How Fraud Examiners Can Use and How Fraudsters Can Abuse Artificial Intelligence

SPEAKER INTERVIEW

Amber Mac, TV/Radio Host, Internet of Things Expert at AmberMac Media, and keynote speaker at the upcoming 2017 ACFE Fraud Conference Canada in Toronto, October 29-November 1

What do you think is the No. 1 security risk that advancing technology poses?

I think the Internet of Things (IoT) attack surface is the biggest technology threat today. As Gartner points out, there will be 20 billion devices connected to the internet by 2020. However, unlike smartphones and computers, we're seeing thousands of newly released IoT gadgets every day from a myriad of suppliers. This means that security precautions are often bypassed in order to get to market more quickly. (Hear Amber discuss this even more in depth in her podcast interview at ACFE.com/podcast.)

How do you think fraud examiners could potentially use (and conversely fraudsters abuse) AI?

When we talk about artificial intelligence (AI), fraud examiners are more regularly using this technology to detect fraud (without even knowing it). For example, machine learning software (one application of AI) can now quickly and effectively determine accounting abnormalities. However, fraud attackers are also using early stage AI to commit fraud. If fact, most worrisome to me is video fraud. Many research institutions are already experimenting with algorithms that program a video to make a politician or business leader appear to say things that they did not. One can only imagine the issues with this as the technology gets into the wrong hands.

What are you most hoping attendees of the conference will take away from your presentation?

I really want attendees to leave my presentation with a much better understanding of the future of both the Internet of Things and artificial intelligence. It’s critical to recognize what’s happening in the market today and where things are heading in the next five to 10 years, so fraud examiners can properly prepare for the inevitable risks.

You are on the front lines of the latest and greatest technology out there, but what is one thing you still hold on to that is manual or traditional?

Strangely enough, I still write my research notes on a piece of paper or in a notebook. For me, it’s not that I don’t recognize the power of digital tools to simplify this process, but I use this practice as a memory tactic. It’s only upon writing with pen to paper that I can better recall facts and stats.

You can read more about Amber and register for the 2017 ACFE Fraud Conference Canada at FraudConference.com/Canada. Be sure to register by September 29 to save CAD 100!

How is Your Company's Fraud Health? Test It and Find Out.

AUTHOR'S POST

Mandy Moody, CFE
ACFE Content Manager

As we prepare for International Fraud Awareness Week, November 12-18, we make sure to always share one of our tried and true, free resources: the ACFE Fraud Prevention Check-Up. The complimentary tool will test your company’s fraud health with a detailed checklist and video.

Why you should take the Fraud Prevention Check-Up:

• It is an easy-to-use way to identify gaps in your company's fraud prevention processes. By identifying risks early, you have a chance to fix the problem before losing money and becoming a victim of fraud.
• It is a great opportunity to establish a relationship with a Certified Fraud Examiner (CFE) whom you can call when fraud questions arise. Since the risk of fraud can be reduced but is rarely eliminated, it is likely your company will experience fraud in future and will need a CFE's assistance.
• Strong fraud prevention processes bolster the confidence investors, regulators, audit committee members and the general public have in the integrity of your company's reports, which will help you attract and retain capital.

Make it a priority to get your ACFE Fraud Prevention Check-Up and share it with your colleagues and managers during this year's Fraud Week. Also, check out more free resources like this at FraudWeek.com.

Clare Rewcastle Brown to Discuss Money-Laundering Controls Learned from 1MDB Scandal

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Sarah Hofmann
ACFE Public Information Officer

“I think this whole offshore financial structure that’s been allowed to grow like a canker … the whole thing’s got out of control,” said investigative journalist Clare Rewcastle Brown in an interview with the Association of Certified Fraud Examiners (ACFE). 

Rewcastle Brown founded The Sarawak Report and Radio Free Sarawak in 2010 to disseminate news that concerned the Sarawak region of Malaysia and eventually, news surrounding the emerging 1MDB (1Malaysia Development Bhd) scandal. In August 2015, a warrant for her arrest was issued by a Malaysian court for "activities detrimental to parliamentary democracy" and the "dissemination of false reports."

“I think we’re seeing a swing of the pendulum and I think 1MDB’s just kind of cropped up perhaps at the right place at the right time … governments across the world have started to realize that they’ve lost control and populations have lost patience,” she said.

Rewcastle Brown will address anti-fraud professionals from across Europe at the 2017 ACFE Fraud Conference Europe in London, March 19-21. Despite having an arrest warrant issued for her by a Malaysian court, Brown remains optimistic that corruption on a global scale can be defeated. She said, “I do think we’re seeing a lashback and 1MDB is going to be just one example of enforcement agencies hitting back.”

Despite not being able to attend the 2016 ACFE Fraud Conference Asia-Pacific last November in Singapore due to safety concerns, she is committed to speaking in-person at the conference in London. She plans to lay out the intricate timeline of the 1MDB scandal that allegedly began in 2009 and runs through present day.

