The glossary provides structured definitions of key concepts in economic forensics, fraud prevention, and economic crime, forming the basis for a consistent and shared understanding of the field.
Definition: The glossary functions as a semantic reference system that structures and connects core concepts, terminology, and relationships within economic forensics.
A
Asset Misappropriation
DEFINITION
Asset Misappropriation refers to the theft or misuse of an organisation’s assets by employees or third parties.
CONTEXT
Asset misappropriation includes schemes such as cash theft, expense fraud, and misuse of company resources and is a core category of occupational fraud. It commonly occurs where internal controls are weak or where segregation of duties is insufficient.
MEANING
It results in direct financial losses and indicates weaknesses in control and oversight.
EXAMPLE
Unauthorized personal expenses charged to a company credit card.
B
Bid Rigging
DEFINITION
Bid rigging involves collusion between bidders to manipulate tender outcomes.
CONTEXT
Bid rigging typically occurs in procurement and tendering processes and is closely linked to collusion, corruption, and vendor fraud. It is particularly relevant in regulated markets and public procurement environments.
MEANING
Undermines fair competition, leads to inefficient procurement outcomes, and causes significant economic harm.
EXAMPLE
Companies rotate winning bids in public tenders.
SOURCES
Bribery
DEFINITION
Bribery refers to the offering, promising, giving, or receiving of an undue advantage to influence the actions or decisions of an individual in breach of their duties.
CONTEXT
Bribery is a core form of corruption and occurs in both public and private sector environments. It includes direct or indirect benefits, monetary or non-monetary, and is commonly associated with procurement, licensing, contracting, and regulatory decision-making. The term serves as an umbrella concept for specific forms such as bribery of public officials and bribery in the private sector.
MEANING
Bribery undermines integrity, distorts decision-making, and creates significant legal, financial, and reputational risks. It is a central focus of compliance and anti-corruption frameworks.
EXAMPLE
A company offers financial incentives to a decision-maker to secure a contract award.
Bribery of Private Officials
DEFINITION
Bribery of Private Officials refers to offering, giving, or receiving improper advantages between private sector parties in a business context.
CONTEXT
Bribery in the private sector typically occurs in procurement, sales, or contract negotiations. It is closely linked to Corruption, Conflict of Interest, and weak Internal Controls, and may result in market distortion and significant Compliance risks.
MEANING
Bribery of Private Officials is illegal or subject to sanctions in many jurisdictions and represents a significant risk to corporate governance and integrity.
EXAMPLE
Kickback payments in exchange for preferential supplier selection.
SOURCES
Bribery of Public Officials
DEFINITION
Bribery of Public Officials refers to offering, promising, or giving advantages to public officials in order to improperly influence their actions or decisions.
CONTEXT
Bribery of Public Officials is a core element of Corruption and is heavily regulated under international anti-corruption laws and compliance frameworks. It commonly occurs in connection with public procurement, licensing, and regulatory oversight.
MEANING
Bribery of Public Officials represents a high legal and reputational risk and is subject to strict enforcement, particularly in cross-border business activities.
EXAMPLE
A payment is made to a public official to accelerate the approval of a license.
SOURCES
C
Cash Larceny
DEFINITION
The theft of cash after it has been recorded in the accounting system.
CONTEXT
Cash larceny is a form of asset misappropriation that occurs after cash has been recorded, distinguishing it from skimming. It is closely linked to weaknesses in internal controls, particularly in cash counts, reconciliations, and segregation of duties.
MEANING
Indicates control deficiencies in cash handling processes and is generally detectable through discrepancies in recorded and actual cash balances.
EXAMPLE
Cash is stolen from the register after closing.
Channel Stuffing
DEFINITION
Channel Stuffing refers to the practice of deliberately oversupplying distributors to artificially inflate short-term revenue or performance metrics.
CONTEXT
Channel stuffing is commonly associated with financial statement fraud and revenue manipulation and is considered a typical red flag in financial reporting. It is often driven by sales pressure and weak internal controls.
MEANING
It distorts financial performance and shifts inventory and sales risks downstream to distributors.
