Fraud News Update 12.22.16 – I’ve been traveling extensively over the last three weeks, both in and out of the country on business, and haven’t had an opportunity to publish a new issue of the Fraud News Update.
As a result, this week’s “Mega Holiday Edition” features added content on stories of interest I followed over the last three weeks: Biggest Fraud Hotspot (we’re #1), The Ongoing Stagecoach Bank Saga (Prudential’s now involved), Wildlife Crimes (the outdoor flow of illicit fraud), PCI and EMV (are they good fraud prevention suitors?), Turning a Blind Eye (on corporate fraud), Sextortion (blackmail or extortion?), Chicago Politics (pay to play), Elder Fraud (an inside look), Whistleblowers (does corporate change follow?) and “Pay to Stay” (phony NJ college snares Visa fraud suspects).
As leaders in the fraud consulting arena, read on for more topical information and our insights, observations and unique commentary on some of the weekly fraud news stories.
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Well, at least during the holidays anyway. Excerpts from a recent Business Wire article includes this gem, which should be absolutely NO surprise to anyone…unless of course you’ve been living in a cave somewhere without access to digital media:
“U.S. Card Not Present (CNP) fraud attempt rates are expected to increase by 43 % following the U.S. adoption of EMV chip cards, which protects card data through encryption.”
Okay, this is absolutely a “no brainer.” When EMV (Chip and Pin) was introduced in the U.S. it was touted as the next miracle cure to prevent credit card fraud.
The reality is that it doesn’t prevent ALL types of credit card fraud. More accurately, it’s really just another deterrent to preventing in person, point of sale (POS) fraud attempts.
However, while in person POS fraud attempts have decreased, if you believe the studies, fraud deterrence in one area facilitates shifting patterns and methodologies in another. So, we have a decrease in in person credit card fraud and a corresponding increase in online, CNP, fraud as the figures suggest.
So, the next time someone errantly tells you that chip and pin prevents credit card fraud…be sure to set the record straight.
The Ongoing Stagecoach Bank Saga
There are several old axioms that hold true today: “Where there’s smoke there’s fire” and “the 80-20 rule.”
In the fraud profession, the scope, or magnitude, of any fraud is often described by the 80-20 rule…meaning that the 20% you know about is overshadowed by the 80% you don’t know about and that has historically held true throughout my career.
We’re seeing that scenario play out in the Wells Fargo Bank saga as reports describing the number of whistleblower complaints against Wells have started surfacing and many are undoubtedly going to be tied to the current scandal.
But wait, there’s more! Much like how the 80-20 rule accurately describes financial loss amounts, it also describes types of fraud and methods used to commit fraud as well.
Fraudsters are “equal opportunity” criminals…very rarely do they resort to just using one method in the commission of their frauds or just one type of fraud.
Proving the point, now comes whistleblowers from Prudential Insurance who apparently came forward alleging that along with the unnecessary bank accounts, Wells Fargo employees also pawned off add-on insurance policies on unsuspecting consumers.
Fraud takes all forms. As stated in the above story, oftentimes multiple techniques are intermingled during the commission of one crime type. There’s usually a primary crime and a secondary crime and that holds true with crimes committed in the outdoors as well.
Proceeds from the commission of wildlife crimes have to be laundered much like fraud committed against banks. Wildlife crimes, and the fraud and corruption associated with it, were highlighted at the recent International Anti-Corruption Conference in Panama City.
Particularly noteworthy is the fact that this is the first time wildlife crimes have been featured at the IACC conference.
The PCI and EMV Courtship
EMV was featured in an earlier story about credit card fraud prevention. The EMV beat rolls on again as welivesecurity.com’s December 12th blog features a piece on the potential marriage, and financial crime prevention benefits, of an EMV and PCI union.
Are EMV technology and PCI standards the answer to the growing financial crime epidemic? One things certain… more is generally better than less. Anything which enhances, or makes a technology solution more robust, is usually beneficial in the fight against fraud.
Turning a Blind Eye
The discussion centers around fraud blindness and whether it’s rampant in businesses and organizations?
A piece in the November 3rd, 2016 Fraud News Update pointed to statistical research suggesting that 70% of businesses surveyed were woefully unprepared and left themselves vulnerable to fraud.
