Exposing Fraud
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Preface xiii
Foreword by James Rately xv
About the Author xvii
Acknowledgements xix
Structure and Method of the Book xxi
Opening Thoughts xxi
Approaching Counter?]Fraud Work xxii
Chapter Specifics xxii
Finally xxiii
1. Cutting through the Maze 1
Introduction 1
1.1 What is Fraud? The Most Debated Question 2
Perceptions and representations of fraud 4
Definitions, key distinctions and informing elements 6
The mens rea of Fraud 6
Misrepresentation. Practicalities 7
Conveying the misrepresentation 7
Definition of fiduciary duty 8
1.2 Other Distinctions 9
Intent 9
The difference between 'misrepresentation' and a hoax 10
1.3 Lying, Fraud and the State of the Mind 10
Lying and the problem with words 11
Ethnicity misunderstood: the chasm between belief and actual criminal deception 13
1.4 Cutting through the MAZE 14
'The Three Cs' 14
1.5 Distinguishing and Overlapping: Fraud and Money Laundering 17
Money laundering: the mens rea 19
'Politically Exposed Persons' - a reference 22
Trade?]based money laundering 23
1.6 Now Adding Corruption ... Linking to Fraud 25
Key distinctions (fraud and corruption) 25
Coercive practices 27
Collusive practices 27
1.7 Legislation Summary 27
Definitions: Comparatives 28
Africa - Middle East - Malaysia - South Africa 28
Sharia law 29
The role of Sharia principles regarding the choice of governing law 30
Insurance and the law: a special mention 31
The United Kingdom Fraud Act 2006 33
Bribery Act 2010 (UK) 34
United States - Definition of Fraud 35
Foreign Corrupt Practices Act 1977 (FCPA) 36
Sarbanes-Oxley Act (USA) 36
Dodd-Frank (USA) 36
Other Fraud Related Legislation 37
1.8 Evidence 37
Evidence - law in itself. Not a 'free for all' game to ensure prosecution 37
Basic Principles of Evidence for Fraud Investigators 38
Format 38
Evidential sources, classification and practicalities 38
Evidence (definition) 38
Burden of Proof: Criminal 39
Burden of Proof: Civil 40
Criminal Evidence 40
Direct 40
Primary and secondary 41
Circumstantial 41
Hearsay 42
Forensic 42
Other fraud?]relevant incidental evidence 44
Electronic (digital) evidence 44
'Volatile' Data 44
Witness Testimony 45
Whistle blowing - witnesses nonetheless. 50
Whistle?]blower Retaliation and Criminal Charges 50
Expert Witnesses. Who are they? 50
Accreditation and representation 51
Chapter Summary 53
2. Concepts and Dynamics of Fraud 55
Introduction 55
2.1 Costs of Fraud - Including the Hidden Ones We Don't Like to Mention 56
2.2 It is Not Enough to Know 'What Fraud is' - Know Your Business! 59
2.3 The Varying Psychologies of Fraud 65
Why fraud is unique as a crime 65
Victims and 'victimhood' (in fraud) 65
A cluster of informative dogmata to help to advance conceptual thought of fraud and fraud offenders 68
Important Distinction 68
Two distinctly different approaches to fraud offending 68
Narcissist leadership and inevitable Fraud 70
Impulsive fraud 70
Impulsive Decision Making and Working Memory 72
Systemic fraud 73
The Difference between Fraud and Mistake, Under the False Claims Act 76
'Organised' fraud? 77
Fraud offender profiling 79
Profiling: where it lies in fraud 79
Profile differences between theft and fraud offenders 81
Why do 'good people' do bad things? 82
Predictive modelling? 84
2.4 Contexts, and Leading to Cross?]Activities of Fraud 85
Golden Rule: Follow the behaviour, not just the 'type' of fraud 85
Financial Fraud - corporate contexts and entities 86
Business Assets 86
Intangible Assets and Intellectual Property Theft 86
Intellectual Property Theft 87
Trade Secret Theft and Corporate Espionage 88
Financial Statements 90
'Beneish Model' 95
Accounting 96
Other Fraud Attacks against Banks 101
Shell Companies 102
Ghost Employees 103
Inventory Shrinkage 104
Fraudulent Conveyancing 104
Procurement - a mains scenario reconciling fraud and corruption 105
Procurement - Fraud Definitions: Recap 106
Healthcare 112
Other instances of Healthcare fraud 113
Insurance 115
Telecom fraud 117
Revenue Share Fraud 118
Subscription Fraud 119
Premium Rate Service Fraud 119
Interconnect Fraud 119