EXAMPLE
Distributors are forced to accept excess inventory at the end of a reporting period to boost reported revenue.
Check Tampering
DEFINITION
The misuse or alteration of checks.
CONTEXT
Check tampering is a form of asset misappropriation and is most common in organisations with manual or paper-based payment processes. It is closely linked to weaknesses in internal controls, particularly in payment approvals, reconciliations, and segregation of duties.
MEANING
Indicates weak payment controls and is a common fraud scheme in low-automation environments.
EXAMPLE
A check is issued to an unauthorized payee.
Collusion
DEFINITION
Cooperation between parties to commit fraud.
CONTEXT
Collusion often occurs in procurement, finance, and decision-making processes and is closely linked to kickback schemes, conflicts of interest, and weaknesses in internal controls. It is particularly critical because multiple parties deliberately cooperate to bypass control mechanisms.
MEANING
Undermines key control principles such as segregation of duties and represents a major risk factor for difficult-to-detect fraud.
EXAMPLE
Buyer and vendor coordinate fake invoices.
Conflict of Interest
DEFINITION
A Conflict of Interest arises when personal interests may influence an individual’s objective judgment or decision-making.
CONTEXT
Conflicts of interest often arise in procurement, decision-making, or control processes and are closely linked to conflict-based corruption, internal controls, and fraud risk assessment. They are a core element of compliance programmes and governance frameworks.
MEANING
Undisclosed conflicts of interest significantly increase the risk of misconduct, corruption, and fraud and undermine organisational integrity.
EXAMPLE
Awarding contracts to a company owned by a family member.
Conflict-Based Corruption
DEFINITION
Conflict-Based Corruption refers to corrupt behavior driven by undisclosed or improperly managed conflicts of interest.
CONTEXT
Conflict-Based Corruption typically occurs in decision-making processes such as procurement, contracting, or hiring. It is closely linked to corruption, weak internal controls, and insufficient compliance frameworks, particularly where disclosure requirements are lacking.
MEANING
Conflict-Based Corruption is difficult to detect, as decisions may appear legitimate while being influenced by personal interests.
EXAMPLE
Awarding contracts to a company owned by the decision-maker without disclosure.
Control Override
DEFINITION
Control override refers to the deliberate circumvention or bypassing of established control mechanisms.
CONTEXT
Control override often occurs in connection with occupational fraud, particularly involving senior management, and is closely linked to weak segregation of duties and inadequate monitoring of exceptions. It is a key concept in internal controls, governance, and audit processes.
MEANING
It is a high-impact risk because authority and access can neutralize control frameworks.
EXAMPLE
A manager forces an exception payment approval.
Corruption
DEFINITION
Corruption is the abuse of entrusted power for private gain.
CONTEXT
Corruption is an overarching concept that includes various forms of undue influence, particularly bribery, illegal gratuities, and trading in influence. It occurs in both public and private sectors and is closely linked to conflicts of interest, kickback schemes, and internal controls within governance frameworks.
MEANING
Distorts decision-making, undermines fair competition, and creates significant legal, financial, and reputational risks.
EXAMPLE
Awarding contracts in exchange for personal benefits.
D
Data Manipulation
DEFINITION
Data manipulation refers to the deliberate alteration, suppression, or falsification of data to achieve a desired outcome or bypass controls.
CONTEXT
Data manipulation often occurs in the context of financial reporting, operational metrics, or system logs and is closely linked to internal controls, access rights abuse, and forensic evidence handling. It is particularly relevant in IT-driven processes and integrated system environments.
MEANING
Undermines the reliability of decision-making and can deliberately bypass control mechanisms.
EXAMPLE
Altering accounting entries in ERP systems.
E
Economic Extortion
DEFINITION
Economic extortion refers to the extraction of economic benefits through threats, pressure, or the exploitation of dependencies.
CONTEXT
Economic extortion often arises in business relationships, supply chains, or regulatory dependencies and is closely linked to corruption, including trading in influence and illegal gratuities. It is often enabled by power imbalances and weak internal controls.
