraud students and
faculty must embrace the ambiguity of operating in foreign spaces and be flexible and adventurous.
Topical Coverage: Effective global anti-fraud education requires the proper coverage of international
topics. Some issues might include: cross-jurisdictional challenges; differences in country-specific laws;
international money movement and money laundering; the U.S. Foreign Corrupt Practices Act (for U.S.
companies operating around the globe); and differences in crime and punishment, privacy, and individual-
rights regimes around the globe.
TRAINING GLOBAL ANTI-FRAUD STUDENTS
The challenges for global fraud examination in higher education bring opportunities for effective anti-fraud
and ethics programs. Some of the benefits of global higher education include more efficient – and less
costly – uniform training patterns. The challenges require the dedication of faculty, students, and
professionals. But when implemented, they can yield significant benefits to anti-fraud communities around
the world.
Haluk F. Gursel, Ph.D., CFE, CGFM, CPA, is chief compliance officer of the United Nations AIDS
Programme. He is president emeritus of the ACFE Switzerland Chapter and a member of the ACFE’s
Higher Education Advisory Committee. He is a past recipient of the ACFE’s Hubbard Award and
Outstanding Achievement in Anti-Fraud Education Award.
Richard “Dick” A. Riley Jr., Ph.D., CFE, CPA, is a Louis F. Tanner Distinguished Professor of Public
Accounting in the College of Business and Economics at West Virginia University in Morgantown. He is
chair of the ACFE Higher Education Advisory Committee and the vice president of operations and research
for the Institute for Fraud Prevention and a past recipient of the ACFE’s Outstanding Achievement in Anti-
Fraud Education Award.
1 “Former U.N. Oil-for-Food Chief Indicted.” Colum Lynch. The Washington Post. Jan. 17, 2007. “Park Sentenced to 5 Years in
U.N. Oil-for-Food Bribery Scandal.” The Washington Post. Feb. 23, 2007.
2 “Siemens guilty of global fraud.” Ben Conery. The Washington Times. Dec. 16, 2008.
3 www.concurringopinions.com/archives/2009/01/satyam_frauds_s.html
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