Macewan Fraud

Brief History

On August 23, 2017 MacEwan University reported to the RCMP – Alberta Division that a fraud had occurred, later to be discovered as a phishing scam. It came to the university’s awareness after Clark Builders, a company with ongoing working relations with MacEwan inquired about why they had not yet received payment for billed invoices. The Clark Builders group stated “MacEwan is one of our best clients who pays us on time, all of the time.” (Graney J. &., 2017) This raised red flags for Clark initially, which then raised immediate red flags for MacEwan. Upon discovery of which 3 employees were involved, they were fired immediately with pay. The employees separately made 3 payments of $1.9 million, $22,000, and $9.9 million to fraudulent bank accounts over a period of 9 days, ending August 19, and then 4 days later is when the fraud was discovered. This had occurred because no controls were in place around changing the banking information of a vendor and the deception created by the fraudsters in which they “ had created a website that resembled the domain site of one of the university's major suppliers. Using that site, the fraudsters impersonated the supplier, asking the university to transfer accounts payable to a new bank account the fraudsters controlled.” (Graney J. &., 2017) In this incident a few low-level employees were able to transfer $11.8 million dollars to scammers without raising any internal red flags in the company, nor having to come across authoritative & financial controls, and initially passing through e-mail fraud detection software. An expert stated that the loss “is among the largest publicly disclosed phishing scams.”  In 2016 the total losses to fraud reported in Canada due to online phishing scams was $12.8 million dollars, showing how much fraud has grown in this field. MacEwan has since changed their controls to those that “require employees to verify all changes to vendor master files by phone and follow up email confirmation. All changes are reviewed by employee's supervisor, manager or director before the changes take effect.” (Graney J. , 2018) Post legal proceedings the university will have to write off $880,000 of losses from the contingency fund which was included in the budget, so the fraud had not impacted academic or business operations. (Graney J. , 2018)

Chapter 6 – Corruption

Corrupt practices are seen throughout this fraud as there was the use of shell companies from Montreal to Hong Kong and then back to Vancouver used to syphon the stolen cash. We can see Conflicts of Interest when the Vancouver company got a loan from the Hong Kong company as the two owners were related individuals.

International focus on Corruption was seen to be used as RCMP’s Integrated Market Enforcement Teams were used to work with the Hong Kong law enforcement agencies and securities regulators to investigate the fraud. The fraud was further reported to Government of Canada’s Canadian Anti‐Fraud Centre (CAFC)