Policing Fraud: An Excerpt from Jim Ratley's New Autobiography


Mandy Moody, CFE
ACFE Content Manager

I have had the honor of working for and with ACFE President James D. Ratley, CFE, or as many of us know him, Jim, for almost seven years. (His mama calls him Jimmy Don, but don't tell him I told you that). I still remember the first time I met him. It was July of 2010 and "hot as all get out" (one of his quotes) in Austin, Texas. We were preparing for the 21st Annual ACFE Global Fraud Conference and we had just had a meeting to go over everyone's duties. Jim came up to me at my desk and told me the first of many (tall) tales. He said, "I am the janitor here, so any time you need anything removed or taken out, you just let me know." I knew of his photo from the website, but I was still left speechless because I didn't know what to say. Did I remember his name and face wrong? Was he really the janitor? Do places even have a 24-hour janitor? So many questions ran through my mind in the 30 seconds it took for him to reveal a big grin and a somewhat shy cackle. 

I have been listening to his stories ever since, and I am excited to share this exclusive look at his recently released autobiography, Policing Fraud: My Journey from Street Cop to Anti-Fraud Leader. Here is just a small taste of the many stories that make up Jim Ratley:

"When I worked in Internal Affairs, I often wondered how police officers could commit frauds that jeopardized their careers, livelihood, and ability to support a family. In some ways, it’s an unanswerable question. We all are, to a large extent, mysteries to ourselves and each other. But this much I knew: Because actions matter more than intentions, there could be no justification for betraying those who rely on you. So my actions at home and on the job were going to be as good as I could make them. I was no saint, and still am not, as you’ll learn in the following pages. But I try to learn from my mistakes, and when I make a commitment to my family, my friends, my colleagues, or my employer, I honor it.

It was therefore a shock and a deep disappointment to me that DPD [Dallas Police Department] did little about the time-card fraud that a couple dozen officers in the motorcycle and street patrol units had committed. A few of the officers involved were transferred to other units; most of the offenders, however, were reprimanded but not disciplined or penalized.

A cynic would have said the results were predictable. But you didn’t have to be a starry-eyed optimist to think the department would enforce its own regulations. These requirements supposedly were equivalent to the word of God, and they spelled out everything from when to draw your weapon and how to file arrest warrants and expense reports to what meritorious citation ribbons you could wear above your badge. Although these rules numbered in the hundreds, if you didn’t adhere to them, you’d be cited for noncompliance, which would negatively affect your pay, chances for promotion, duty station, assignments, working partners, and days off—in short, your entire professional life. So I followed these sensible rules and expected the department to enforce them fairly without exception.

But for the dozens of officers implicated in the time-card frauds, there was safety in numbers. Prosecuting so many of them would have severely tarnished the department’s public image and was therefore politically unacceptable to the top brass. So, despite my lieutenant’s and my protests, the case was hushed up and forgotten as quickly as possible. But it was clear to me—and to any crook in DPD—that the bigger the fraud, the smaller the punishment would be."

Read more stories from Ratley's life as a fraud fighter and get your copy today at ACFE.com

Using Social Media to Give You an Edge in Investigations


A quick search on my social media networks would tell you where I work, who my family members are, where I went to college and who my 5 year-old claims to be her “boyfriend.” Yes, social media is full of seemingly useless information like cat memes and time-lapsed cooking videos. But, what if all of those small, meaningless pieces of information added up to something bigger? According to Diana Ngo, those “crumbs” can each or all lead to that competitive edge you need when working on a fraud examination. “Social media gives me that competitive edge in investigations,” Ngo said. “It gives you a crumb that you can follow.”

Ngo is an Associate Director at Blackpeak Group, where she manages complex reputational and investigative enhanced due diligence projects. She also led the breakout session at the 28th Annual ACFE Global Fraud Conference titled, “Using Social Media for Investigative Purposes” where she highlighted the following ways you can use social media in your investigations:

  • Source of wealth research for on-boarding clients
  • Asset identification research for asset-seizing court orders
  • Whistleblower investigations for employees having undisclosed interests via family members
  • Investigating misrepresented personal or business relationships

According to Ngo, law enforcement uses social media for 80 percent of its investigations. While there may seem like an endless list of sites to consider, she highlighted the top areas of coverage to pay specific attention to:

  • WeChat: China’s Facebook. Best for finding sources. Pro Tip: You can use keyword searches for all public accounts.
  • Weibo: China’s Twitter. Pro Tip: Look at followers of a person and the people they follow for connections.
  • Instagram: A photo-sharing network. Fastest-growing application with most active users 18-29 years old. It is extremely popular in the Philippines and Singapore. Pro Tip: Every single photo has a timeline, so you can build timelines around posts.
  • Facebook: Members have the most active internet users. Pay close attention to the privacy settings: they are complicated and change frequently. Pro Tip: Use their strong search engine. You can search down to “men who went to the UCLA, live in New York and work at Deloitte.”
  • LinkedIn: Professional networking site. Made up of more males than females, people of higher incomes and higher education levels. Pro Tip: You can change the settings on your account to search anonymously.

