Top Fraud Predictions for 2015: Technology will shape the fight

GUEST BLOGGER

Scott Patterson, CFE
ACFE Senior Media Relations Specialist

Technology will give fraudsters an edge in 2015, but it will also provide new tools for organizations and investigators. Three of our experts weighed in on digital currencies, information security and other issues that will help shape the effort to prevent and detect fraud in the new year:

  • Technology will increase the sophistication of fraud schemes. This is an existing trend that will accelerate in 2015, according to ACFE Regent Gerard Zack, CFE, Managing Director – Global Forensics for BDO Consulting. “More and more we are reacting to reports of fraud with, ‘how did they do that?’” Zack said. “It’s a reflection of schemes becoming more complex and capitalizing on technology, including some of the new technology deployed by companies in the interest of improving efficiency. While simple frauds still exist, we are seeing a distinct proliferation of more complex fraud schemes.”
  • But technology (like data analytics) will also help catch tomorrow’s frauds. Zack is quick to note that for fraudsters, technology is a double-edged sword – as it will also be leveraged by the professionals trying to catch them. “There will be more breakthroughs in the use of technology to detect fraud – particularly in the use of visual analytics and also in the use of tools to mine unstructured data.”
  • Improving information security will be a major priority. More massive data breaches, like the ones that have stricken Home Depot, Target Corp. and other large retailers over the past two years, are likely to occur in 2015, according to ACFE Vice President and Program Director Bruce Dorris, J.D., CFE. “These breaches have exposed widespread vulnerabilities among organizations that store and maintain personal information, putting millions of individuals at risk,” Dorris said. “Considering that storage of data continues to grow at an exponential pace, more trouble lay ahead – and there is an increasing need for information security and protecting against data breaches.”
  • Digital currencies will shake up fraud risks for retailers and consumers. An increased acceptance of bitcoin and other digital currencies among merchants will signal a shift in fraud risk, according to Jacob Parks, J.D., CFE, Associate General Counsel at the ACFE. “Vendors/sellers face reduced fraud risks from ‘friendly fraud,’ where customers fraudulently cancel credit card or bank payments after receiving an item,” Parks said. “Digital currency transactions are generally permanent, which makes this scheme untenable. However, consumers face an increased risk of fraud by dishonest sellers, since the transaction is often not insured or protected by an agreement with a financial institution. Additionally, consumers using digital currencies have a reduced identity theft risk because the transactional data stored by the seller cannot be used by malicious parties to charge the customer (this also means vendors have a reduced risk of data breaches involving these customers).”
  • With protections for whistleblowers increasing, more people will step forward to report fraud. Dorris said that a decade ago, few countries had whistleblower protections. However, increased awareness about the harm caused by major frauds at organizations has led to legislators looking to whistleblowers to prevent or mitigate such crimes. “France, South Africa, South Korea, Australia and other countries have all taken substantial reforms to protect whistleblowers, particularly those who identify crimes in the public sector,” Dorris said. “U.S. policy has moved beyond simply protecting whistleblowers; it now has several programs that financially incentivize whistleblowing regarding bribery, tax evasion and corporate accounting fraud. The programs are largely still in the beginning stages, but have already had major payouts.”

With a new year also comes new threats. But, as many anti-fraud professionals know, just as the fraudsters think of new techniques to wreak havoc, the fraud fighters standing on the other side are armed and ready to prevent and detect it. 

Want more? Visit ACFE.com to find two more fraud predictions for 2015.

The ACFE Law Enforcement and Government Partnership: A Partnership that Benefits Your Agency

GUEST BLOGGER

Sarah Ellis, CFE
ACFE Partnership Manager

The start of the New Year often means a fresh perspective, and that is certainly the message we hope to convey with the release of our new Law Enforcement and Government Partnership (LEGP) webpages. We are proud to debut our new LEGP website with a renewed sense of professionalism and user-friendly navigation. Be sure to check it out at ACFE.com/LEGP.

