Transcript IIA – ACFE Fraud Seminar November 13, 2013 Cutting Edge Tips in Today’s World of Fraud Christopher J.

IIA – ACFE Fraud Seminar
November 13, 2013
Cutting Edge Tips in Today’s
World of Fraud
Christopher J. Rosetti
CPA, CFE, CFF, HSG
Community Focus | Statewide Impact | National Network
Agenda
 Introduction
 Metadata
 Trendy Websites
 Questions
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To Good to Be True
My Twin
3
Why You Are Listening to Me Today
Cuba
WTC
WTC
WorldCom Contact
Information
Where Else
 FBI Academy
 Morocco, Puerto
 Gracie
 CNBC
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Mansion
Rice, Greece, etc.
Frank Knows Fraud
So Does Bruce
Fraud and People
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Fraud is perpetrated by people!
Fraud is oftentimes limited by one’s
imagination
There is no right way or wrong way
to Perpetrate a fraud
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Technology assists the fraudster
Technology assists the investigator
Abbreviated History of
Fraud
Gregor MacGregor
George C. Parker
Carlo ???
Grammy Award Winning
Artists
Pride of the
Yankees
Bernie Madoff
Technological Advances
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Checks
Telephone
Photocopiers
Fax Machines
Computers
Accounting
Software
Internet
Smart Phones
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MacPuter
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WHY DO YOU HAVE TO BE ACTIVELY
AWARE OF FRAUD?
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Fraudsters and criminals are doing more information
and knowledge sharing than the anti-fraud professionals
that are tasked with finding them.
You can not assume that because you were a DOS
expert in the 90’s that your computer skills are still
sufficient to catch a fraudster let alone identify their
schemes.
Fraud comes in many different shapes, sizes, and colors.
If you are not actively aware, you may be sitting right
next to fraud and not even know it.
IRS
 E-filing
 Started in the 1980s
 78,000 returns filed the first year
 Went nationwide in 1990
 Decreased filing errors
 Decreased IRS postage costs
 Increased audit efficiency
 Increased opportunity for fraud
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Metadata
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Hidden information embedded in computer files but not
generally visible in the ordinary display or printing of the
document
Digital DNA
◦ Keeps track of changes to documents, including Word, Excel,
Power Point
◦ Reveals information about the creation, alteration and
transmission of a document
◦ Types of Metadata (MAC, Document and Digital)
◦ Identifies times and dates of changes
◦ Deleted text
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Examples of Metadata Stored in
Documents
 Your name
 Your company’s name
B
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 The name of your computer
V
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 Names of previous authors
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 Document revisions
t
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 Hidden text of cells
n
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 Comments
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Properties
Document Illustration
Metadata regarding the last 10 users of a document is
captured and stored and is valuable when an individual
denies ever seeing a particular smoking gun document.
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B
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True Story
Metadata reveals Merck edited out negative
test results from Vioxx drug study during 2007.
Email Example
Plaintiff claimed she was discharged in
retaliation for making a sexual harassment
complaint.
 Defendant produced a memo, dated before her
complaint that listed her on a list of employees
to be let go in a planned seasonal layoff
 She contested the authenticity of the email
with the memo.
 The memo’s Metadata confirmed its date of
creation, prior to her complaint.
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Another Email Example
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Terminated employee fabricated an email to
suggest that a manager with whom she had a
romantic relationship had made the decision to
terminate her. Metadata exposed the
terminated employee as the author of the
document.
It's risky, of course---if we're caught, it could mean many
hours of community service.
Williams v. Sprint/United
Management Co.
Terminated employees brought a class action
suit
 Sought Excel spreadsheets with all Metadata
intact, including embedded formulae
 Court Ruled the Metadata was discoverable
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Extra Credit
What to Know About NFP Frauds
NFP are more susceptible to fraud than
other organizations
 85% of all frauds involve asset
misappropriation
 Cash is the most common asset
misappropriated
 Cash is primarily misappropriated via:
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◦ Purchasing Fraud Schemes
◦ Expense reimbursement schemes
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Trend Setter
ACFE 2012 Report to the Nations
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Asset misappropriation schemes
◦ Most common—87% of cases
◦ Least costly—median loss of $120,000
Financial statement frauds
◦ Least common—8% of cases
◦ Most costly—median misstatement of $1 million
Corruption schemes
◦ Just over one-third of cases
◦ Median loss of $250,000
What They Do
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Create Shell Companies
Create Fictitious Invoices
Create Fictitious Websites
Create Fake Telephone numbers
Create Virtual Operators
Create Fictitious Resumes
What to do?