Ngo reminded attendees to not solely rely on the information you find while scrolling and searching. According to Ngo, you still have to confirm everything you find because social media is managed by individuals. And those individuals, like us, want to represent themselves in the best way possible online. I mean, no one is going to post a video of themselves with piles of jewels and brag about a crime they committed, right?

The Power of Knowing, Accepting and Using Your Professional Strengths and Weaknesses


Mandy Moody, CFE
ACFE Content Manager

Do micromanagers know they are micromanagers? Are coworkers who are not replying to emails intentionally ignoring you? Does that mean they don’t like you or they don’t value your time and energy? Do people who don’t speak up in meetings not care about the topic at hand? I would guess that the answer to most of these questions is no. In reality, they are each behaving in a manner that is most comfortable for them. They are not aware that others, who have their own and different way of doing things, are not connecting or understanding them.

Jean O’Brien, executive coach, trainer and speaker, is one of the career coaches at this year’s 28th Annual ACFE Global Fraud Conference. In the Career Connection booth in the Exhibit Hall, she will be administering one of the most beneficial personality assessments one can take when addressing professional awareness — the Myers-Briggs Type Indicator (MBTI). I caught up with Jean last week and asked her to break down the importance of the MBTI and explain just how valuable it can be for career development. “The MBTI provides skills to 'talk' another’s language, and confidently step out of your comfort zone to best interact and communicate with different personalities,” she said. “Without this insight and awareness, we miss opportunities every day to build a successful business-leadership expertise.”   

What exactly is the Myers-Briggs Type Indicator and why is it so valuable?
The MBTI assessment is a series of questions that reveals our preference for the way we collect information, make decisions and what attitude we prefer to use as we interact with the world. An example such as, “Do you take initiative in making contact with others or do you let others initiate first contact and begin conversations?” conveys insight into the way you prefer to act, make decisions or manage conflict. This information identifies the tools you need to clearly and effectively communicate with others.

Why do you think this personality test is so beneficial for fraud examiners?
Fraud examiners have specific, specialized skills that are highly valued for observing and communicating information that may not be apparent. They prepare evidence, testify in court, interview witnesses, coordinate investigative efforts and advise businesses on ways to improve fraud detection to justify actions. The MBTI will enhance their skills in situations for career development, interviewing and networking that may be out of their comfort zones. It will help them be confident in environments that may be challenging or stressful.

Do you have a story that conveys why this exercise is so valuable?
In my experience, every MBTI situation has made a significant difference, increased awareness, provided an avenue to adapt when appropriate and to make changes for improved relationships. In one example, an organization referred a person to me for coaching who was going to be terminated if he did not become more aware, learn new skills and make adjustments necessary for his success as a valued employee. Good people were leaving because of him and behaviors had to change. He completed the MBTI assessment and we explored every detail, observing how and why his micromanagement style of telling people what to do impeded employees rather than allowing their capable knowledge, experience and expertise to be effective for the team. Through examples seen from the other person’s perspective, he began to see how he was limiting growth and success. It took patience and practice for him to observe his behaviors and the reactions of others. He worked hard, and with appropriate changes, open conversations and actions he was able to regain his leadership, confident that he and his team were preforming well. He was recognized by the company, sought out as an expert as someone who learned to combine knowledge, confidence and power to represent the organization internally and publicly.    

You can find Jean at the Career Connection Booth in the Exhibit Hall at the upcoming ACFE Global Fraud Conference in Nashville, June 18-23. She will be administering MBTI assessments and providing coaching for $50 per session. Register for a session today!

Wearables Strike Again: Deceased Woman’s FitBit Used to Solve Her Murder


Jeremy Clopton, CFE, CPA, ACDA
Director, Forensics and Valuation Services

In what seems to be a pattern in investigations, a deceased woman’s FitBit was used to help solve her alleged murder. In this situation, the data from the FitBit, as well as social media activity, was used to disprove an account of events provided by her husband.

This story illustrates how data beyond the obvious can be used in investigations of all types. The same mentality can be beneficial to fraud examiners as well. The key is to consider all the potential data points available to help in an examination. 