You can easily view and download informational resources about the partnership, navigate through our list of current partners, learn about the benefits associated with joining and quickly get in touch with ACFE staff. Our newest members are now on the website immediately after partnering, and you can connect with more than 800 LinkedIn members in the public sector who are dedicated to fraud prevention and detection by joining the ACFE Law Enforcement and Government Partnership group on LinkedIn.

As mentioned, our informational resources are available for download including our new LEGP video featuring Angela Byers, Section Chief of the Financial Crimes Section of the FBI and Dom Blackshaw, Detective Senior Sergeant of the Western Australia Police. This video, narrated by actor Stacy Keach, highlights the benefits of becoming an LEGP member, having CFEs on staff and how an agency can go about joining the partnership.

We are happy to welcome our newest LEGP members: the Food and Drug Administration, Office of Criminal Investigations, Michigan Gaming Control Board and the New York State Insurance Fund – The Division of Confidential Investigations. Your agency is encouraged to become a partner alongside more than 100 agencies like these and unlock the opportunity to build a solid foundation of anti-fraud knowledge for your team.

Visit ACFE.com/LEGP to view partnership benefits and the newly-released informational video to help you get started. For more information on how to participate, contact Sarah Ellis, CFE at SEllis@ACFE.com.

Using an IT Background to Unravel Fraud Schemes

MEMBER PROFILE

John Schneider, CFE, CISA, CIA
Chief Gaming Inspector, Pokagon Band Gaming Commission in Michigan

John Schneider, CFE, CISA, CIA, serves as Chief Gaming Inspector at Pokagon Band Gaming Commission in Michigan. As a former IT director, Schneider knows the use of technology can be a key advantage both for fraudsters and the investigators trying to catch them.

Which types of fraud cases are the most interesting to you, personally? Did a certain type of investigation really draw you in?

Inside jobs, such as skimming and cash larceny, are fascinating to me because of the many creative ways people come up with to exploit internal control weaknesses. Investigations into fraudsters at a table game (such as blackjack, roulette, etc.) really draw me in – like a puzzle that must be solved. How did they get away with it? How did we catch them? What controls can be implemented to thwart future attempts? It is truly a cat and mouse environment.

During your career, you have also worked as an internal auditor and as an IT director. How did you make the transition from IT into auditing and fraud?

Technology often is either the tool used to exploit control weaknesses (think hackers), or technology itself is being exploited in order to successfully commit fraud. I was asked many times to conduct fraud investigations as an IT director because I knew the systems and their audit log/reporting capabilities. This logically extended into surveillance reviews, physical and logical control systems, and so forth. In my opinion, fraud examiners of the future – and even the now – must have or develop a solid IT background to be effective in many types of fraud investigations.

So, when the opportunity to join the PBGC came up, I jumped at it. It was a natural transition for me. As a tribal member myself, I am proud to serve the Pokagon Band of Potawatomi Indians.

What do you think are some of the most important things for fraud examiners to keep in mind when working to prevent and detect fraud?

Two things:  1) No internal control system is completely immune from being exploited, and 2) The fraud triangle helps to explain why everyone is a potential suspect. I know that sounds jaded, but how many times have you heard the reaction, “I can’t believe he/she did that” after the guilty party was identified?

What advice do you have for other fraud examiners who would follow in your footsteps?

Gain at least a fundamental understanding of IT, learn to assess the effectiveness of internal controls and get your CFE certification, of course. The knowledge and subsequent recognition gained through the certification process has been invaluable. And no, I’m not just saying that because of this interview.

Do you have any hobbies when you're not fighting fraud?

I recently became more involved in tribal gaming regulations at the national level with the National Tribal Gaming Commissioners/Regulators (NTGCR) organization. I also speak at conferences on occasion regarding tribal gaming regulation, IT, audit and fraud. I  play guitar, tennis and basketball in my spare time.

Read John's full profile on ACFE.com.