So, clearly some organizations are only taking steps which are regulatory required. However, their overall approach involves turning a blind eye towards the total efforts, philosophical beliefs and management interaction necessary to holistically combat fraud.
In a recent interview, Doctoral student Veronica Morino concurred stating “I arrived at the point where I realized that there was an increasing gap between the reality of fraud and how people and organizations were trying to counteract it.”
Interestingly, she then stated that the only people really benefiting from increased amounts of fraud are the growing ranks of fraud specialists themselves, something I’ve said for years. “The country’s going to hell in a financial crime hand basket…the worse things get the more job security fraud professionals have.”
Morino’s take was similar but slightly more eloquently put. When talking about the increased number of fraud specialists, she said “the more ills, the more we have to pay the bills!”
Sextortion: It’s Really Just Blackmail
There’s a lot of discussion these days about digital crime and everyone’s talking about sextortion, which really isn’t extortion at all despite the cute play on words.
Extortion usually involves physical threats of violence if the victim doesn’t comply with a requested action. It’s kind of like a Soprano’s episode… a business owner is enticed to pay protection money because “one would hate to see something awful happen to this nice business” (i.e. no payment and the business mysteriously burns down).
I saw this sextortion piece and the author’s entirely correct. Sextortion’s really just high-tech blackmail, which doesn’t involve threats of physical violence but, likewise, demands for money which is central to the crime. “Pay up or we’ll put your embarrassing digital video clip online for everyone to see.”
The two crimes are often confused but, generally speaking in blackmail cases, unlike extortion cases, some geek from overseas likely isn’t coming to your door in person threatening to “break your legs” if you don’t pay.
Oh sure, they’ll probably still put your video online if you don’t pay but the good news is that unlike an extortion case your legs will still be in tact.
Sextortion: despite the cute play on words… It’s high-tech blackmail, folks!
A-n-o-t-h-e-r Chicago Alderman Indicted
What can I say? Pay to play – it’s the Chicago way!
Innocent until proven guilty and all that… but time will tell. If the history of political corruption in the Windy City’s any indication (and this doesn’t even include Governors or state politicians) it’s not looking good for the accused.
Word Association: Illinois Politics = Chicago FBI Field Office Job Security.
Inside Look – Fraud Against Older Adults
Technology is making it easier for global bad actors to take advantage of older adults.
This piece reminded me that there’s never a better time than now to make sure there are checks and balances in place to protect our older parents, grandparents, aunts, uncles, friends etc.
Some simple advice: be proactive! Make sure older adults are aware of what phishing attempts look like, that their computers are properly safeguarded with AVS, that they never give out personal, or financial, information over the phone and always hang up on suspicious callers.
There are also fraud prevention tools older adults can use to safeguard their finances/personal information and those are definitely worth looking into.
Whistleblowers – Does Corporate Change Follow?
Wells Fargo and Prudential whistleblowers were highlighted in this edition of the Fraud News Update. The apparent lack of any transparent activity, on behalf of the organizations involved, in these businesses begs the question: do whistleblowers really have any effect on corporate culture whatsoever?
With the number of whistleblower complaints going through the roof, the immediate answer would obviously seem to be a resounding “yes.” That, however, begs a second question: if so, for how long?
These and other whistleblower issues were studied at the University of Iowa by Dr. Jaron Wilde. A 2016 New York Times article examines some of the research based conclusions from the study of documentation made available by the federal government in a sample of whistleblower cases.
Pay to Stay – How Federal Agents Snared Visa Fraud Suspects
The Internal Revenue Service’s scary reputation notwithstanding, it appears the federal government has a sense of humor after all.
Looking to investigate Visa fraud and people in the country illegally, they created a totally fake college in New Jersey and named the investigation “Pay to Stay.”
Clearly, Pay to Stay is an homage to those of us in Illinois who’ve endured years of political “Pay to Play,” as featured earlier in this week’s Fraud News Update.
What’s next… a Midwest crop subsidy investigation: Pay to Hay? A Southwest pottery investigation: Pay to Clay? Or a Churchill Downs horse fixing investigation: Pay to Nay?
Seriously, the feds did some great work in this case and it’s worth a read.
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