Let’s consider a financial statement manipulation scheme. While you may know the user ID that posted the entry, it is important you look even further for evidence of who actually posted it. Other relevant data points may include:

  • Date/time the entry was posted
  • Workstation from which the entry was posted
  • User ID typically associated with that workstation, compared to the user ID posting the entry
  • Was the user signed in remotely or in the office?
  • Who was in the office on the date/time the entry was posted (badge access records)?
  • Was there email activity or other digital activity on the workstation?
  • Who actually logged in to the workstation from which the entry was posted?

Clearly there is a lot more information than just the date, debit/credit, account number and amount. As you approach your next examination, consider the following:

  • What is the alleged scheme?
  • What other data can help me determine what happened or who was involved?
  • Are there data sources to help corroborate or refute the allegations?
  • Do the patterns of activity match our expectations?

I’m not saying a FitBit and social media will help solve your next investigation, though I am confident there is quite a bit more data out there you may find useful to your case.

You can hear Jeremy speak on how to effectively communicate complex data next week at the 28th Annual ACFE Global Fraud Conference, June 18-13 in Nashville.

What You Need to Know About the U.K.’s Criminal Finances Act


Jordan Underhill, J.D.
Research Specialist

On April 27, the U.K. officially passed the Criminal Finances Act 2017. This law represents the most significant development in U.K. corporate criminal liability since the passage of the Bribery Act in 2010. The Act also strengthens the government’s ability to combat money laundering, terrorist financing and tax evasion. The various provisions of the Act are expected to come into force later this year and will affect both U.K.-based firms and foreign firms conducting business in the U.K.

Tax Evasion
One of the most important sections of the Act expands corporate criminal liability for tax evasion. This expansion represents the U.K.’s latest effort to combat domestic and global tax evasion and to increase its coordination with foreign governments. The Act creates two new strict liability criminal offenses:

  1. Failure to prevent the facilitation of U.K. tax evasion offenses
  2. Failure to prevent the facilitation of foreign tax evasion offenses

These new offenses are modeled after Section 7 of the Bribery Act, which created a strict liability offense for the failure of commercial organizations to prevent bribery on their behalf. Like Section 7, these new “failure to prevent” offenses have potentially broad applications because no intent is required. A corporation can be held liable for the actions of employees who, in their professional capacity, encourage or assist the tax evasion of others. This is true regardless of whether upper management had knowledge of or directed the actions of the facilitator.

However, the Act does provide a defense for firms that have reasonable prevention measures in place. To successfully assert this defense, the corporation must show that, at the time of the offense, it had reasonable prevention procedures in place to prevent employees from facilitating tax evasion. Alternatively, the corporation can show that it was not reasonable in all circumstances to expect the corporation to have any prevention procedures in place.

Unexplained Wealth Orders
Chapter 1 of the Act creates the “unexplained wealth order” (UWO), which is a new investigatory tool that authorities can use to expose corruption, tax evasion and other illicit activities. UWOs require individuals to explain the origin of funds that appear disproportionate to their reported income. These orders can be issued by a High Court at the request of an enforcement authority to a “politically exposed person” (e.g. public official) or a respondent that the court has reasonable grounds to suspect is involved in a serious crime or is associated with someone involved in a serious crime.

A UWO can be issued to someone not based in the U.K. and may relate to property outside of the U.K. If an individual makes false or misleading statements in response to a UWO, they can be convicted of a criminal offense that carries a maximum penalty of two years’ imprisonment.

Anti-Money Laundering and Terrorist Financing
The Act also enhances the abilities of law enforcement to investigate suspected money laundering and terrorist financing in three key ways:

  1. The Act empowers law enforcement to issue disclosure orders during money laundering investigations. These orders compel individuals that authorities suspect may have relevant information to answer questions and disclose documents. Individuals who fail to comply with disclosure orders can be fined up to £5,000.
  2. The Act allows for information sharing between various firms when there is suspicion of money laundering. This includes the ability for firms to submit joint suspicious activity reports (rather than a single report for each firm), which combines information from each firm into a single, cohesive document to create a more streamlined investigation for authorities.
  3. The Act gives the National Crime Agency (NCA) more time to investigate suspicious activity reports. Ordinarily, when a business submits a suspicious activity report, it requests consent from the NCA to proceed with the reported transaction or activity. The NCA can deny consent, creating a 31-day moratorium period during which investigators can gather evidence on the reported activity and determine if further action is required. However, this window is often too short for a thorough investigation. The Act allows the NCA to petition a court for up to six 31-day extensions to the moratorium period, providing more time for a careful analysis of the suspicious activity.

The Criminal Finances Act represents another step in the fight against fraud. Affected businesses should conduct risk assessments to ensure that they are in compliance with the Act before it comes into force later this year. In particular, special attention should be paid to procedures designed to prevent employees from facilitating tax evasion. Likewise, employees should be educated about the Act and any changes in internal policies.