5 Proven Analytic Methods to Discover Fraud in Data

GUEST BLOGGER

Scott Patterson
ACFE Media Relations Specialist

To wrap up Fraud Week, I’d like to pass along some words of wisdom from one of this year’s new Official Supporters, Centrifuge Systems. Renee Lorton, Centrifuge’s CEO, wrote to us about the importance of analyzing and evaluating data in any effort to detect and prevent fraud.

“Big data is everywhere. Customer data. Social networking data.  External watch sites. Industry lists,” Lorton wrote. “With more data comes the opportunity for hidden crimes of collusion -- criminal rings of behavior that span global business networks. International Fraud Awareness Week is a call to action to tame this jungle of data.” 

So these tips are for the “data guardians.” Lorton provides five proven analytic methods to discover fraud in your data:

• Integrate disparate data sources enabling your analysts to connect the dots and reveal the truth. This could include business line data, fraud alerts, customer transaction records, employee data or invoices.
• Profile your data first. Charts and histograms can be very effective ways to understand the data values you are working with. These initial profiles will point you in the right direction for more advanced analysis which may include creating new variables and defining relationship maps.
• Extend your current analysis techniques to include interactive data visualization. You will find that different forms of charts, time lines, tables and relationship graphs reveal unique insights that predictive technologies and rules based systems simply can't find.
• Use "visual cues" when analyzing relationship graphs. These can include link directions, size of nodes and width of links. These visual cues allow you to quickly identify interesting parts of the graph. For example, you can quickly pinpoint people with similar addresses or large financial transactions.
• Document and share insights throughout the investigation. As you reveal key findings, hidden relationships or unusual behavior, document your results. Tracking the discovery process over time will be invaluable as you educate others on how you arrived at your conclusions. Sharing results with other fraud analysts should speed up the investigation.

Thank you to Centrifuge Systems, and all of our Official Supporters, for making this an amazing week of raising awareness and shining a spotlight on white-collar crime.

Until next year...

Accounting Students Earn College Credit and a Conviction

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Jeff Kubiszyn
ACFE Chapter Development Manager

I often preach that involvement in your local ACFE Chapter is more than just attending meetings and seminars. It is about giving something back to the profession and the community. Some ACFE Chapter members work with charities to raise food or money for the disadvantaged. Others speak to civic groups about the dangers of fraud and how to effectively protect assets and investments. And some go even further by working hand-in-hand with law enforcement to help make fraud a less-lucrative business in their communities.

Last year, the Spokane Chapter of Washington leadership asked its members to participate in a program full of potential, if not a little ambitious. Dubbed the Justice for Fraud Victims Project, their task was to work with graduate students from Gonzaga University, investigators and prosecutors to review and submit cases the Assistant U.S. Attorney’s Office did not have the manpower to investigate. Chapter members helped the students test theories and prepare reports on their findings. They spent time with the students reviewing books and records, and ultimately, proving a white collar crime to a jury.

Last month, the accounting students of Gonzaga University celebrated their first victory: the program’s first conviction. After months of combing through statements and bills, the students found that the treasurer of a local Knights of Columbus Chapter was writing checks to himself. Thanks to the members of the Justice for Fraud Victims Project, the people who may not have otherwise had any prospect of recovering ill-gotten gains received justice.

Lenore Romney, CPA, CFE, CVA, and Spokane Chapter member was the CFE mentor working with students on the convicted case. “Working all semester with my student team was personally rewarding regardless of the case outcome,” Romney said. “My team of students was incredibly bright and diligent, and really took ownership in our investigation – they were like sponges soaking up the practical knowledge I was trying to share with them in only one semester’s time together. I was proud of my team’s effort the day they gave their final class presentation, the day I submitted our report to law enforcement, and especially the day I was notified that charges were filed! Obtaining a guilty plea and restitution within a year of submitting our case was the icing on the cake!”