1MDB is currently being investigated by Swiss, Singh and U.S. authorities. In a question-and-answer session after her prepared remarks in Singapore, Rewcastle Brown addressed what controls she thought could help prevent this type of large-scale money laundering. “I think this case is really an opportunity to hold banks and players in these actions seriously to account. And to make the actors who have broken the rules pay the penalty, seriously. [They should be] absolutely exposed, shamed and embarrassed because we need to put off future, potential situations like this arising again,” she said. “I think that’s the best we can hope to come out of this. By showing at last, that the financial regulators have teeth and that they’re catching up to the global criminal element who have been using our offshore system and far-too compliant financial organizations. If we can get ahead of them, maybe that’s the best way to deal with this particular problem.”

Find out more about the upcoming 2017 ACFE Fraud Conference Europe, and register by February 17 for early registration discounts, at FraudConference.com/Europe.

Former Enron CFO to Speak on Gray Areas at ACFE Fraud Conference in Dubai

SPEAKER INTERVIEW

Interview with Andrew Fastow, former Enron CFO and convicted fraudster,* and keynote speaker at the upcoming 2017 ACFE Fraud Conference Middle East, January 29-31

What are you most hoping attendees will take away from your presentation?
This is my first time to speak in this region, so I am looking forward to the opportunity. I am hoping attendees will take away that there is more than one way to think about fraud. Fraud can often occur even when people don’t realize they are committing fraud, and this is something that fraud examiners need to be thinking about. It’s not just about bribery, embezzlement and faking numbers or accounts, but about certain behaviors. I hope people will gain some insight into the behaviors that can lead to fraud.

Why do you think the Enron scandal and message you share remains relevant today?
It remains relevant because of its size and its magnitude, and also the spectacular way and speed with which it imploded. It’s scary because almost no one saw it coming. It is also particularly relevant today because of the human behaviors exhibited there; they are universal human behaviors. Some people are just better at controlling them than others. It really is a story about human nature more than a story about business. I think that’s why it resonates with people. Almost everyone is guilty of this type of behavior at varying degrees and at some point professionally or personally. A comment I often get after my presentations is, “I could think of a dozen situations I have been in where I rationalized things, and now I am second guessing what I did.”

When you are delivering your presentation and sharing your story, are you most trying to highlight the controls that were not in place or red flags missed, or do you think you could potentially sway executives to think twice before crossing blurry ethical lines?
I hope that people walk out of my talk confused. I am not there to lecture them on what the answers are. I want them to walk out thinking, “Whoa, I was thinking everything was black and white, but there really are many shades of gray.” It is not just the black area that leads to fraud, but the gray area as well.

Read more about Fastow and other keynote speakers at ACFE.com/MiddleEast.

*The ACFE does not compensate convicted fraudsters.

Webinar: How Our Implicit Biases Affect Investigations

GUEST BLOGGER

Emily Primeaux, CFE
Assistant Editor, Fraud Magazine

Imagine you’re driving a car and suddenly a squirrel darts out in front of you. What is your immediate reaction? You’ll swerve or break — or you may even accelerate. Do you think about swerving or braking in the split second that the critter crosses your car? 

Let’s continue with the car example, but now you’re deciding to buy one. You spend time researching makes and models, and most likely, prices. Do you actively think about doing this research before going to the dealership?

These are the two examples that Bret Hood, CFE, Supervisory Special Agent at the FBI, used to explain the two systems of thinking as described by Daniel Kahneman in his book, “Thinking, Fast and Slow.” Hood described these scenarios in his top-rated session, "Why Let the Truth Get in the Way: How Our Implicit Biases Affect Investigations,” at the 27th Annual ACFE Global Fraud Conference in June. You can catch a rebroadcast in webinar format tomorrow at 11 a.m. EST. (And, you can also earn any lingering ethics CPE you need to complete for 2016).

In the first example with the squirrel, you’re reacting with a routine behavior that you don’t even think about. This is system one. In the second example at the dealership, you’re thinking before you act. This is system two.

“You spend more time in system one,” said Hood. “And that’s where your blind spots are.”

Hood went on to explain that these blind spots are implicit biases. Basically what this means, he explained, is that no matter what happens around us, our minds are consciously evaluating stimuli and making choices. These biases are going to impact your experiences — you can be primed in certain ways.

This happens because system one is far more efficient than system two. Before you have a chance to assess any situation, system one is leading you to a decision. And the more experience we have, the more likely we are to fall victim to implicit biases.

“If our implicit biases play a role in reaching the conclusion, this has a profound effect on the rest of the investigation,” said Hood. In a fraud examination, if you decide ‘I know this person did it,’ it’s hard to step away from that idea.

Hood explained that acknowledging that you might be susceptible to implicit biases will help you notice when your behavior and actions are being influenced by those same biases. “If our goal is to find the person who is responsible for the crime, acknowledging our own biases and finding ways to mitigate them will lead us to the person we truly seek.”

Find out more about Hood's webinar, which will air tomorrow at 11 a.m. EST, as well as three other top-rated speakers to be featured over the next three weeks in the ACFE's All-Star Webinar Series.