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Recycling & Opportunistic Fraud

I was getting caught up on the news when I came across the following two articles. What do they have in common? Recycling and fraud.

KC, Blue Springs Men Indicted in $388,000 Scrap Metal Scheme

Semi filled with empty cans
The first article dealt with a California recycling firm that was accepting

 empty aluminum cans shipped in from Nevada and Arizona, which don't have deposit laws, to claim recycling deposit funds.  California collects and pays out hundreds of millions of dollars a year on cans, glass and plastic bottles with its CRV (California Redemption Value) deposits, and a semi load of empty cans can add up to a lot of money.

The second article hits a little closer to home for many of us. The indicted men were redeeming scrap metal for their employer and keeping most of the proceeds for themselves. The two men were facilities engineers at the DST Winchester Data Center. When the data center underwent renovations, copper wire and other metals were removed and redeemed at a local scrap dealer. The two men performed 137 scrap redemptions but only turned over proceeds from 39 of the redemptions, costing DST $355,146.

2016 report by KPMG titled Opportunistic fraud: a growing concern, identified weak internal controls as a significant factor in 61% of the investigated fraud cases, and the problem appears to be growing. The number of fraudsters who were able to commit their crimes by taking advantage of weak controls in their organization rose to 27%, up from 18% in 2013.

The main motive for those committing fraud was personal profit (60%), greed (36%), or simply "because it was possible" (27%). Sixty-five percent of the fraudsters worked for the company, and 38% had worked for the company for at least 6-years

These are current employees, many of whom have "established a strong position of power and are highly regarded within the organization."  They are the ones who are going to recognize lack of controls or how to get around weak controls to commit fraud.

Recycling is a big business, with billions of dollars at stake. If you are redeeming materials for recycling, put controls in place, monitor what leaves your facility and follow the money.

Don't be a victim of opportunistic fraud.