Fraud Examiner: 'Interviewing is Not a Simple Yes or No Answer'

MEMBER PROFILE

Kenneth Springer, CFE, Founder and President
Corporate Resolutions Inc. 

Author Kenneth Springer, CFE, is the founder and president of Corporate Resolutions Inc., a specialized firm that gathers intelligence and offers a variety of investigative services that helps its clients make informed business decisions. When conducting an investigation, “use your investigative skills to follow the evidence,” Springer said. “Interviewing is not a simple yes or no conversation; there are skills required to make sure the person feels comfortable in order to elicit the most honest and complete information.”

How did you become passionate about fighting fraud? 
While in college, I spoke with a family friend who was in the FBI. I became very interested and pursued it.

What steps led you from the FBI to starting your own company?
Although I enjoyed the FBI and the people I worked with, I had an opportunity to leave and get involved in managing a small investigations firm that conducted background checks and investigations for private firms. Four years later, I was running the company and decided I wanted to start my own business. I put together a business plan, got a Small Business Administration (SBA) loan and started Corporate Resolutions Inc. in August 1991.

What is one of the biggest lessons you have learned since becoming a CFE?
When investigating a fraud, you cannot necessarily rely on all of the facts as initially presented by the client since they may have their own agenda. You need to be open-minded and not have a preconceived notion as to how the fraud may have happened and by whom. Use your investigative skills to follow the evidence.

I know this because a long time ago a client led me to believe that a certain employee had committed the fraud we were investigating. It turned out that the client was actually responsible. The client was eventually arrested by the FBI.

What is a memorable case or project that you have worked on — one that made you feel especially proud?
In one instance, investors backed a company that sold hardware (desktops) and during a surprise audit, found $5 million dollars missing. After two months of having forensic accountants try to figure out the fraud, we were brought in to conduct interviews and gathering facts. We quickly learned that while the auditors were there, the CFO abruptly resigned and left town (in our business we call that a clue).

We immediately began fact gathering on the previous CFO and learned he had formed a similar-sounding entity within the company, yet the CEO was unaware of it or why it was formed. He also changed company procedure so that he was the one who opened all of the company mail.

To perpetrate his scheme, he would buy 100 computers, pay for them and then return 50. When the computer company sent a refund check, he was able to take the check and deposit it into the account he had fraudulently formed — which was located at the same branch where the company did their banking. Thus, it did not raise any red flags within the company. The FBI is still looking for him.

While putting together the fidelity bond claim for the insurance company, we did a background check on the previous CFO. He was not a CPA as he had claimed and the three references he provided did not check out.

What activities or hobbies do you like to do outside of work?
Spending time with family and golfing.

Read Kenneth's full member profile in the Career Center on ACFE.com.

What’s in a Name? How to Reconcile Linguistic Differences in Identity Matching

LIVE FROM THE ACFE GLOBAL FRAUD CONFERENCE

Sarah Hofmann
ACFE Public Relations Specialst

For most people, your name is one of the purest, and easiest, summations of your identity. For those in the business of screening identity data against compliance intelligence information, a name may be the best tool you have to track and prosecute fraudsters around the globe. However, things get complex when you consider the multitude of countries and organizations developing sanction lists using their language’s translations of names.

When dealing with names, anti-fraud professionals must think both about the source language and the language it is being transcribed into. Would a name that originally is written in Russian Cyrillic characters and placed on an Egyptian watch list have the same sound and root name if then translated into English or French? Victoria Meyer, CFE, ACCA, Director of the Swiss Business Academy, discussed this potential problem during her session, “Linguistic Identity Matching” at the 27th Annual ACFE Global Fraud Conference.

“These are all different things you need to take into account to see ‘is this name a match or not?’” she said. “The pronunciation in the different countries is different, so you get different end translations.”

Showing the example of the name, عبد الرحمن حسين , she explained that it has more than five different potential English translations depending on what nationality the Arabic characters are first being translated into Latin characters from. If that name was translated from Yemeni Arabic into English, the translation would be “Abdirahman Hussein (Cabdiraxmaan Xuseen).” If translated from Pakastani Arabic into English, the name would be “Abdur Rehman Hussain.” While these might not be entirely dissimilar, a software program designed to match lists would likely not be able to match them.

Similarly, the same root name in a specific language could translate to different outputs in different languages. Former President of the Russian Federation Boris Yeltsin’s full name is originally written Борис Николаевич Ельцин. However, in French it is translated to Boris Nikolaïevitch Eltsine. In Spanish, it is Boris Nicoláievitch Iéltsin.

The largest takeaway that professionals operating in the multinational sanctions realm need to realize is that to perfect their linguistic identity matching software and processes they must educate themselves on the linguistic patterns and customs of all countries they deal with. For counterterrorism experts, French and German translations of names are starting to come into play more as many refugees have been moving to areas in those countries, and the law enforcement and terrorism authorities are creating watch lists in their language.  

