Forewordby James D. Ratley, CFE, President and CEO, Association of Certified Fraud Examiners
Beyond the basics—tools for applied fraud management
In Exposing Fraud: Skills, Process, and Practicalities, anti-fraud expert Ian Ross provides both ideas and practical guidelines for applying sound techniques for fraud investigation and detection and related project management. The investigative principles in this book are truly universal and can be applied anywhere in the world to deal with any of the range of fraud types prevalent in today's business environments. Topics covered include cyber fraud, the psychology of fraud, data analysis techniques, and the role of corporate and international culture in criminal behavior, among many others. Ensure an optimal outcome to fraud investigations by mastering real-world skills, from interviewing and handling evidence to conducting criminal proceedings.
As technologies and fraud techniques become more complex, fraud investigation must increase in complexity as well. However, this does not mean that time-tested strategies for detecting criminals have become obsolete. Instead, it means that a hands-on approach to fraud detection and management is needed more than ever. The book does just that:
Takes a unique practical approach to the business of detecting, understanding, and dealing with fraud of all types
Aids in the development of key skills, including conducting investigations and managing fraud risk
Covers issues related to ethically and efficiently handling impulsive and systemic fraud, plus investigating criminals who may be running multiple scams
Addresses fraud from a global perspective, considering cultural and psychological factors that influence fraudsters
Unlike other fraud investigation books on the market, Exposing Fraud develops the ethical and legal foundation required to apply theory and advice in real-world settings. From the simple to the complex, this book demonstrates the most effective application of anti-fraud techniques.
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Half the work that is done in this world is to make things appear what they are not.
—E. R. Beadle
INTRODUCTION
Cutting through the Maze.’ This chapter attempts to codify and achieve a succinct understanding of fraud as a clear (but not over-simplified) explanation. Avoiding the incessant circular discussion around definitions saves time and gains more convictions. Moreover, a common output of this problem among others, being that professionals across investigations, risk and data analysis, audit, are often at odds with each other with the ever-present dilemma on agreeing what fraud actually is.
Risk management and prevention are alluded to but the main emphasis of this book is investigation, to introduce you to the issues and nuances of fraud awareness from a fresh perspective, with practicalities to combine with your skills, side-by-side.
The run of this first chapter commences with a fundamental engagement of fraud definitions, leading to more involved engagement with the theoretical perspectives and explanations, which are then closed in and combined with practical guidance to reassure you that the definitions are mostly in common with each other, to then lead to a chapter summary of accepted definitions. Therefore, this chapter does not purport or claim to ‘reconcile’ definitions (which cannot be done) but forms the fundamentals to counter-fraud work and places them into a workable practical perspective.
PLEASE NOTE
When I refer to a fraud ‘player’ in all chapters, the word ‘offender’ is used, as opposed to the word ‘accused’. In Exposing Fraud, together we will deal with a range of examples of how cases are both investigated and disposed of. An ‘offender’ is identified when a case of fraud is established in any context. The ‘accused’ is normally the reference to a (fraud) criminal who is legally charged (or sued) to appear before a court. Hence, non-police or enforcement Investigators whose cases are addressed by HR policy as opposed to a case for indictment to court, differ in terms of the scale of the standard of proof. Fraud Investigators (not necessarily ‘dedicated’ Investigators) need to be clear on how far they need to go in ‘proving’ a case with this describing of a person involved in fraud, and to remove existing confusion.
The above benchmark is to be borne in mind and used as a running element when reading and working through this book.
1.1 WHAT IS FRAUD? THE MOST DEBATED QUESTION
This chapter hits upon one the most challenging aspects of fraud and its explanation: the differences and the argument about that amorphous area which is ‘problematic’ to some, being the difference between what is fraud and what is ‘sharp practice.’
At this early stage in our working together, to help delve into this area, write down your first response to the scenario in the activity below.
Activity: Please state your own understanding of what the word ‘fraud’ means.
This is not a trick question or a test. It is just to help discover your notions of fraud as an entity as well as a crime at this point.
Broken down further, and in connection with another which was once at least a burning question, was looking at the ‘mis-selling’ of financial products by UK banks. Source evidence was gathered which included sales pitches such as, ‘Your mortgage application will be viewed “more favourably” if you take out the mortgage protection insurance’ – or, ‘the credit card insurance is compulsory’.
So are these two examples fraud? To me, the short answer is yes, as this is over and above and (dishonestly) extraneous to a bona fide business transaction because there is a blatant misrepresentation of fact, actual gain for the offender and actual loss to the parties. Banks in the UK were guilty of systemic and institutional fraud when the staff were given open licence to sell financial products that were needless to a customer by any means. Sales ‘techniques’ with ‘patter’ and half-truths were prima facie fraud (and hence why billions of pounds were set aside in compensation in the wake of it). But the practicalities of outcomes are different. Cases of fraud do not always get prosecuted, as we know. No one from the banks went to jail. So this early engagement with definitions and live practicalities is to set out our way forward.
Next, is a fraud case which is an extended example from the above, and we can make use of a case study involving United Airlines in February 2015.
CASE STUDY
A currency exchange-rate error in third-party software supplied to United Airlines affected several thousand bookings on United’s Denmark-facing website. The technical fault temporarily caused flights originating in the United Kingdom and denominated in Danish Kroners, to be presented at only a fraction of their intended prices.
Because tickets became available at unusually low prices they were instantly ‘snapped up’ because of the technical errors.
Customers booking the flights (mostly in the US) identified ‘Denmark’ as their country, in, other words, where their billing statements are received when entering billing information at the completion of the purchase process, and were able, online, to complete their purchase at the mistaken fare levels.
News of these obviously wrong fares spread like wildfire online. ‘Bloggers’ boasted about buying multiple tickets, hoping that when the mistake was discovered, they would use the consumer authorities to bully United Airlines into honouring the cheaper fares.
Please state if you think this case contains ‘fraud’ and why. Or, if not, then why not?
The above activity is not a ‘test’. It is a platform to engage early and deal with the ‘ethical versus fraud’ dilemma. Please return to this page and case after the next section, so you can review your account above and re-appraise and sharpen up your approach to fraud as a crime.
Perceptions and representations of fraud
Many academic, legal and vocational disciplines lack definitions to work with, but a polite though honest point made in this chapter (and in furtherance of the good of countering fraud) is that in the world of counter-fraud work there are too many. Academic definitions vary widely and become more and more disparate the more authors become involved and colour the meaning of fraud with their own hypotheses.
As with most serious crimes, many notions of what fraud actually is miss the poi...
Table of contents
Cover
Title page
Copyright
Dedication
Preface
Foreword
About the Author
Acknowledgements
Structure and Method of The Book
Chapter 1 Cutting Through the Maze
Chapter 2 Concepts and Dynamics of Fraud
Chapter 3 From Fraud Awareness to ‘Risk’ – A Professional Step
Chapter 4 Exposing Fraud: Fraud Investigation at Work
