Corporate fraud continues to be prevalent and underwriters must take a new approach to conducting due diligence in order to detect fraudulent activity when assessing a company's risk profile.

This is according to Barry Minkow, the forceful CEO of The Fraud Discovery Institute (FDI) who spoke yesterday at the Professional Liability Underwriters Society conference at the Fairmont Hamilton Princess Hotel.

Minkow told the audience to supplement their due diligence activities by continually studying recent fraud cases to learn the techniques being used: "know your blind spots, things like SPVs (special purpose vehicle) really need to be double-checked, and watch for the true extent of accountability of the senior managers in a company," he said.

"Fraud is an issue that is not going away ? the FBI is currently opening three to five new fraud cases per month of $100 million or more," said Minkow. "They don't all start out that big, but once you get away with financial fraud on a small scale it reinforces your behaviour and you continue."

Minkow speaks from experience: before his 21st birthday he made headlines as the youngest person in the US to take a company public but was subsequently jailed for fraud. After serving seven years in prison he turned his life around and now through FDI works with government and the private sector to combat white-collar crime.

In what was arguably the most entertaining presentation of the day Minkow engaged the conference delegates using humour, recent history and even audience participation to talk about the techniques typically used by white-collar criminals to circumvent due diligence.

"I define fraud as the skin of the truth stuffed with a lie, and a lot of the time you have to go beyond the most obvious to catch it," said Minkow.

"Auditors typically look at the expenses side of the financials which is fine and is their job, but my company looks for how income may be being manipulated.

"Some of the major areas of opportunity for fraud are off-book transactions and mergers and acquisitions, typically used to inflate or misrepresent a company's value," he said. Minkow also pointed to predictability in a company's transactions with a specific entity or entities being a possible pointer to illegal activity.

"Remember that fraud is never an end in itself but rather a means to an end."

He said that the CEO's and CFO's who commit these crimes usually have " a 'cure' that they intend to use eventually to erase or fix the fraud"? if they don't get caught. He blamed the increased prevalence of white-collar crime on a shift in the corporate mindset that reveres "achievement" in terms of bringing in business rather than character and integrity.

"The attitude is 'right equals forward motion and wrong equals anyone who gets in my way'," he said.

"For the lawyers it's all about the billable hours, for the CEO's it's all about getting revenue in the door and boosting the stock price. Achievement is the god that all of us who perpetrated fraud serve," he said.