Fighting Fraud (eBook)

Cover 1
Title Page 4
Copyright page 5
Quotation 8
Table of Contents 10
Preface 20
Acknowledgments 24
Introduction and Premise 28
SECTION I: AN INTRODUCTION TO THE WONDERFUL WORLD OF FRAUD 30
Chapter 1: The New-Old Global Business Environment 32
INTRODUCTION 32
GLOBALIZATION OF BUSINESS „ BENEFITS TO NATION-STATES 34
EXPANSION OF THE GLOBAL MARKETPLACE AND THEIR AREAS OF OPERATIONS 35
TYPES OF CORPORATIONS 36
CORPORATE OWNERS AND LOCATIONS 36
CORPORATE PRODUCTS 37
THE HIGH-TECHNOLOGY FACTOR 38
NANOTECHNOLOGY 40
HIGH-TECHNOLOGY-RELATED FRAUDS AND OTHER CRIMES 43
ADVENT OF THE SUPERHIGHWAYS 43
THE IMPACT OF SUPERHIGHWAYS ON FRAUDS AND OTHER CRIMES 44
A SHORT HISTORY OF FRAUDS AND OTHER CRIMES VIA THE I-WAY 46
SUPERHIGHWAY FRAUDS AND OTHER CRIMES TO I-WAY ROBBERIES 47
I-WAY ROBBERY „ ITS PREVALENCE 49
THERE IS NO I-WAY PATROL TO STOP I-WAY ROBBERS 50
GLOBAL CONNECTIVITY VIA THE I-WAY = GLOBAL EXPOSURE TO ATTACKS BY FRAUD-THREAT AGENTS AND OTHER MISCREANTS 50
CAPABILITIES AND LIMITATIONS OF LAW ENFORCEMENT 51
CHALLENGES TO SECURITY PROFESSIONALS AND OTHERS 52
CASE STUDY 1 53
CASE STUDY 2 54
SUMMARY 55
Chapter 2: Corporate Assets, Frauds, and Other Terms „ What Are They? 56
INTRODUCTION 56
DEFINITION OF GENERAL FRAUD 57
SPECIFIC FRAUD DEFINITIONS 60
CORPORATE ASSETS 61
OTHER TERMS AND DEFINITIONS 62
CASE STUDY 63
SUMMARY 64
Chapter 3: Fraud-Related Laws 66
INTRODUCTION 66
SOME U.S. FEDERAL FRAUD-RELATED LAWS 67
RELEVANT CONSUMER PROTECTION LAWS FOR FRAUD IN THE UNITED STATES 69
A FEW EXAMPLES OF U.S. FEDERAL ENFORCEMENT OF FRAUD-RELATED LAWS, APPROACH AND ACTIONS 69
MAIL FRAUD STATUTES (CONDENSED AND PARAPHRASED) 70
MONEY LAUNDERING 72
FINANCIAL INSTITUTION FRAUD (BANK FRAUD) 72
CIVIL LITIGATION 72
U.S. TREASURY COLLECTION 73
SECURITIES VIOLATIONS 73
ROLE OF PHONE COMPANIES 73
EUROPEAN FRAUD-RELATED LAWS 74
EU FIGHT AGAINST FRAUDS 74
ASIA AND FIGHTING FRAUD 76
CASE STUDY 77
BLOWING THE WHISTLEŽ ON DEFRAUDERS CAN BE DANGEROUS 79
SUMMARY 79
Chapter 4: Corporations Don’t Commit Frauds People Do
INTRODUCTION 82
ARE DEFRAUDERS A PRODUCT OF THEIR ENVIRONMENT, OR IS IT IN THEIR GENES? 82
SOME CRIMINOLOGY THEORIES 83
FRAUD-THREAT AGENTS 85
HUMAN ERRORS „ ACCIDENTS 85
MAN-MADE OR MALICIOUS FRAUD THREATS 86
POTENTIAL FRAUD-THREAT AGENTS 86
CAPABILITIES 93
MOTIVATION 94
ACCESS 96
CATALYSTS 97
INHIBITORS 98
AMPLIFIERS 100
FRAUD-RELATED FACTORS FOR ATTACKING SYSTEMS 103
RELATIONSHIP OF THREAT ELEMENTS 103
CASE STUDY 103
SUMMARY 107
Chapter 5: Fighting Fraud „ Whose Job Is It Anyway? 108
INTRODUCTION 108
ROLE OF EXECUTIVE MANAGEMENT 109
ROLE OF CORPORATE MANAGEMENT 111
