Modern-day Horseplay

By Chetan Dalal, CFE

Don't let Trojan horse fraud buck your company's financial future. 

It is said that a man with a pen and a briefcase can steal 100 times more than 100 men with machine guns. White-collar criminals have proliferated so rapidly that auditors and accountants are having to equip themselves with fraud examination tools that can counter the uncanny ingenuity, planning, and foresight of today's financial-crime opportunists. Trojan horse fraud is one such white-collar scheme that requires a crafty criminal mind to perpetrate, but an even sharper fraud examiner to detect and investigate.

What is Trojan Horse Fraud?
The term "Trojan horse" refers back to the mythical Trojan War. The legend says that during this war, Greek soldiers penetrated the well-fortified city of Troy by designing and hiding in a large, innocent-looking, hollow wooden horse and then placing the it at the entrance of Troy's city gates. The Trojans, mistaking the horse for a peace offering, brought the horse within the city's walls. At an opportune moment, the Greek soldiers came out of the wooden horse, ambushed the unsuspecting citizens of Troy, and won the battle.

In much the same manner, when fraudsters recognize illicit money-making opportunities, they often create Trojan horse-like vehicles that allow them future access to necessary files, vaults, accounts, or computers to perpetrate fraud at an opportune moment.

Horsing Around at ABC Mutual Fund
To demonstrate how Trojan horse fraud works, take into consideration the case at ABC Mutual Fund (a fictitious name), a large investment company that issued "units" (similar to shares, on which the dividend is earned by the unit holder) under both open (investment options which don't have a date for redemption of units) and close-ended (investment options with specified dates for redemption) accounts. Located in Mumbai, India, with branch offices across the country, ABC Mutual Fund employed 2,000 people. All its accounts were managed by registrar and transfer (R&T) agents, who handled issue application funds, reconciled money received with application forms, computed dividends payable, printed and posted unit certificates (similar to share certificates), and tended to other ancillary matters such as queries and complaints. ABC had 13 accounts managed by various R&T agents. For each R&T agent, ABC appointed an additional manager to monitor and coordinate activities.






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