special webinar: charity fraud - what does your charity need to know? part 1 of 2
TRANSCRIPT
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Charity Fraud –What your charity needs to know
March 1, 2011
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reminders You can hear us, but we can’t hear you
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Turn up your computer’s volume
Have questions? Type questions in the Questions Log
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Webinar Agenda
Fraud Prevention Month & Charity fraud
Survey results on charity fraud
An inside look at charity fraud
Tips for protecting your charity
Charity Fraud Awareness Quiz
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Fraud Prevention Month
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Charity Fraud – What is it?
• Impersonators pretend to represent a legitimate charity
• A false charity is created
• The money never reaches the charity
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Goals:
• empower Canadians to recognize the signs of charity fraud
• enable Canadians to identify legitimate charities
• ensure that charities maintain Canadians’ trust
Partnership to raise awareness about charity fraud in Canada
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Why focus on charity fraud?
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Understanding Canadians’ Donation Habits, Views and Awareness about Charity Fraud and Efforts Taken to Protect Against Fraud
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Survey Methodology
• February 2nd – 3rd, 2011
• Angus Reid Public Opinion conducted online survey among 1,008 randomly selected Canadians.
• 2011 survey follows up on November 2009 survey
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• Canadians are generous –Average 4.8 donations/yr
• Women are more likely to give
• Older Canadians (55+) are more likely to give
• Canadians in Prairies are more likely to have donated
Charitable Giving: Activities and Trends
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Preferred Donation Methods
1. Cheque
2. Online
3. Door-to-door
4. Phone
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Concerns About Charity Fraud
• Significant increase in the number of Canadians concerned about becoming victims of charity fraud
• 65% vs. 51% in 2009
• Majority believe the risk is greater now than 10 years ago
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Concerns About Charity Fraud
• As a result of this increasing concern, more than one-half of Canadians say they are less likely to donate to charities
• Incidences of charity fraud remains low & stable
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Protection from Charity Fraud
• Despite the significant increase in fear of charity fraud, many take no steps to protect themselves
• What made people trust a charity:
– Reputation
– Media coverage & advertising
– Being asked by a friend or colleague to give
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How Fraud Can Affect Charities
Craig HannafordFraud Squad TV
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Frauds Targeting Charities
• Canada has a robust charity, not-for-profit and volunteer community.
• Charities account for approximately 6.8 of GDP.
• Charities employ 12% of Canada’s economically active population
• Charities are a rich target for fraudsters
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Frauds Targeting Charities
• Internal fraud
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Frauds Targeting Charities
• In a recent study, dollar losses to fraud for charities ranged from $474 to $2,300,000.
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Frauds Targeting Charities
• Most fraud cases in charities are detected by accident!
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Frauds Targeting Charities
• What types of charities are affected?
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Frauds Targeting Charities
• What types of charities are affected?
• Smaller charities appear more vulnerable.
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Frauds Targeting Charities
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Internal fraud prevention tips:
• Segregation of duties and responsibilities• Regular internal audits• Cheque signing authorities• Proper and documented policy and
procedures• Watch for changes in spending habits of
employees• Tip line or some way employees can make
anonymous complaints. (FOLLOW-UP)
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Frauds Targeting Charities• External fraud
• No real statistics – hard to quantify
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Frauds Targeting Charities
External fraud types:• False invoices• False directions to donors to change gift deposit
instructions• Advance fee• Materially false applications for funding• Fundraising contractor fraud• Charity identity theft (reputational risk)• Bogus tax receipts• Investment scams
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Frauds Targeting Charities
External fraud prevention:• Data protection and restrict access• Proper vetting of new staff• Ensure all staff and external partners
are aware of your ‘normal’ operating procedures.
• Proper documented procedures on crucial processes. (i.e. issuance of tax receipts)
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Frauds Targeting Charities
• Processing of invoices follows documented procedures. (Purchase order matched to invoice matched to payment)
• Internet searches on regular basis for your own charity.
• Proper investment policy and procedures. Legal counsel review.
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Fraud Awareness in the Charitable Sector
Presented by: Michael Fox
Director, Fraud Strategy, Capital One
March 1, 2011
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The Donor Information Life Cycle
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• At any stage in the above life cycle,
weaknesses in the way information is handled
can lead to the identities of your donors being
used for fraudulent purposes.
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Very Little Information is Required to Commit Fraud
Name Address
Date of
Birth
Credit
Card
Number
Credit
Card
Receipts
User ID /
Phone
NumberPassword
• Fraud can be committed with as little as 2-3
pieces of the above information
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Collection and Transmission
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• In recent years, fraud rings have commonly moved
their attacks to the information transmission stage.
• Limit information collection to what is necessary – if
you don’t need it, collecting additional information is
simply taking on additional risk.
• When processing credit card donations over the
internet, use a secure, encrypted channel.
• Send a follow up email to the donor to confirm the
donation.
