Fraud News Update 12.26.14

Fraud News

12.26.14 – This week’s post-Christmas (“Scrooge”) edition of the Fraud News Update features: Seafood Pirates (Arrgh!), Compliance Failures (Financial Impact On You?!), Symantec (No Software To Prevent Fraud?), Religious Rip Off (Not a “God Fraud” case this time…), Up in Smoke (Fraud Charges Tied To Marijuana Industry) and the Sony Debacle (Enter Judy Smith Stage Left).

As leaders in the fraud consulting arena, read on for more topical information and our insights, observations and unique commentary on the weekly fraud news. Like our content? Feel free to share Fraud News Updates with your network or colleagues.

Seafood Pirates Have No Sole

On December 16th, the White House released “New Recommendations to End Pirate Fishing and Seafood Fraud.” Arrgh!

As a fraud professional, I’m more than a little curious how the pollockticians in D.C. plan to accomplish this task when the last we left this fraud news story, “Seafood fraud cases plummet as NOAA cuts investigators.”

I trolled through the recommendations last week while sitting in my sturgeon’s office but couldn’t really fathom what they were talking about. They’re being so koi, they must think we’re all gillable.

So, I decided to mullet over. It’s clearly a codtradiction in terms, how do we end seafood fraud while simultaneously filleting investigative staffs?

The inevitable conclusion: the governments floundering on this initiative, a definite gaff.

The enforcement lines are all tangled…someone has their head up their bass.

Compliance Failures May Empty Your Wallet

Companies are regularly fined for their failures to get regulatory compliance correct. That’s “so 5 minutes ago” and yesterday’s news.

Big Bucks Bullseye!

In today’s fraud news, however, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FINCEN) went above and beyond the normal corporate penalty protocol handing down a $1 million dollar civil penalty directly on the former Chief Compliance Officer at MoneyGram himself.

Fining an individual for their on the job decisions, or lack of action, isn’t completely unprecedented. However, this financial penalty is sending ripples through the compliance world as it’s clearly a “game changer” for employees in these types of compliance roles.

If individuals can be held personally, and financially, responsible for their work on behalf of a company, it may lead some to think twice about the ramifications associated with taking these kinds of compliance leadership roles.

We’re not saying MoneyGram didn’t have issues during the Chief Compliance Officer’s tenure. Previously, the “company settled with the U.S. DOJ for $100 million for their role in furthering wire fraud and the lack of a robust anti-money laundering program” in a multi-year fraud scheme.

However, the ability to go after individual compliance officers for their failure to perform corporate duties with more due diligence is certainly newsworthy.

Indemnify Me Please?!

These types of penalties are certainly going to have (if they haven’t already) individual compliance officers asking their companies to insure them personally for their compliance work. This will serve to protect compliance officers, and their individual assets, financially. More than likely, we’ll be entering into a whole new realm of employment contract law as a result.

Individual liability for corporate compliance failures…definitely a game changer!

Symantec: A Software Company Without Software To Prevent Fraud?

In this fraud news story, Symantec (SYMC), a leading software company that helps us protect our computers from external bad actors (Norton Anti-Virus and numerous other security products), suffered an embezzlement.

A former Symantec Marketing Manager plead guilty this week to pilfering over $1.1 mil in funds from the software company.

The irony here: wouldn’t it stand to reason that a software company would have “software” in place to prevent internal fraud by employee’s?

I don’t know if they did or not but perhaps “Embezzlement Eliminator 1.0” is in the works!

Multiple Fraud Methodologies

As we’ve written about in past Fraud News Updates, employees often use more than one method to perpetrate internal fraud. This particular case was no different as the employee “supersized” the fraud when she used at least three different methods (T & E Fraud via Corporate Credit Card/Phantom AP Billing Scheme/Cash Wire Transfers).

Combine those nefarious theft efforts with a money laundering scheme, committed via the phantom company the employee set up to funnel the “ill-gotten booty” through, and you have the proverbial grand (fraud) slam!

Larger Embezzlements Are A Really Big Indicator

We’re seeing larger and larger embezzlements, taking place over longer periods of time. This definitely points to internal control breakdowns at companies around the globe.

Embezzlement is bad enough but the fact that this employee exploited multiple control weaknesses is a sign that Symantec should be looking to significantly strengthen their internal anti-fraud posture in a number of areas.

What’s The Takeaway?

Frauds like this inspire absolutely NO confidence in an entities ability to fulfill their fiduciary responsibility, safeguard funds, revenues or information.