MEANING
It can involve both internal and external actors and represents a significant risk to integrity, compliance, and fair market practices.
EXAMPLE
Threatening delays unless paid.
Expense Account Fraud
DEFINITION
The submission of false or inflated expense claims.
CONTEXT
Expense account fraud is a form of asset misappropriation and is common in decentralised organisations with large employee bases. It is closely linked to weaknesses in internal controls, insufficient management review, and lack of awareness within fraud prevention programmes.
MEANING
Although often small per incident, it can result in significant cumulative losses and indicates systemic control weaknesses.
EXAMPLE
Personal meals claimed as business expenses.
Expense Manipulation
DEFINITION
Expense Manipulation refers to the improper recognition, deferral, or capitalization of expenses to influence reported financial results.
CONTEXT
Expense manipulation is commonly associated with financial statement fraud, hidden liabilities, and earnings management practices. It is considered a typical red flag in financial reporting and is often enabled by weak internal controls.
MEANING
It is used to manipulate earnings and distorts the true financial performance of an organization.
EXAMPLE
Expenses are deferred to future periods to artificially increase current profits.
Expense Reimbursement Fraud
DEFINITION
Improper expense reimbursement claims.
CONTEXT
Expense reimbursement fraud is a form of asset misappropriation and is closely linked to expense account fraud, weaknesses in internal controls, and insufficient management review. It is common in organisations with decentralised approval processes and high volumes of expense claims.
MEANING
Although often small per incident, repeated occurrences can lead to significant cumulative losses and indicate systemic control deficiencies.
EXAMPLE
Duplicate or altered receipts.
F
False Invoice Scheme
DEFINITION
Invoices for goods or services not provided.
CONTEXT
False invoice schemes are a common fraud scheme in procurement and payment processes and are closely linked to vendor fraud, collusion, and weaknesses in internal controls. They are often enabled by insufficient verification of vendors, services, or invoices.
MEANING
Result in direct financial losses and indicate significant deficiencies in procurement controls and verification processes.
EXAMPLE
Invoice without proof of delivery.
Financial Statement Fraud
DEFINITION
Financial Statement Fraud is the intentional misrepresentation of financial information to mislead stakeholders.
CONTEXT
Financial Statement Fraud often involves manipulation of revenues, expenses, assets, or liabilities. It is typically committed by senior management and is closely linked to weak Internal Control systems and governance failures.
MEANING
Financial Statement Fraud distorts decision-making, undermines market confidence, and can result in significant financial and legal consequences.
EXAMPLE
Premature recognition of revenue to inflate reported earnings.
G
Ghost Employee
DEFINITION
Ghost Employee refers to fictitious or terminated employees who remain on payroll and continue to receive salary payments.
CONTEXT
Ghost Employee is a common fraud scheme in payroll and HR administration. It is closely linked to weak internal controls, lack of segregation of duties, and insufficient reconciliation between HR and finance systems.
MEANING
Ghost Employee schemes result in direct financial losses and indicate weaknesses in joiner, mover, and leaver processes as well as system integration and controls.
EXAMPLE
Salary payments continue to be made to an employee who has already left the organization.
H
Hidden Liabilities
DEFINITION
Hidden Liabilities refer to the omission, understatement, or concealment of existing obligations in financial reporting.
CONTEXT
Hidden liabilities are commonly associated with financial statement fraud, improper asset valuation, and weak internal controls. They often involve the manipulation or omission of provisions, contingent liabilities, or off-balance-sheet obligations.
MEANING
They distort the true financial position and create a misleading impression of financial strength.
EXAMPLE
Failure to recognize required provisions for expected liabilities.
I
Illegal Gratuities
DEFINITION
Illegal Gratuities refer to the provision or acceptance of benefits without a direct exchange, which may influence decisions retrospectively or create dependencies.
CONTEXT
Illegal gratuities are closely related to corruption, often acting as a precursor or complementary practice to bribery. They typically arise in procurement, contracting, or approval processes and are linked to conflicts of interest and weak internal controls.
MEANING
They undermine the integrity of decision-making, create dependencies, and increase the risk of subsequent corrupt behavior.