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Storage
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• Create procedures to prevent improper access to
information by both external and internal parties.
• Where possible, divide up sensitive information – don’t
store everything about a donor in one place.
• Conduct privacy training to educate employees about the
importance of protecting personal information.
• Establish clear lines of accountability for information
storage and protection. Appoint an internal “champion”.
• Do not store information, such as credit card data, that
you will not be using again.
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Storage
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• The risk of an attack from internal sources is often
greater than from external parties.
• Specific access controls must be in place to limit
employees to only the personal information that is
needed to do their jobs.
• Restrict any transportation of donor information
offsite, in both paper and data form.
• If possible, track when donor information is accessed
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Ongoing Usage
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• If credit card information must be kept – such as in the case
of monthly donations – additional security is appropriate. A
reputable, experienced third-party payment processor is
often the best solution.
• Obtain specific consent from donors for any ongoing use.
• Screen any third parties that you will be transmitting
information to (such as for Direct Mail or Telemarketing),
ensuring they uphold high standards. Use data encryption.
• Continue to follow clear internal access control procedures.
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Disposal
Ongoin
g
Usage
Storage DisposalCollection and
Transmission
• Personal information should not be retained any longer
than is absolutely necessary. The best way to avoid
losing data is to not have it to begin with.
• Establish clear rules outlining the minimum length of time
information shall be held to fulfill tax or regulatory
requirements, and the maximum time information shall be
held before being destroyed.
• Regularly review existing information to ensure that it is
still required.
• Information must be disposed of in a way that minimizes
any potential of illegitimate access.
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What if Our Information is Compromised?
• If suspects have been identified, it is appropriate to contact law
enforcement
• Payment associations such as Visa/MasterCard, along with
credit reporting agencies, should be contacted when there is a
risk of identity theft. They will be able to take action to minimize
the impact on individual donors.
• The Office of the Privacy Commissioner of Canada should be
notified when there is a breach involving personal information.
• Donors should be notified as soon as possible that their
personal information has been compromised, including;
– The specific personal information involved,
– Any corrective actions that have been taken to rectify the problem,
along with corrective actions that will be taken,
– Instructions to donors on steps they can take to protect themselves
against identify theft and fraud.
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Additional Resources
• Canadian Standards Association Model Code for the Protection
of Personal Information - 10 Basic Principles:
1. Accountability
2. Identifying Purposes
3. Consent
4. Limiting Collection
5. Limiting Use, Disclosure, and Retention
6. Accuracy
7. Safeguards
8. Openness
9. Individual Access
10. Challenging Compliance
• Personal Information Protection and Electronic Documents Act
(PIPEDA): http://www.priv.gc.ca/leg_c/leg_c_p_e.cfm
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Methods to Instill Confidence in the General Public
• Avoid “suspicious” soliciting techniques that are overly aggressive or
high pressure.
• Ensure those soliciting on your behalf are up front about the name of
the organization, with proper identification
– Make it easy to find and contact your organization to verify
information if people are suspicious
• Be clear about the charity and about how donations are used
• Provide an annual report and financial statement
• Outline the portion of donations that goes to charitable activities, and
the portion that goes to administrative costs.
• Ensure compliance with any do-not-call lists
• Have a clear and simple process for donors to end recurring donations
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The Charity Fraud Awareness Quiz
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The Charity Fraud Awareness Quiz
• March 1st - March 31st
• Each participant eligible to enter their favouritecharity for a chance to win weekly and monthly prize
• Prize donations from Capital One:
• Weekly $1,000 donation• Grand $20,000 donation
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The Charity Fraud Awareness Quiz –2010 Winners!
Congratulations to last year’s winners:
• Gabriola Health Care Foundation, Gabriola (BC)
• IWK Health Centre Foundation, Halifax (NS)
• Nuu Rain Inc, Nipawin (SK)
• Canadian Breast Cancer Foundation
How can you win?
Encourage your supporters to take the
Charity Fraud Awareness Quiz and increase your charity’s chances to win!
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ABOUT MYCHARITYCONNECTS
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• Join us for thought-provoking keynotes, practical how-to workshops and plenty of chances to learn from other non-profits about what works online… and what doesn’t.
• Proud partner in Net Change week
MyCharityConnects Conference 2011
JUNE 6 – 7 | MaRS Centre, Toronto
www.mycharityconnects.org/2011Conference
Registration now open!
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Upcoming Webinarswww.mycharityconnects.org/webinars
• March 9 – Facebook Basics for Your Organization
• March 15 – Charity Fraud, Part 2
• March 23 – The Art of Storytelling: 2.0 Edition
• April 13 – Blogging Basics
• April 27 – Social Media Done Right: 5 Case Studies
• May 11 – Spruce up your E-newsletter
• May 25 – 10 Tips to Improve Your Website
• June 15 – Getting the Most From your MyCharity
Account & Reports
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QUESTIONS
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Type questions in the Questions Log