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Listen to me!
QuickBooks Edit function
Review cancelled checks
Review credit card statements
Require credit card statements as
documentation
THE INFORMATION & TOOLS
ONE STOP SHOPS
Book of the Month Club
Interesting Websites
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http://www.alibisnpaybacks.com/
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B
www.falseexpenses.com
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www.alibinetwork.com
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www.paladindeception.com
What They Offer
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Receipts on authentic thermal paper!!!
A toll Free hotel telephone number confirming
your checked in at the hotel
Rescue calls to get you out of a meeting
 Virtual doctors offices
 Fake travel documents and confirmations
 Virtual employment
 Shopping service
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Internet Alibi
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Another Web Site’s Services
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Have alibis validated by live operators
Choose between local or out of town alibis
Call in sick service
Escape a date
Printable doctors services
Virtual doctors services
Virtual travel agency
And prepare just about anything you can
imagine!!!
Advertisements
Politicians have spin doctors,
celebrities have publicists, corporations
have lawyers and public relations departments,
investment banks have analysts, now regular people have
ALIBI NETWORK. Visit our E-Store to help us protect your
interests.
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More Services
Call in Sick Service.
Call In Sick Service provides clients with a cast-iron sickness alibis. We
would call a place of your work for you and pretend to be your doctor
/dentist or a spouse, etc. and tell your boss that you can’t come in. So you
will not have to fake it on the phone! This is even useful for our clients
who are self-employed – freelancers, business owners, etc.
Escape-a-Date Service.
You were looking forward to a perfect date when she suddenly told you
she was married. Our service allows you to set-up a save me from my date
phone call at a predetermined time. We will call you at the time you wish
and if married dating is not something you are into, we will set the tone
for an immediate getaway.
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These People Mean Business
Your Problems:
1. You don’t have the resources (money, people, time)
2. You believe your auditors are the Special Forces of Forensic
Accounting
3. You are very trusting
4. You believe that fraud could never occur because you have internal
controls
5. These people are very convincing and/or confrontational
6. The Board is not familiar with their fiduciary responsibilities or the
possibility of fraud
7. You don’t have the big guns
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Shell Companies
Create Fake Website
Creating Fake Websites
Choose a domain name (e.g.,
IAMAFRAUDSTER)
 Choose a web host (e.g., Go Daddy)
 Build your website
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◦ Get more detailed info on www.ehow.com
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FAKE WEBSITES DETECTION
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Use Whois lookups to determine the owner and when
the website came online.
◦ Compare the services, invoices, and other pertinent
information to the “go live” date.
Look to see if there is contact page that lists a physical
address and/or phone number, or corporate offices.
◦ Use search engines to identify the location of the
office to see if it is mail drop, post office box or
registrar’s office.
Use www.archive.org to view the website history of
the site to determine its length of use and appearance
over time.
PURCHASE A LOCAL NUMBER
EXPENSE ACCOUNT FRAUD
The
Criminal Mind…
1.I want or need extra money and I want to use my
expense account to do it, I will need to know,
◦ Where I can get fake receipts
◦ How to make fake receipts
◦ What are the best expenses to fake
Interesting Website Descriptions
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False documents
Print fake receipts
Fake receipts generator
Create phony sales receipts
Fake receipt printing service
The accounts payable network
Fake Receipt Website Offerings
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Sample Advertisement
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Fictitious Expenses
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False Receipt Story
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FAKE RECEIPT MAKERS
INVOICING PROGRAMS
HOTEL INVOICE TEMPLATES
Fake Airline Confirmation
Dear Mr. Client,
Ticket Information
Passenger(s): First Name, Last Name
*AIRLINE NAME* record locator: 35GKTKT
Ticket type requested: electronic (e-ticket)
Our record locator: AJVAPVHQ9825T72NA
Airline ticket number(s): 6413ADVCAD6SV54
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Tuesday, XXXXX, 2006
*AIRLINE NAME* Flight #####.
LOS-ANGELES INTERNATIONAL AIRPORT (LAX) to BUSH
INTERCONCTINENTAL (IAH)
Departure (LAX): Date, 4:10 PM CDT (evening)
Arrival (IAH): Date, 9:27 PM CDT (evening)
Class: COACH
Seat assignment: XX
Fake Hotel Confirmation
Dear Mr. Client,
This is to confirm your hotel stay at the "Hotel Name" in New York, N.Y. from
Date through Date.