ROLE OF THE CORPORATE EMPLOYEES 112
ROLE OF THE ETHICS DIRECTOR 112
ROLE OF THE AUDITOR 113
ROLE OF THE FRAUD EXAMINER 114
ROLE OF THE CHIEF SECURITY OFFICER (CSO) 115
WHY THE CORPORATE SECURITY PROFESSIONAL? 116
CASE STUDY 117
SUMMARY 117
Chapter 6: Where There Is a Will There Is a Way „ Fraud Schemes 118
INTRODUCTION 118
TYPES OF FRAUD SCHEMES 119
FINANCIAL 120
CREDIT CARD SKIMMING 124
MORTGAGE FRAUDS 125
COMPUTER AND TELECOMMUNICATIONS FRAUDS 126
ATM FRAUDS 130
CLICK FRAUD 133
CLIP-ON FRAUD 135
SECURITIES FRAUDS 136
EMPLOYMENT APPLICATION FRAUDS 137
IDENTITY THEFT SCAMS 137
NIGERIAN SCAMŽ 138
ACCOUNTING FRAUD SCHEMES 140
BRIBERY AND CORRUPTION 145
CONFLICTS OF INTEREST 145
PURCHASING „ FOUR BASIC CATEGORIES 145
INVENTORY 146
INVESTMENTS AND FIXED ASSETS 147
PAYROLL AND PERSONAL EXPENSES 148
PROCUREMENT/CONTRACTS 149
TELEMARKETING FRAUD 149
ADVANCE FEE SCHEME 150
COMMON HEALTH INSURANCE FRAUDS 150
LETTER OF CREDIT FRAUD 151
PRIME BANK NOTES 151
THE PONZI SCHEME 152
PYRAMID SCHEME 152
CASE STUDY 153
SUMMARY 154
Chapter 7: Fraud Cases and Analyses „ Learning by Example 156
INTRODUCTION 156
ACTUAL FRAUD AND FRAUD-RELATED CASES 156
PHISHERS AND TAXPAYERS 157
FRAUD BY CORPORATE EXECUTIVES 158
FOREIGN EXCHANGE TRADING FRAUD 160
KATRINA WASTE AND FRAUDS 161
ORGANIZED CRIME AND CYBERCRIME 161
SECURITIES FRAUD IN CYBERSPACE 162
COMPUTER HARD DRIVES LEAD TO FRAUDS 162
DEBT-COLLECTING FRAUDS 163
GOVERNMENT CONTRACTING FRAUD 164
FRAUD-THREAT AGENTS CAN BE ANYONE IN ANY POSITION 165
U.S SECURITIES AND EXCHANGE COMMISSION (SEC) FIGHTING FRAUD 166
FRAUD IN SCHOOL SYSTEMS 167
DEAD SOLDIERS AND E-MAIL SCAMS 168
ANOTHER EXAMPLE OF INSIDER FRAUD 168
EXECUTIVE MANAGEMENT AND ACCOUNTING FRAUD 169
MERCHANDISE RECEIPT AND EXCHANGE FRAUD 170
CLICK FRAUDS 171
MORTGAGE FRAUD 171
GOVERNMENT CONTRACTORS AND FRAUD 172
FRAUDS AND MICROSOFT SOFTWARE 173
Y2K-RELATED FRAUD 173
DATA STORAGE CONDUCIVE TO FRAUD-THREAT AGENTS 174
ANOTHER EXAMPLE OF CLICK FRAUD 175
PYRAMID SCHEMES MOVE ON TO THE INTERNET 175
PREPAID CELLULAR PHONE FRAUD 176
IDENTIFYING INTERNATIONAL CORRUPTION 177
CREDIT CARD INFORMATION THEFTS AND FRAUDS 178
HACKERS, CRACKERS, PHISHERS, OH MY! 179
URBAN LEGENDS AND FRAUDS 180
MEDICAL RESEARCH FRAUD 180
CORRUPTION AND THE WAR IN IRAQ 181
COMMENTS ON IDENTITY THEFTS AS A VEHICLE TO FRAUD 182
LOBBYISTS AND CORRUPTION 182
INTERNET SCAMS ARE INTERNATIONAL 183
FAKING A MEDICAL CONDITION 183
INTERNET FRAUD SWEEP 184
ATM FRAUD 185
SOCIAL SECURITY SCAM 185
STAMP FRAUD 186
BANKER AND IDENTITY THEFT 187
ACCOUNTING FIRM FRAUD 187
LAWYERS AND MEDICAL RIP-OFFS 189
