Untethered From the Office: How We Fight Fraud on the Go


James D. Ratley, CFE
ACFE President and CEO

It was wonderful to see so many of you at the 26th Annual ACFE Global Fraud Conference. At the opening general session, I told attendees that ACFE founder and Chairman Joseph T. Wells, CFE, CPA, and I recently were discussing the future of fraud and what lies ahead for the profession.

I told them that when the ACFE was founded in 1988, the life of the Certified Fraud Examiner (CFE) wasn't nearly as complicated as it is today. However, technology has quickly changed our profession.

In the latest Fraud Magazine cover article, "Fighting fraud on the go: CFEs enter smart new world of mobile devices," by Robert Tie, we find that many fraud examiners now carry their offices in their pockets. We conduct our jobs with convenience and speed.

But because it's so easy to unobtrusively make audio and video recordings with smartphones and tablets, Tie writes, a critical question arises: Is it legal to secretly make those recordings during interviews or on surveillance assignments? "It's complicated," says David Wall, J.D., CFE, CPA, PI. (Wall is a director in the forensic and litigation practice of SingerLewak LLP, a regional public accounting firm.)

"State privacy laws comprise a jurisdiction-by-jurisdiction patchwork of sometimes conflicting rules," Wall says. "But they all agree on two key principles." The first is that private individuals — and in certain situations, public officials and celebrities — have the right to a reasonable expectation of privacy, he says in the article. The second principle, according to Wall, is that it's illegal to intrude upon anyone's privacy without first obtaining that person's informed consent.

Tie then gets practical and provides app recommendations. "My smartphone is an absolutely critical tool for staying in touch with people, information and activities," says Brian Willingham, CFE, PI, president of the Diligentia Group Inc. in Katonah, New York. He loads apps on his phone for organizing educational materials, case studies, articles and schedules; and coordinating real-time conversations about documents, spreadsheets and presentations shared through the cloud.

I remember when our first fax machine at the ACFE was the most marvelous bit of technology we'd ever seen. Instant communication! But we were still tethered to our desks. No more. However, as Spider-Man's Uncle Ben said, "With great power, comes great responsibility." Read about the implications of the brave new world.

Chief Compliance Officer Prepared to Fight Fraud 'Anywhere, Anytime'


Dante Fuentes, CFE, Chief Compliance Officer  
Security Bank

“Think fraud, fight fraud, anytime, anywhere. Sacrifice for the good of others,” says Dante Fuentes, CFE. Raised in one of the most populated cities in the Philippines, Fuentes is Chief Compliance Officer for Security Bank, one of the top 10 local banks in the Philippines. Fuentes is also president of his local ACFE chapter and finds that the most rewarding aspect of his job is that he is able to help others reach their full potential from the training he gives them. “I am able to coach and mentor, learn skills that better myself, and I am able to pay it forward and assist someone else in the same way.”

When did you become passionate about fighting fraud? 
I became passionate about fighting fraud when I worked in a bank in 1978 as a savings account bookkeeper.

What do you think contributed to your success moving into your current position? 
More than the experience, the training I received from the ACFE helped me improve and achieve my goals in my current positions.

What does your current role entail? 
As the Chief Compliance Officer at Security Bank, part of my job is not only to help prevent misdemeanors and fraud in the organization, but also to lead money laundering investigations. I am the lead senior officer for purposes of administering the compliance program and interacting with the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) on compliance-related issues. I also oversee the design of an appropriate compliance system, promote its effective implementation and address breaches that may arise. I report the matter to the Board, and recommend the imposition of appropriate disciplinary action on the guilty parties and the adoption of measures to prevent a repetition of the violation. I am responsible for ensuring the integrity and accuracy of all documentary submissions to the Bangko Sentral ng Pilipinas. My job requires me to have the commensurate skills and expertise to provide appropriate guidance and direction to the bank on the development, implementation and maintenance of the compliance program.

My other affiliations, such as being the president of the ACFE local chapter (ACFE – Philippines), the president of the Association of Bank Compliance Officers, Inc. (ABCOMP) and one of the Senior Advisers of the Good Governance Advocates and Practitioners of the Philippines (GGAPP), entails managing/administering my peers on matters related to fraud detection and prevention from which the knowledge and experience I acquired from being a CFE was a big help.

What are the best opportunities for someone entering into your career? 
The best opportunity for someone entering into a career like mine would be the experience gained through the years of exposure in your field of endeavor and proper training.

What do you wish you knew (but didn’t) when you first contemplated this career? 
I wish I knew in the early part of my career that there was a formal organization of fraud warriors.

Is there a memorable case or project that you have worked on? 
Indeed I do. My most memorable case with fraud was very painful. Early in my career, I investigated my best friend, who was my co-employee in a bank. He recommended me to the bank where we both worked, and his parents and my parents are very close friends. When my best friend was suspected to have abstracted cash, I was assigned to do the investigation and make a recommendation. The problem was, should I exonerate my friend or do what is right? I chose to do what is right. My best friend was terminated. I did not realize then that I had to go through and experience this emotional process and overcome it to be a better fraud fighter.

After the first experience, almost 200 more fraud investigations followed. Most of the fraud cases I have investigated in the banks I worked with were committed by first-time offenders, therefore easier to investigate and prosecute – unlike a money laundering investigation which is a more complex and sophisticated fraud committed by seasoned, learned and mostly powerful people.

What do you consider to be the most important values a CFE must have? 
The most important values of a CFE are to have a strong character and moral integrity.

