Finding Small Business Fraud with James Ratley

There are a shocking amount of businesses that ultimately fail
because of fraud. Many managers and business owners are unaware
of their losses because they do not have the systems in place to
look for fraud and it may not be their primary concern.


Today’s guest is James Ratley. Jim graduated from the University
of Texas at Dallas with a bachelor’s degree in Business
Administration. In 1971, he joined the Dallas Police Department
as a police officer. He was on numerous task forces with a
concentration on major fraud cases. He joined a major forensic
accounting practice and was in charge of fraud investigations.


In 1988, he was named the Program Director of The Association of
Certified Fraud Examiners and in 2006, became the President. In
2011, he became the CEO and he retired in 2018 after 30 years
there. James has been an adjunct professor, published author, and
named by Accounting Today as one of the top influencers multiple
times.
Show Notes:

[1:14] - James shares his background and the way his career
panned out over 30 years.

[3:35] - When the ACFE was established, there was no
information or education around it at all.

[5:09] - The average organization loses 5% of their revenue
to fraud. Out of every ten people hired, statistically, six of
them will steal from you.

[6:46] - Fraud can be prevented and strategies to reduce
fraud are typically inexpensive.

[8:40] - It’s important for business owners not to be afraid
to call it fraud.

[10:25] - Fraud perpetrators believe they deserve what
they’ve taken.

[13:26] - It’s important for businesses to have strong
management and leadership. Training is crucial.

[14:18] - James discusses the most common types of fraud and
how even the seemingly minor things could be detrimental.

[18:24] - Fraud perpetrators are really good at hiding what
they are doing and making the business owners believe it could
never be them.

[20:15] - Another strategy is to separate tasks out and be
strict about them.

[21:37] - Surprise cash counts is another good strategy.

[23:13] - There are no small frauds, only frauds that have
not had time to reach maturity.

[25:44] - You impact rationalization through education.

[29:16] - James lists some of the red flags that could
indicate something more going on.

[31:31] - There should be policies and regulations that
purchasing officers are held to.

[36:30] - Auditors must be completely independent.

[40:10] - Some business owners will deny the problem is
happening because it is hard to deal with and accept that someone
they trust could be stealing.

[44:35] - Many small organizations go out of business due to
operating at a loss. Most of the time this is because of fraud.

[47:25] - Never judge someone by the standards you have for
yourself.

[51:12] - Something to remember is that most fraudsters will
steal in even numbers.

[53:11] - In most cases that James has worked, the manager
had seen all the signs, but never thought anything about it.



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