When practicing linguistic identity matching, the onus falls on the fraud examiner to ensure the accuracy of any type of matching software their organization might be using. “This is your risk tolerance you’re setting. It’s not fair to delegate it to someone in IT,” said Meyer. She said that someone well-versed in code and computer patterns, but not familiar with many nuances of international linguistics, would not be able to effectively create a software matching system unless given the patterns and specific triggers to look for from a linguistic professional.

Ultimately, anti-fraud professionals need to be the ones leading the charge in reforming and perfecting multinational linguistics identity matching. Meyer explained that currently, the vendors touting identity matching systems have said, “We know our searches are rubbish, but no one expects any better, so it’s fine.” With the fight against fraud becoming undeniably global in nature, it is more important than ever for fraud examiners to look outside of their own language borders. 

Find conference articles, photos and videos at FraudConferenceNews.com.

CFE's Passion is Also His Career

MEMBER PROFILE

Scott Moritz, CFE
Managing Director, Global Lead, Protiviti Forensic
Protiviti  

As a child of the 60s and 70s, Scott Moritz, CFE, global leader at Protiviti , was enthralled by TV shows like “Mannix” and “Kojak.” These popular shows portrayed ‘white hat’ detectives breaking open their cases. Being prone to wearing the ‘white hat,’ Moritz considers himself fortunate that his passion is also his career. While advocating anti-fraud efforts, Moritz has learned that it is important to “recognize that things are not always black-and-white” – balance is key. Moritz quotes American psychologist, Abraham Maslow, “If all you have is a hammer, then everything will look like a nail.” To this Moritz replies, “In order to avoid becoming a hammer, you need to keep an open mind, follow the facts and accept that not every allegation is true or can be proven. Our job is to investigate the allegations, determine whether they have merit and report the results.”

How did you become passionate about fighting fraud or what sparked your interest to enter into the anti-fraud field?
From the time I was very young, I was fascinated with the notion of becoming a detective and getting my ‘gold shield.’ Wearing the white hat has always been my instinct, and I am fortunate that my passion for investigations took me in the direction that it did.

What steps led you to your current position?
After college I confided in one of my sisters that I was submitting applications to take several police department entrance exams. My sister asked me if I had considered the FBI. She encouraged me to pursue it and put me in touch with a friend who was an FBI Special Agent in New York City for advice.

Fifteen months after applying to the FBI, I was sworn in as a new agent through the FBI Academy and was assigned to the Memphis, Tennessee, division on a white-collar crime squad. After four years in Memphis, I transferred to the FBI’s largest field office in New York. When I was assigned to the Asset Forfeiture Money Laundering Squad, I was a little deflated. I had my heart set on working traditional organized crime since New York City is home to five major crime families. I quickly realized that I had landed on a great squad whose primary focus was conducting parallel financial investigations of major criminal cases to then identify, seize and forfeit criminally-derived assets in order to dismantle major criminal organizations. Hence, I got to work on the largest high profile cases in the New York area, which included major organized crime, narco-laundering and white-collar crime cases.

After making many of these cases, I was offered an opportunity to leave the FBI and work for a Big 6 accounting firm. I ended up working on more than 30 monitorships of private sanitation companies during the course of my early private sector career. I also worked on a wide variety of financial crime and corruption cases, and made several stops along the way at different accounting and consulting firms, including two start-ups, before assuming leadership of Protiviti’s Forensic practice three years ago.

What are the most challenging aspects of being a White-Collar Crime & Anti-Corruption Strategist?
I think the biggest challenge is to get our clients to view fraud and corruption risk management and compliance as a strategic imperative and a critical part of their overall strategic planning. In 30 years of investigating financial crime and corruption, including 20 years of advising companies on these subjects, I’ve seen very few organizations that include fraud and corruption risk in their strategic planning processes. Instead, they opt to wall them off, which often results in their failure to consider the full spectrum of weaknesses and threats that could inhibit them from realizing their strategic goals.

What position in your career do you feel has made the most impact in your professional growth and why?
I think it’s really two positions. As an FBI agent investigating white-collar crime and corruption, I had to develop the ability to ingest and analyze large amounts of information about companies, the industries in which they operated and how the financial crime occurred. Something else that made a significant impact on my professional growth was coming into contact with people across a broad spectrum of society, from drug addicts, organized crime members and bank robbers to CEOs, judges and U.S. Senators. I had to learn how to establish common ground with every type of person and build rapport. It’s something that has served me well both professionally and personally.

What activities or hobbies do you like to do outside of work?
I’ve got three sons, all of whom were very active in school sports and other activities. My youngest is now a freshman in college and suddenly the flurry of high school football, baseball, indoor track meets, hosting pasta parties and attending awards dinners have all come to an abrupt halt. My wife and I are now struggling with how to continue to be helicopter parents from 250 miles away. In responding to this question, it occurs to me that I need a hobby. I know my son would probably appreciate it being something other than him.

Read Scott's full profile in the Career Center on ACFE.com.

Why Hollywood Loves Fraud

GUEST BLOGGER

Sarah Hofmann
ACFE Public Relations Specialist

On the big screen and small screen alike, it appears that there’s a new villain in town — fraud. From ABC’s miniseries Madoff, Oscar winner The Big Short, Showtime’s thriller Billions and many more projects in production, fraud seems to be the new hot topic for studios to explore.