When you are not working, what types of things do you enjoy doing? 
My Monday and Wednesday nights are for bowling. This is my “me” time with friends. In fact, I just bought my new bowling shoes when I attended the conference in Baltimore.

Read Dante's full profile in the Career Center on ACFE.com.

How Mexican Officials Launder Money


Dennis Lawrence, CFE

Lawrence is a Denver-based risk consultant.

Mexico has rightfully earned its reputation as a hotbed for chaos and corruption. Home to the world’s most powerful drug cartels, both local and national political figures live in constant fear of upsetting the wrong person. Compounded with a weak rule of law in many regions and a complicated relationship with big business, it is no surprise that government officials routinely exploit their positions for personal economic gain. Whether they can figure out a way to successfully launder corrupt payments, however, is a less certain affair.

Financial institutions are cracking down on money laundering in Mexico in light of increasing pressure from regulatory authorities, and it is perhaps more challenging today than ever for government officials to keep bribes undetected. Here are a few real life stories (and methods) of the worst offenders who got caught.

Governor Recruits Broker
Former governor of Quintana Roo, Mario Villanueva, spent the latter half of the 1990s amassing a fortune by authorizing the Juarez cartel to smuggle hundreds of tons of cocaine from Colombia to the U.S. via the Yucatan Peninsula. In exchange for a minimum of $400,000 in cash per load, Villanueva directed state and federal police to offload, transport, store and protect drug shipments destined for American consumers. In search of a way to protect his growing fortune, the governor enlisted the help of Lehman Brothers broker Consuelo Marquez to create several offshore corporations of which Villanueva and his son were beneficiaries. Each was carefully designed to conceal the names of its true owners (entities owned by layers of other companies or trusts is a favorite tactic). Marquez then established brokerage accounts at Lehman Brothers in the names of those offshore corporations and coordinated transfers of drug trafficking proceeds into and out of the accounts at the direction of the governor. Nearly $19 million was laundered through the firm. Villanueva disappeared days before the end of his term in 1999, and was discovered by Mexican police in a remote part of the Yucatan two years later. According to the Federal Bureau of Prisons, the ex-governor is currently incarcerated in Lexington, Kentucky, and is scheduled for release in 2019.

Trusted Intermediaries
Between 2005 and 2011, former Secretary of Finance for the Mexican state of Coahuila, Javier Villarreal, increased the state government’s public debt from $27 million to $2.8 billion, likely with the help of former Governor Humberto Moreira, who has yet to be officially charged with any crimes. According to court records, Villarreal obtained fraudulent state loans amounting to $250 million using falsified documents before tasking his wife and other relatives to open bank accounts in the U.S. The accounts collectively received millions in cross-border transfers from Mexico, likely from entities funneling money to obfuscate the origin of official government funds. Family members went on to create several LLCs for purchasing both commercial and residential properties in Texas.

Villarreal’s mistress, Altagracia Daniela Rodriguez-Garcia, was placed in charge of opening a particularly strategic bank account at a JPMorgan Chase branch in Brownsville, Texas. As instructed, she waited one year prior to quietly adding Villarreal’s name as an authorized signer. Shortly thereafter, Villarreal traveled to the same branch to open an offshore investment account held in Bermuda. The pieces of the puzzle came together when it was learned that he and a co-conspirator held a meeting with JPMorgan Chase bankers in Mexico where they inquired as to whether wire transfers could be deleted from bank systems so that no transactions would be seen going from Mexico to Bermuda via the U.S. Villarreal was arrested by Mexican authorities in 2012 as part of a public corruption investigation, but disappeared for two years before surrendering to U.S. authorities on the international bridge between Juarez and El Paso. In September 2014, he pleaded guilty to money laundering charges in a Texas federal court.

Corporate Fronts
Located in Northern Mexico, the lawless border state of Tamaulipas has been the site of numerous massacres and beheadings in recent years. According to U.S. law enforcement officials, the deterioration in security can be partially attributed to the tenure of former governor Tomas Yarrington who allowed drug cartels to operate freely in Tamaulipas without police interference. Apart from payments related to drug trafficking, Yarrington received an abundance of bribes for public works projects. In exchange for the rigged awarding of contracts, construction company owner Fernando Cano purchased real estate for the governor using front names. As Yarrington’s trust in Cano grew, the wealthy businessman became responsible for personally guaranteeing a $2.5 million loan on an airplane acquired using ill-gotten gains through a front company set up by another conspirator. He subsequently guaranteed numerous other loans linked to real estate opportunities involving similar modus operandi where shell companies were created by individuals in Yarrington’s inner circle and used to obtain expensive properties in the U.S. and Mexico. The governor’s demise came when, in the midst of divorce proceedings, Cano’s angry ex-wife spoke openly about the two mens’ wrongdoings. Yarrington disappeared in 2012 and remains on the run.

Financial crimes involving members of government are certainly not limited to Mexico, but as it stands today, the country is a magnet for public corruption. With that said, perhaps the sole commonality among almost all political figures who launder money is that they can’t do it alone. Family members, confidantes, bribe givers and the occasional corrupt financial services employee all play a role in the process… not to mention the banks that safeguard the funds themselves. Consequently, it only takes one mistake at the bank resulting in a Suspicious Activity Report, one angry colleague-turned-police informant or one careless act in an otherwise perfectly run multi-year operation to trigger the downfall of another elected official. The only question is, who’s next?

[Note: All figures are in U.S. dollars.]