ANOTHER MENTION OF THE NIGERIANŽ SCAMS „ VARIATIONS ON A THEME 189
CASE STUDY 190
SUMMARY 190
SECTION II: ESTABLISHING AND MANAGING AN ANTI-FRAUD PROGRAM 192
Chapter 8: The International Widget Corporation 194
INTRODUCTION 194
IWC BACKGROUND INFORMATION 194
KEY ELEMENTS FOR THE CSO TO CONSIDER 197
GETTING TO KNOW IWC 198
IWC’S BUSINESS PLANS 199
STRATEGIC BUSINESS PLAN 199
TACTICAL BUSINESS PLAN 200
IWC’S ANNUAL BUSINESS PLAN 202
IWC AND THE HISTORY OF ITS CSO 202
KEY ELEMENTS OF IWC’S ANNUAL BUSINESS PLAN 205
ANTI-FRAUD PROGRAM PLANNING 205
IWC’S DEPARTMENTS OF PRIMARY IMPORTANCE TO THE CSO 205
IWC VISION, MISSION, AND QUALITY STATEMENTS 207
PLANS 209
OTHER IWC PLANS AND CSO SUPPORT 210
CASE STUDY 210
SUMMARY 211
Chapter 9: Establishing an Anti-Fraud Program 212
INTRODUCTION 212
IWC’S ANTI-FRAUD PROGRAM 214
ANTI-FRAUD PROGRAM PROJECT PLANNING 218
IWC ANTI-FRAUD PROGRAM PROJECT MANAGEMENT AND PLANNING 221
ANTI-FRAUD PROGRAM PROJECT TEAM 224
ANTI-FRAUD DRIVERS „ THE FIRST MAJOR TASK IN ANTI-FRAUD PROGRAM DEVELOPMENT 224
IWC ANTI-FRAUD PROGRAM REQUIREMENTS „ POLICIES 225
RISK ASSESSMENT „ THE SECOND MAJOR TASK IN DEVELOPING AN ANTI-FRAUD PROGRAM 225
BASICS OF IWC’S RISK ASSESSMENT PROCESS 226
THREATS 228
NATURAL THREATS 229
MAN-MADE THREATS 229
VULNERABILITIES 230
RISKS 231
ASSETS PROTECTION RISK ASSESSMENTS 231
ASSETS PROTECTION RISK ANALYSES 233
DEVELOPING ANTI-FRAUD DEFENSES 233
THREE KEY INGREDIENTS IN AN ANTI-FRAUD PROGRAM’S DEFENSES 234
IWC’S ANTI-FRAUD POLICIES 235
ANTI-FRAUD REQUIREMENTS AND POLICY DIRECTIVE 238
ANTI-FRAUD PROCEDURES 239
THE CSO AND SECURITY DEPARTMENT’S ANTI-FRAUD ACCOUNTABILITIES 241
OFF-SITE CORPORATE FACILITIES 241
RECRUITING ANTI-FRAUD PROFESSIONALS 241
CASE STUDY 242
SUMMARY 243
Chapter 10: Managing an Anti-Fraud Program 244
INTRODUCTION 244
CSO LEADERSHIP 245
MANAGEMENT VERSUS LEADERSHIP 246
MEETING CUSTOMERS’ EXPECTATIONS 247
IWC INTERNAL CUSTOMERS 248
IWC EXTERNAL CUSTOMERS 248
IWC EXECUTIVE MANAGEMENT EXPECTATIONS OF A CSO 249
MANAGING RISK 251
SECURITY’S VISION, MISSION, AND QUALITY STATEMENTS 252
MANAGING THE IWC ANTI-FRAUD PROGRAM 252
PLANNING 252
SOME ASPECTS TO INCORPORATE INTO AN ANTI-FRAUD PROGRAM PLAN 254
BUDGETING 256
CONTROLLING 259
QUALITY, PROCESS IMPROVEMENT, AND ASSESSMENT OF ORGANIZATION PERFORMANCE 261
PROCESS MANAGEMENT 261
PERFORMANCE MANAGEMENT 262
USING TECHNOLOGY TO DELIVER ANTI-FRAUD PROGRAM SUPPORT AND SERVICES 263
MANAGING QUALITY AND MANAGEMENT OVERSIGHT 264
WHAT IS RISK MANAGEMENT AS IT RELATES TO IWC’S ANTI-FRAUD PROGRAM? 264
MANAGING AND REDUCING RISKS TO CORPORATE ASSETS 265
PROGRAM FOR MANAGING ANTI-FRAUD DEFENSIVE RISKS 266