Interconnect bypass - also known as GSM Gateway or 'SIM Box' fraud 120
Prepaid Fraud 121
Fraud Directly Funding Terrorism 121
Cyberterrorism 125
Stand?]alone or peculiar fraud cases of note 126
2.5 Cybercrime and Fraud 129
Cybercrime: A new presence of fraud in the 21st century 129
Hacking 129
Alerts and triggers and 'Big Data' 131
Phishing and Internet fraud 132
List of phishing activities 134
Bitcoin and cloud currency: Vulnerabilities 134
Social Networking as a 'Facilitator' of Fraud 136
Privacy First: 136
How do online 'social communities' work? 137
Victims becoming Fraudsters 138
Safety Culture 138
Preventative Measures: Practicalities
Never give out your social security number 138
Fraud viz?]a?]viz Social Networking 139
Appendix to Chapter 2-Business Terminology 141
3. From fraud awareness to 'risk' - a professional step 143
Introduction 143
Wake up Call - Impactive Case Study 144
3.1 Beyond the Definitions 147
Rational choice theory 147
The Fraud Triangle 147
Who Commits Fraud? 148
Risk assessing as opposed to investigation: The difference 148
Fraud Risk Assessment 148
Right to Audit Clauses 149
'Pseudo?]stability' 149
Handling intelligence. Handling information 150
4. Exposing Fraud: Fraud Investigation at Work 153
Introduction 153
4.1 What is an Investigation? 154
Investigation work: Is it really for you? 155
Comments on the questions in Self?]assessment 1: Investigation Notions 157
Comments on the questions in Self?]assessment 2: Avoiding Stereotyping 158
Do you think that there is a place for psychometric testing in our profession? 160
Keeping a 'Learning Log' 160
Formats 161
About Roles (and job titles) 162
Auditors 162
Internal Control 164
Risk Managers 165
Journalists Informing Investigation 165
The 'psychological contract' 166
4.2 Formalities and Investigation Goals 167
The Truth, but which version? 168
Versions of the 'Truth' 169
How far do you go in an investigation? 169
4.3 Identifying the Essential Skill Set of the Fraud Investigator 170
Particular Talents and Skills 172
Where skill goes hand in hand with training 172
Advancing Skill: Lateral and Cognitive Thinking 177
Lateral Thinking Exercise (1) 180
Lateral Thinking Exercise (2). Fraud 180
Memory. The better half of intelligence 181
Memory Training 181
Observing Ethical Behaviour - not a rule, but a way of life! 182
Keeping an Investigations Log - a must! 183
4.4 'Hands?]On' 184
'Respond' - Do Not React' 184
Knowing where to start 188
The 'capability list' 189
Investigative Interviewing 190
The PEACE Model 190
SE3R - a tool of interviewing excellence 195
'PEACE,' 'SE3R' and Identifying Unique Knowledge. 202
Resourcing 203
Scenarios 205
Unfamiliar cases 207
Catching the co?]accomplices as well! 209
Using IT to inform fraud investigations effectively 210
Data Analytics: Fraud 211
Data Mining 211
Data Analytics in Investigations 212
Associates and Mapping 212
4.5 Management of Investigations 213
Baselines of Investigation Planning 213
Receiving a case from someone else, or handing a case on 214
Managing a fraud investigation's caseload 215
Setting simple and clear team or organisational counter?]fraud efficiency 216
Team building skills are crucial to ensure effective investigations 217
Team Objectives of Fraud Investigation and Prevention 217
4.6 Assessing Your Skill Set 218
1 Appraising information 218
The Analytical Mind - Preparing Yourself 218
Appendix A: Sample response to Skill Assessment 224
4.7 Investigation Outcomes 226
Report Writing 226
Main Points of Note: 226
Avoiding 'bad duplicity' 227
Structures and Formats 227
'Content Not Form' 227
How are reports read? 227
SAMPLE REPORT STRUCTURE 228
5. Training and Education 229
5.1 Training: What does it Mean to You? 229
Introduction 229
Academic Qualifications 230
In?]house training 230
Professional Accreditations: Fraud specific and collateral qualifications 230
5.2 Preparing Yourself for Exams 231
Multi?]choice exams 231
Multi?]choice questions - Specific Guidance 231
Essays 233
Typical Essay Questions ?] Evaluation Format 233
'Problem' or scenario questions. The 'IDEA' method 235
Final Summary 241
Bibliography 243