EXAMPLE
A gift provided to an employee after a contract has been awarded.
Improper Asset Valuation
DEFINITION
Improper Asset Valuation refers to the intentional overstatement or understatement of assets in financial reporting to misrepresent an entity’s financial position.
CONTEXT
Improper Asset Valuation is commonly associated with financial statement fraud and other forms of fraud. It is closely linked to weak internal controls, flawed valuation processes, and deliberate manipulation of financial statements.
MEANING
Improper Asset Valuation distorts financial ratios, affects creditworthiness, and may lead to misinformed decisions by investors, lenders, and other stakeholders.
EXAMPLE
Overstated inventory values to improve reported financial performance.
Improper Disclosures
DEFINITION
Improper Disclosures refer to incomplete, misleading, or intentionally distorted disclosures in financial statements or accompanying notes.
CONTEXT
Improper Disclosures are often associated with financial statement fraud and other forms of fraud. They typically involve omissions or misrepresentations of key risks, assumptions, or uncertainties and are linked to weak corporate governance and internal controls.
MEANING
Improper Disclosures reduce transparency and may lead to misinformed decisions by investors, regulators, and other stakeholders.
EXAMPLE
Omission of material risks or uncertainties in financial statement disclosures.
Inventory Theft / Asset Theft
DEFINITION
The unauthorized taking of an organization’s physical assets, including inventory, equipment, or materials.
CONTEXT
Inventory Theft / Asset Theft is a form of fraud that commonly occurs in warehousing, production, and logistics environments. It is closely linked to weak internal controls, lack of segregation of duties, and insufficient inventory management processes.
MEANING
Inventory Theft / Asset Theft results in direct financial losses and may indicate broader control weaknesses in inventory management and oversight.
EXAMPLE
An employee repeatedly removes goods from inventory for personal resale.
Invoice Splitting
DEFINITION
Artificially splitting invoices to bypass approval thresholds.
CONTEXT
Invoice splitting typically occurs in procurement and payment processes and is closely linked to override of approval limits, control override, and weaknesses in internal controls. It is a classic example of red flags in fraud detection.
MEANING
A common circumvention technique used to bypass formal approval processes and a clear indicator of control weaknesses or fraudulent intent.
EXAMPLE
Invoices are divided to avoid approval requirements.
K
Kickback Scheme
DEFINITION
A Kickback Scheme refers to a structured arrangement in which a person receives hidden payments or benefits in exchange for favouring a business partner.
CONTEXT
Kickback schemes commonly occur in procurement and contracting processes and are closely linked to corruption, conflicts of interest, and weak internal controls. They are often enabled by insufficient segregation of duties and lack of transparency in vendor relationships.
MEANING
Kickback schemes systematically distort procurement decisions, increase costs, and represent a significant fraud and compliance risk.
EXAMPLE
A purchasing manager receives undisclosed commissions from vendors in exchange for awarding contracts.
SOURCES
Kickback Vendor
DEFINITION
Kickback Vendor refers to a scheme in which a vendor provides secret payments or benefits to influence purchasing decisions.
CONTEXT
Vendor kickbacks typically occur in procurement processes and are closely linked to corruption, conflicts of interest, and weak internal controls. They often arise in environments lacking proper segregation of duties and oversight of vendor relationships.
MEANING
Vendor kickbacks distort procurement decisions, lead to inflated costs and reduced quality, and represent a significant fraud and compliance risk.
EXAMPLE
A supplier pays undisclosed commissions to an employee to secure contracts.
SOURCES
M
Management Fraud
DEFINITION
Management fraud refers to fraudulent acts committed by individuals in senior or decision-making positions who use their authority to override controls or influence outcomes.
CONTEXT
Management fraud is closely linked to control override, corruption, and weaknesses in internal controls and governance structures. It often occurs in connection with financial statement manipulation, incentive misalignment, and insufficient oversight.
MEANING
Particularly high-impact and difficult to detect due to authority, access, and influence.
EXAMPLE
Executive-led financial manipulation.