RESPONDING TO FRAUD INCIDENTS 269
MANAGING FRAUD THREATS 270
CASE STUDY 271
SUMMARY 273
Chapter 11: Winning Through Teaming 274
INTRODUCTION 274
ANTI-FRAUD PROGRAM TEAM BUILDING 274
EXECUTIVE MANAGEMENT AS TEAM MEMBERS 275
TEAMING WITH IWC EXECUTIVE MANAGEMENT THROUGH A BUSINESS APPROACH 276
TEAMING WITH CORPORATE PEERS 277
TEAMING AND DEALING WITH OFFICE POLITICS 279
TEAMING WITH YOUR SECURITY MANAGERS 281
TEAMING WITH YOUR SECURITY STAFF 282
TEAMING AND DEALING WITH SATELLITE OFFICES IN IWC HEADQUARTERS IN THE UNITED STATES 286
TEAMING AND DEALING WITH SATELLITE OFFICES IN FOREIGN LANDS 286
CASE STUDY 287
SUMMARY 289
Chapter 12: Anti-Fraud Functions 290
INTRODUCTION 290
ANTI-FRAUD PROJECT TEAM FUNCTIONAL TASKS 290
ANTI-FRAUD FUNCTIONS 291
ANTI-FRAUD PROGRAM’S NON-SECURITY TEAM FUNCTIONS AND MEMBERS 293
CASE STUDY 294
SUMMARY 295
Chapter 13: Are We Winning the Battle? How Do We Know? Measure It! 296
INTRODUCTION 296
MEASURING AN ANTI-FRAUD PROGRAM’S COSTS, BENEFITS, SUCCESSES, AND FAILURES 297
COMMON LOE MEASUREMENT TECHNIQUES FOR EACH FUNCTION 298
EXAMPLES OF METRICS BY FUNCTION 299
INVESTIGATIONS AND NCIS METRIC CHARTS 300
EXAMPLES OF ANTI-FRAUD INVESTIGATIONS METRICS 301
PROCESS MEASUREMENTS 306
CASE STUDY 307
SUMMARY 310
SECTION III: THE FRAUDULENT FUTURE 312
Chapter 14: What Will the Fraudulent Future Hold for Corporations? 314
INTRODUCTION 314
GLOBALIZATION OF BUSINESS TO CONTINUE 317
EMPLOYEES OF THE FUTURE 317
THE FUTURE GLOBAL CORPORATION 318
FUTURE OF FRAUD ATTACKS ON CORPORATIONS 320
FUTURE ANTI-FRAUD PROTECTION NEEDS OF CORPORATIONS 321
CASE STUDY 322
SUMMARY 322
Chapter 15: The Impact of High Technology on Fraud 324
INTRODUCTION 324
HIGH-TECHNOLOGY FRAUDS 324
HIGH-TECHNOLOGY ANTI-FRAUD DEFENSES 327
CASE STUDY 328
SUMMARY 329
Chapter 16: What the Security and Other Anti-Fraud Professionals Must Do Now to Personally Prepare to Combat Tomorrow’s Frauds 330
INTRODUCTION 330
BECOMING AND STAYING PROACTIVE AND AGGRESSIVE IN FIGHTING FRAUD 331
GETTING A FRAUD EDUCATION 331
GAINING FRAUD-RELATED CERTIFICATIONS 332
ASSOCIATIONS 333
GAINING ANTI-FRAUD EXPERIENCE 334
TO CONDUCT OR NOT TO CONDUCT FRAUD LECTURES AND WRITE FRAUD ARTICLES 336
CASE STUDY 336
SUMMARY 337
Chapter 17: Summary and Final Thoughts 338
INTRODUCTION 338
SUMMARY 339
FINAL THOUGHTS 340
WHAT OTHERS THINK ABOUT THE ANTI-FRAUD LEADERSHIP POSITION IN A CORPORATION 340
TOBY J. F. BISHOP, CFE, CPA, FCA, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF CERTIFIED FRAUD EXAMINERS WORLD HEADQUARTERS 343
IN CONCLUSION „ MY THOUGHTS 344
SOME REFERENCES 346
END OF LINE 347
About the Author 348
Index 350