The timing of pop culture tackling fraud is undoubtedly tied in some way to the Great Recession of 2008. While fraud is a crime that, by definition, is mainly hidden, the entire world saw how far-reaching the effects can be when big banks began to fail. Script analyst Mars Incrucio explained, “The subprime mortgage crisis in the states left the American public in a state of outrage, and it needed someone to blame. The words ‘banker’ and ‘Wall Street’ suddenly became even more vile and rapacious than they had before. All of this is to say, bankers, brokers, hedge fund managers, and any one percent figures now make for a great bad guy.”

As the dust began to settle on the destruction caused by unethical businessmen, there was another side of human nature that lent itself to being interested in stories of fraud and corruption. Vice President of Education for the ACFE, John Gill, J.D., CFE, explained that movies and shows about fraud can also appeal to a basic curiosity in people. “I think part of it is [the audience asking], ‘Would I ever do something like that?’... People find themselves facing ethical dilemmas more than they think.”

Luckily, Hollywood is beginning to pay attention not only to the greedy villains responsible for fraud; they are celebrating the men and women who uncover these schemes. Incrucio said, “Be on the lookout for the new hero motif, the investigator. These characters use research, wit and hard work to bring down ostensibly greedy and negligent corporate figures. Films such as Spotlight and Truth utilize this character as a direct challenge to the villains beget by the same public outrage.”

In addition to raising awareness about the investigators that ferret out these crimes, seeing more tales of fraud on the screen can lead to the public having an increased awareness of what to lookout for. Gill said, “Many stories are real and the ones that aren’t show an accurate depiction … they’re very helpful to get the word out about some of these schemes … [they] put a face to some of the realities of fraud.”

Whether they serve as PSAs for the general public on red flags to avoid or show entertaining tales of dogged investigators defeating the “evil fraudster,” it’s a safe assumption to make that there will be even more movies and shows in the coming years that show what we already know: fraud is a real issue that needs to be tackled.

Laying the Foundation: Maximizing Your Success

FROM THE RESOURCE GUIDE

Tiffany Couch, CFE, CPA, CFF

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Learning the basics. While the phrase may conjure up long ago memories of learning the alphabet, using building blocks, participating in a new sport or, starting over in a new school, new job or new professional field — I find that when it comes to fraud examination, the basics are essential to the success of any engagement. From understanding fraud schemes and the red flags of those schemes, to interviewing witnesses, collecting evidence and writing reports, applying these fundamental concepts consistently during each engagement are building blocks indeed — building blocks of success.

In a recent engagement I was asked to identify why and how a senior vice president had manipulated the CEO’s signature on an expense reimbursement form — I definitely used “the basics”:

  • To identify that all four expense reimbursement schemes (fictitious, altered, mischaracterized and duplicate) were potentially being perpetrated against our client; 
  • To ask open-ended questions which led to information regarding the suspect’s approval authorities, lifestyle and assets;
  • To appropriately collect evidence, including paper and electronic evidence; and
  • To write a solid fraud examination report that led to an indictment and arrest of the suspect just three weeks later (and eventually to his incarceration in federal prison for 46 months).

Conducting a fraud examination based on a solid foundation of knowledge, skill and professional standards will lead to a successful case resolution. In fact, the more complex a case, the more important those basics become. Think about this: you are the smartest person in the room. Sure, your report or testimony may be considered by attorneys, judges and intelligent clients; but, they do not have the expertise you do. Conveying complex financial crimes in a simple way to those who do not have such a background is your most important job. And doing so consistently will be building blocks for something else: your professional credibility.

Consider what happens when a building or a relationship doesn’t have a solid foundation. You got it — it crumbles. I have been involved in a few cases where professionals who attempted to conduct investigations omitted critical information, opined on the “guiltiness” of a person or wrote incoherent reports. Their professional credibility and their work were put into question. I wondered, “Did they forget the basics? Ignore them? Think the rules didn’t apply to them?” Whatever the reason, it didn’t matter. Their cases crumbled for lack of a foundation. Don’t be afraid to get back to the basics every single time you approach a new case.

Whether you are an auditor wishing to improve your fraud detection skills, a professor wanting to impart more knowledge to your students or a law enforcement officer looking to gain skills for the increasing number of white-collar crimes hitting your desk, you won’t be sorry you spent time attending some of the ACFE’s foundational courses like Principles of Fraud Examination. Where else can you gather the knowledge you’re looking for, network with other like-minded professionals and even meet a fraudster in person? You won’t be disappointed. And who knows, you may just find that learning the basics introduces you to a whole new level of success. You can read more about this course and more events and seminars in our latest Resource Guide.

Tiffany Couch, CFE, CPA, CFF, ACFE Regent, is founder and principal of Acuity Forensics, a forensic accounting firm based in Vancouver, Washington. She has more than 15 years of experience in the field of accounting, with the last seven years focused solely on forensic accounting-related engagements. Couch has conducted dozens of financial investigations, managed litigation cases involving tens of thousands of documents, and has testified in state and federal jurisdictions throughout the U.S.