O
Occupational Fraud Scheme
DEFINITION
A recurring method used to commit and conceal fraud.
CONTEXT
Fraud schemes are a core analytical concept in occupational fraud and are systematically used in fraud risk assessments and fraud detection methods. They help classify common patterns, such as asset misappropriation, corruption, or financial statement fraud.
MEANING
Understanding common fraud schemes enables targeted control design, prevention, and detection, as many fraud cases follow recurring patterns.
EXAMPLE
Creating shell vendors and paying fake invoices.
R
Register Disbursement Scheme
DEFINITION
A Register Disbursement Scheme refers to fraudulent or improper payments made through legitimate disbursement processes.
CONTEXT
Register disbursement schemes are commonly associated with occupational fraud, vendor red flags, and weak internal controls. They often involve falsified documentation, manipulated vendor master data, or insufficient segregation of duties.
MEANING
They are among the most common fraud schemes in financial operations and can remain undetected in the absence of effective controls.
EXAMPLE
Payment made to a fictitious vendor using manipulated payment records.
Revenue Recognition Fraud
DEFINITION
Revenue recognition fraud involves intentionally recording revenue in a manner that does not reflect the underlying economic reality.
CONTEXT
Revenue recognition fraud is a key form of financial statement fraud and is closely linked to management fraud, earnings management, and accounting standards (e.g. IFRS or US GAAP). It commonly occurs in sales-driven or publicly listed companies facing pressure to meet financial targets.
MEANING
A high-impact fraud scheme directly affecting financial reporting, company valuation, and stakeholder trust.
EXAMPLE
Premature revenue recognition.
Round-Tripping
DEFINITION
Transactions with no economic substance.
CONTEXT
Round-tripping typically occurs in the context of financial statement manipulation and revenue recognition and is closely linked to improper asset valuation, improper disclosures, and management fraud. It is often observed in complex group structures or related-party transactions.
MEANING
Used to artificially inflate revenue, liquidity, or business activity and distort the economic reality.
EXAMPLE
Reciprocal billing schemes.
S
Shell Company
DEFINITION
A legally registered entity with little or no operational activity.
CONTEXT
Shell companies are frequently associated with anti-money laundering (AML), corruption, and fraud schemes, particularly for concealing beneficial ownership or facilitating fictitious transactions. They are also relevant in the context of customer due diligence (CDD) and beneficial ownership identification.
MEANING
May be used to obscure ownership structures, financial flows, or fraudulent activities and therefore represents a key risk indicator.
EXAMPLE
Payments made to an entity with no real business operations.
Skimming
DEFINITION
The theft of cash before it is recorded.
CONTEXT
Skimming is a common form of asset misappropriation and typically occurs in cash-intensive environments such as retail, hospitality, or service industries. It is closely linked to weak internal controls and lack of segregation between cash handling and recording.
MEANING
Particularly difficult to detect due to the absence of accounting records and a significant risk factor in cash-based operations.
EXAMPLE
Cash sales are not recorded.
T
Trading in Influence
DEFINITION
Trading in Influence refers to the offering or receiving of benefits in exchange for the use of real or perceived influence over decision-makers.
CONTEXT
Trading in Influence is a specific form of corruption that exploits access to decision-makers rather than formal authority. It typically occurs in political, regulatory, or administrative environments and is associated with elevated compliance risks.
MEANING
Trading in Influence is difficult to detect, as perceived influence may be sufficient. It undermines the integrity of decision-making processes and represents a significant legal and reputational risk.
EXAMPLE
Payments are made to individuals claiming they can influence regulatory or political decisions.
SOURCES
V
Vendor Fraud
DEFINITION
Fraud committed by suppliers against an organization.
CONTEXT
Vendor fraud typically occurs in procurement and contracting processes and is closely linked to fraud schemes, collusion, and weaknesses in internal controls and vendor due diligence. Internal employees are often involved, for example through kickback schemes or conflicts of interest.
MEANING
Leads to financial losses, quality risks, and distorted procurement decisions and represents a key risk area in purchasing functions.
EXAMPLE
Billing for services not performed.