It’s a rewarding experience when you see the positive outcome of a local project, and one of the reasons Chapter involvement is a tremendous benefit to ACFE membership.

Are you involved in your local ACFE Chapter? What are some of the ways you give back to your community?

Congratulations to the Newly-Elected ACFE Regents

ACFE Board of Regents Welcomes Two New Members

The ACFE is proud to announce that Johnnie R. Bejarano, DBA, CFE, CPA, and E. Wendell Hopewell, MBA, CFE, CPA, have been elected to the ACFE Board of Regents. Fellow CFEs elected them from a list of six candidates selected by the Board’s nomination committee. Bejarano and Hopewell will take office at the Board’s meeting this month at ACFE headquarters in Austin, Texas.

JOHNNIE R. BEJARANO, DBA, CFE, CPA, is a senior financial analyst and former accounting manager at National Renewable Energy Laboratory, the nation's primary research and development laboratory for renewable energy and energy efficiency. He's also an adjunct faculty member and area chair of accounting and finance at the Denver campus of the University of Phoenix School of Business. He's a combat military veteran with 26½ years of service in the U.S. Air Force and Colorado Air National Guard. Bejarano was deputy commander for support in the Sultanate of Oman during Operation Enduring Freedom, served as the base comptroller at Buckley Air Force Base, and was involved in inspector general investigations and reports of surveys as an assistant U.S. property fiscal officer. He retired as a lieutenant colonel.

E. WENDELL HOPEWELL, MBA, CFE, CPA, is managing director of Forensic Professionals LLC, a national fraud practice that has helped vindicate corporate executives of fraud allegations launched by audit reports and investigations. Hopewell's career began in the 1980s with Ernst & Whinney, a precursor to Ernst & Young. He was awarded the Ernst & Young Research Fellowship in conjunction with the Government Finance Officer Association of the United States and Canada. Previously, Hopewell led his own regional firm, Hopewell & Company; was director of litigation at BDO Seidman; and was director of litigation at American Express. He also held a federal bankruptcy trusteeship. Hopewell's knowledge and application of professional accounting, auditing, fraud examination, and ethical standards resulted in the nation's first civil finding of audit fraud against state auditors, Pacific West Marketing and Communications Firm Inc. v. California State Department of Transportation, which resulted in a $2 million verdict.

The Board of Regents is elected by CFEs. They are responsible for setting membership standards that promote professionalism and ensure the future of the organization as a whole. Elections are held annually to fill vacant positions and all regents serve two-year terms. Read more about the ACFE Board of Regents here.

ACFE President James D. Ratley Honored by Security Magazine

AUTHOR'S POST

Mandy Moody, ACFE Social Media Specialist

While Hollywood tabloid correspondents and entertainment TV show hosts make their guesses on what A-list celebrity might be sideswiped by the next up-and-coming, wide-eyed adolescent at the next Golden Globes, we at the ACFE are celebrating an award of a different kind. Our president, James D. Ratley, CFE, has been selected as one of Security magazine's Most Influential Security Executives for 2010.

Every year, Security magazine honors top security executives who positively impact the security industry, their organizations, their colleagues and their peers. Mr. Ratley was chosen for his leadership qualities and the positive impact he has had on the nearly 55,000 member-strong ACFE.

His profile, along with other honorees, is featured in this month’s Security magazine. The article is available (free registration required) here. He was also recognized by the magazine at Security 500, a conference for security executives, in New York last month.

This designation is just another achievement to add to Mr. Ratley's long list of accomplishments. In 2005, he was awarded the Cressey Award, the ACFE's highest honor, for a lifetime of achievement in the detection and deterrence of fraud.

Since being named president of the ACFE in 2006, Mr. Ratley has overseen the continued growth of our organization, while assisting in the development of anti-fraud products and services to meet the needs of members. He also serves on our faculty, adding his years of insight and experience to courses we offer to fraud fighters around the world.

Congratulations, Mr. Ratley!

Read the full article in Security Magazine here.