Benford’s Law: Applications 

/
Benford’s Law: Applications 

This blog serves as part two in a three-part series on Benford’s Law. To read part one, click here. Benford’s Law is one of the most interesting things that so many don’t know about — it feels like a trick, but it’s simply a law that applies for no apparent reason. Benford's Law is a theory that says that in lists of numbers, the first digits of the data set follow a pattern, i.e., random numbers aren’t always as random as you think they are. For more information about Benford’s Law, please see the previous blog in this series, Benford’s Law: What It Is and Why Fraud Examiners Use it.

Read More

Case Study: Decoding the Cobweb of Letter of Credit 

/
Case Study: Decoding the Cobweb of Letter of Credit 

Recently, I worked on a case wherein a loan account of a bank turned bad, otherwise known as a non-performing asset. A preliminary investigation was conducted to know the genuine reason for the degradation of the loan account. The allegations included the diversion of the fund by the borrower, trade-based money laundering (TBML) through letters of credit and improper monitoring of the account by the bank. 

Read More

Fraudsters Beware: More Organizations Are Using Analytics and AI Shields To Defend Against Fraud

/
Fraudsters Beware: More Organizations Are Using Analytics and AI Shields To Defend Against Fraud

Everyone likes a good superhero. I always like the ones who use their shields to fight off their enemies.

Superheroes are usually depicted as characters that have abilities greater than a normal person and they use them to accomplish good deeds. In his essay “More Than Normal, But Believable,” for the book “What is a Superhero?” Stan Lee said, “If the good guy is doing something that a normal human being couldn’t do, couldn’t accomplish, then I assume he becomes a superhero.” But isn’t that what people working in fraud and financial crimes try to do? We all bring our unique abilities in fighting crime so the world can be a safer, better place — and together we can accomplish more than one normal human can.

Read More

3 Benefits of Automated Data Visualization for Fraud Investigators

/
3 Benefits of Automated Data Visualization for Fraud Investigators

“Manually tracking money is no longer the solution for professionals.” - Benjamin Chou

The COVID-19 pandemic has presented rare opportunities to commit fraud. For example, a Florida man obtained loans under the Paycheck Protection Program (PPP) valued at $3.4 million by submitting false IRS records.

Bringing cases like this using manual data handling and analysis is burdensome. To develop the evidence you need against the perpetrator, you need to sort through a mountain of financial data.

As a fraud investigator, you spend so much time preparing the transaction data, you may miss seeing the bigger picture. You may not identify the patterns of money moving in and out that characterize fraud, money laundering and other financial crimes. According to one study, up to 85% of financial crimes involve non-analytical and administrative data handling.

Read More

From the President: Number-Pattern Tests, Like Benford’s Law, Are Still Valuable

/
From the President: Number-Pattern Tests, Like Benford’s Law, Are Still Valuable

We’ve all been there in a fraud examination. You’re looking at financial statements, invoice amounts or expense reimbursements that appear normal, but you know in your gut that something is wrong. The numbers just don’t feel right, but it’s not obvious. Like Alice going down a rabbit hole, you’re becoming “curiouser and curiouser” about what you’re inspecting.

In the latest issue of Fraud Magazine, Mark Nigrini, Ph.D., a leading Benford’s Law expert, writes the excellent, detailed cover article on six typical number patterns (including Benford’s) that you can search for during your cases to possibly find fraud.

Read More