Off this fraud news, and what it’s clearly indicative of, if I’m an investor (or potential investor) in a publicly traded company, which SYMC is, my question to them is “What the Fraud?!” How are you going to protect my investment?

Religious Rip-Off?

In past Fraud News Updates we’ve featured a number of internal “God Fraud” cases. However, this next fraud news story takes a bit of a different angle. Pack your bags, its religious travel fraud.

Hajj Hocus Pocus?

According to the feds, this religious rip off involves a Chicago area travel agent (Rashid Minhas – DBA: Light Star Hajj Group). In 2014, Minhas, allegedly, sold fraudulent religious travel packages to Muslim followers making a required (once in a lifetime) religious pilgrimage to the Mecca – commonly referred to as the Hajj.

Professional BULL Riding Tour

First rodeo for the defendant? Hardly. The Chicago Tribune’s reporting that there were criminal charges filed against Minhas in November 2013 for similar travel related fraud related activity allegedly conducted 5 years ago.

Minhas, then operating under the business name City Travel & Tours, allegedly, sold $293,000 worth of airline tickets which were subsequently voided causing a loss to multiple airlines.

If Minhas’ gets convicted on either set of fraud charges, I guarantee that the feds won’t be “voiding” his upcoming travel package: a one way airline ticket and luxurious stay at Club Fed!

Has Travel Fraud Disappeared?

Travel related scams have been around for a long time. Likely, with the advent of “self-help, book your own” Internet travel sites a portion of the travel related fraud previously committed by travel agents has declined as travel agents no longer serve the same role they used to.

However, travel agents are still around booking unique (high dollar) trips, tours and travel packages for individuals and groups. In looking at the large loss amounts from the two (alleged) fraud cases, religious trips to various places, like the Hajj, are big business.

In big travel business, shady operators may be lurking to lull you out of your hard-earned Simoleons (Bread, Bucks, Cabbage, Dead Presidents, Dough, Greenbacks, Loot, Moolah, Scratch or Wad).

Booking travel tours: It’s either “Buyer Beware” now… or “Buyer’s Remorse” later! So,what’s it gonna be?

Up in Smoke (Revisited)

What would an edition of the Fraud News Update be without another reference to the comedians who made reefer madness funny (Cheech and Chong)?!

With the number of medicinal and recreational pot companies increasing, the legalized marijuana industry has become “big business” just like it’s illegal counterpart.

As we’ve seen on the illegal side for years, there’s a lot of money to be made in selling the “wacky weed.” Like the group travel story above, where there’s a lot of money there’s usually fraud.

This fraud news story about “money laundering and conspiracy to structure cash deposits to avoid federal reporting requirements” falls under the “it was bound to happen sooner or later” category.

In fact, with this fledgling new industry growing rapidly, we can expect to see numerous other types of fraud crimes associated with it.

If this were the end of a famous cartoon it would say “That’s Not All Folks!” This is but the tip of the fraud iceberg.

The Sony Debacle

Lastly, it’s official: Sony’s in deep doo-doo! In support of the rising poop level, they’ve hired the real life Judy Smith (former Presidential press aide and crisis manager… individual that the fictional TV character Olivia Pope is modeled after) to help manage their “scandal.”

Smith, the author of Good Self-Bad Self: Transforming Your Worst Qualities Into Your Biggest Assets, will be bringing her POWER model (“Pinpoint the problem; Own it; Work it; Explore it; and Rein it in” to the crime fighting table.

Judy’s alter ego, “Powerwoman,” will need a pair of entertainment industry, privacy, legal and cybersecurity “hip waders” because the manure’s getting deep out in Tinseltown:

Will Sony’s superhero Powerwoman trump the evil international villain Cyberman and return Sony to its previous glory? 

Can Powerwoman “flush the formidable foul feces” surrounding Sony?

Will Sony come out smelling like a rose? (Hope Powerwoman’s packin a barrel of “air freshener” in her bags!)

In all seriousness, this kind of real life, “mega-challenge” will certainly give Judy a chance to demonstrate she’s “as good as advertised.”

Channeling my “Inner Oprah”… You Go Girlfriend!

Fraud News – The Bottom Line

Fraud – empowering people to break the law. It’s a way of life for some and every fraud has a story. At Fraud Solutions, fraud is our world and we’re passionate about prevention. Being proactive is key, so, follow us each week as we cover the fraud beat with added insights, information and unique commentary on stories making the fraud news.

Those are our insights. What are yours?

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