Guest Information
Name: First Name, Last Name
Check-in: Date, 3:30 p.m.
Check-out: Date, 10:00 a.m.
Room type: single
Confirmation id: 3#####59######25F
Rate
$$$$$/night + tax based on a discount rate for (seminar participants, etc.)
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Hotel Information
Name: "The Hotel Name"
Address: XXXXXXXXXXX, New York, N.Y. #####
Phone: ###-###-####
Fake Rental Car Confirmation
*RENTAL COMPANY*
Your Itinerary Number: 644-VPWVH687-AD654
Car Type: Economy (Unlimited Mileage)
Pick-Up Date: January 8, 2007 - 7:00 AM
Drop-Off Date: January 9, 2007 - 7:00 AM
Pick-Up Location: Chicago - Ohare Intl (Ord)
Drop-Off Location: Chicago - Ohare Intl (Ord)
Driver: First name, Last Name
Confirmation #*:PAVHAVH6549DVCD
Confirmation Number is assigned by the rental car company that booked your
reservation and should be your primary reference number when contacting
the rental car company on all issues related to your rental car including pickup and drop-off. Summary Of Charges
Daily Rate (1 x $68.99): $68.99
Subtotal:$68.99
Taxes and Fees:$15.17
Estimated Total Charges:$84.16
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HIRING/RESUME FRAUD,
The
Criminal Mind…
1.I need to conceal my background or my ulterior motive
as to why I am seeking employment,
◦ My criminal record is a red flag,
◦ I want to conceal my previous terminations of
wrongdoing,
◦ I need to disguise my actual past employment,
2.I may need a corroborating website designed,
3.I need fake references who will pass a background
screening process.
4.I need fake diplomas, transcripts, and other related
documents.
PURCHASE A LOCAL NUMBER
Fraud Does not Discriminate
CREATING FAKE IDENTITIES TO PERFECT
CRIMES
1.
2.
3.
4.
5.
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7.
8.
9.
10.
FakeID.cc
21 Overnight
You Finish It
ID-Blog
Novelty ID
Cards
Fake ID
ID Chief
Fake 21
Fake ID Master
Real Fake ID
DIPLOMAS & TRANSCRIPTS
Employment Alibi
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Internet Dr.
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Payback’s and Alibi’s
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HIRING/RESUME FRAUD DETECTION
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HR is the first line of defense. HR professionals and
hiring managers should be alert to references giving
what appear to be canned responses.
◦ Ask for an a fax number to send a confirmation.
◦ Ask for an email address to send a confirmation or
keep in case there is additional follow-up required.
◦ Ask for a mailing address for your records.
In most instances the above mentioned questions will
derail a paid reference service and they will be unable
to provide any of the additional information and this
should be considered a huge red flag.
Contact Universities directly to confirm degrees.
Diplomas are unfortunately no longer reliable proof.
More Fraud
SICK TIME, DISABILITY, INJURY FRAUD
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EASY! Check to see if the doctor is listed locally.
Ask the employee for an address of the doctor or to
write it down on the excuse.
Employee delays in bringing in documents (could be
waiting to have them delivered).
Buy available fake excuse packets and distribute to HR
and use as a comparison.
Ramifications
False job history – one advertisement stated
they would provide them with false business
cards, work phone, work email and a personal
secretary to the extent you are embarrassed
about being unemployed.
 Excuses for being absent, lost productivity
 Promote purchasing fraud
 Confirmation of fictitious receivables
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Ramifications
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Taxes, charitable contributions
Insurance claims
Entertainment expenses (Ragus)
Inflate business expenses for tax purposes
Support for divorce payments
Expense reimbursement for trips
Rental Property deductions
Edit News Websites
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False Publicity
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Easily Make Your Own Unique CNN
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Who Am I and Why Am I Relevant?
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What did he do?
B
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Say it Isn’t So?
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Ramifications
Allows
us to create websites for companies that don’t
exist
Allows us to create websites for products that don’t exist
Allows us to facilitate purchasing fraud
Allows us to facilitate fictitious sales and A/R schemes
Allows us to falsely promote ourselves
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Top 5 Essential Traits and
Characteristics
Social Media Fraud Tools
THE END
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