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Detective Jackelyn Weibel, CFEDetective Jackelyn Weibel, CFEAllegheny County District AttorneyAllegheny County District Attorney
Investigations UnitInvestigations Unit
Asset Misappropriation
Occupational Fraud
Asset MisappropriationFraudulent StatementsCorruption
The typical organization loses 5% of its
annual revenue to fraud. Frauds last a median of 18 months prior to
2012 ACFE Report to the Nations
Frauds last a median of 18 months prior to detection.
Asset misappropriation most common. Small organizations disproportionately
victimized by occupational fraud. 85% fraudsters never charged or convicted
previously.
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Cash
Asset Misappropriations
Billing Disbursements Payroll
Skimming Larceny
Theft of cash BEFORE it enters the accounting
system. (UNRECORDED SALES).
SKIMMING
Most difficult misappropriation to prove because usually there are no records of cash.
Lapping Schemes
Penn State kids cancer drive, local fire department BOOT drive, Salvation Army Red Kettle Campaign, kids sports team fundraisers.
Middle School Secretary (Moon Township)~ $50,000 skimmed cash from kids’ fundraiser deposits.
Convenience store manager(Penn Hills) ~ $60,000 not ring up sales in register and pocketing money during register reconciliation. Inventory shortages…
Bookkeeper for medical practice pocketed customer co-pays and cash payments totaling $108,000.00.
Church Volunteer(downtown) ~ $220,000 stole proceeds from gift card fundraisers.
A/R Clerk (Downtown) ~ $51,000 stole incoming rental payments paid by cash.
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Theft of cash AFTER it is entered into the accounting
system.
LARCENY
Stealing money from the bank deposit. Reversing transactions (register voids).
Usually requires journal entries to hide…
Car Dealer A/R Clerk ~ 80,000 stole cash from vehicle purchase and parts/service transactions and created false accounting entries to cover theft.
Office Manager (Vet) ~ $425,000 stole cash receipts g ( ) $ , pand used future check to cover shortage.
Bank Teller ~ $93,500 cash withdrawals from elderly account holders.
Perpetrator uses false documents (invoice, purchase order, credit card bill) to cause his employer/customer to issue a payment for what
b f d l
BILLING
appears to be a fraudulent purpose.
3 types:Shell Company (usually provides service)Vendor SchemesPersonal Purchases
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EMS Secretary ~ $77,000 used EMS account debit card for her personal expenses.
Meadows Purchasing Manager ~ $250,000 created 2 shell companies to provide cleaning to satellite locations.
Office Manager ~ $57,000 personal expenses charged on company credit cards.
Goodwill Controller ~ $50,000 Opened AMEX card in company name and used it for her personal expenses.
3 Types of schemes:Ghost Employee
PAYROLL
Ghost EmployeeCommissionFalsified Hours and Salary Schemes
Medical Supply Company salesman ~ $79,000 created false invoices to obtain fraudulent commission. Shipped orders to UPS store and hid them in storage facilities.
Payroll Clerk ~ $150,000 Extra and increased payroll.
Trucking company payroll clerk ~ $200,000 extra payroll checks d t l h kand stolen company checks.
Office Manager/Payroll Clerk (vet multiple locations) ~$137,000 & $216,000 increased their payroll.
Payroll billing company ~ $81,000 ghost employees.
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Check Tampering
Forged MakerAuthorized Maker
DISBURSEMENTS
Altered PayeeForged Endorser
Expense Reimbursements
Borough Manager ~ $17,000.00 wrote checks to herself.
Office Manager (Optometrist) ~ $200,000 wrote checks to herself and her creditors.
Borough Manager ~ $180 000 wrote extra checks Borough Manager $180,000 wrote extra checks to herself and used borough credit cards/bank accounts for personal expenses.
VP of Sales Manufacturing Company ~ $250,000 used same or fake receipts for monthly expense reimbursement request.
Corruption
Bribery Conflict Bribery
Kickbacks Bid Rigging
of Interest
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Fraudulent St t t
Fictitious Revenues
Asset/Revenue Overstatement
Statements Concealed Liabilities or
Expenses
Timing Differences
Fraudulent Statements
Enron ~ Ken Lay, Jeff Skillings and Andy Fastow
Ad l hi J h d Adelphia ~ John and Timothy Rigas
LeNature ~ Potlucky Family
Crazy Eddies ~ Sam Anatar
Pressure
Fraud Triangle
Opportunity
Rationalization
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Typical Offender
MaleAge 36-45
h b1-5 years on the jobCollege degreeAccounting, Operations or Sales Department
Tip (50%)Management ReviewInternal Audit
Initial Detection of Fraud
Internal AuditAccidentAccount ReconciliationDocument ExaminationExternal AuditMonitoring
Small Companies!!!!Banking/Financial ServicesManufacturing
Most Vulnerable Organizations
Government and Public AdministrationRetailHealthcareInsuranceConstructionTechnology
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Organizational Red Flags
Too much trust in key employeesLack of procedures for
Department often skipped by auditorsLack of clear lines of p
authorizationNo separation of dutiesLack of independent checks on performance
authorityInadequate attention to details
Individual Red Flags
Employee living beyond his means (lifestyle)
Financial difficulties/high l d b
Overwhelming desire for personal gain
Pay given not appropriate for ibiliti
gpersonal debt
Control issues (unwilling to share duties)
Refusal to take time off
Unusual close association to vendor/customer
responsibilities
Undue family or peer pressure to achieve
No recognition for job performance
Addiction/Gambling
Lack of internal controlsOverride of existing internal controlsLack of management oversight
Most Frauds Occur due to:
Lack of management oversightPoor corporate culture/tone at the topLack of independent checks or auditsLack of employee educationLack of reporting mechanism
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Internal Controls:Billing
Install surveillance cameras
Segregation of duties R i j l
Maintain and update an approved vendor list.
Cross check employee SS numbers and addresses Review journal
entries for write-off and force balancing entries
Bank Reconciliations Review credit card
bills
numbers and addresses to vendor ID numbers and addresses.
Review the back of all cancelled checks.
Purchase authorization
Employee must pick up his own paycheck Separate HR and payroll functions Review payroll checks and payroll summary
Payroll
p y p y ysheets
Segregation of duties Review 1099s at year end Track uncollected sales generated by salesman Randomly sample customers AR balances
Dual signature required No signature stamp Inspect cancelled checks Compare cancelled checks to accounting system
Check tampering
Compare cancelled checks to accounting system entries
Secure unused checks No checks to payable to “Cash” policy Require vendor checks to be mailed out Segregation of duties Positive Pay at bank
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Expense Reimbursements
Require detailed expense reports with original receipts
Check receipts against
Look for: Amounts ending in “0”
or “5” Reimbursements that fall Check receipts against
employee vacation schedule and calendar
Use travel agency for all travel expenses
Require original ticket stubs for air and rail
Reimbursements that fall just below the company approval limit
Receipts that do not look professional
Consecutively numbered receipts
Fraud Prevention Tools
Better management oversight
Increase perception of
On-going employee trainingHotlines
R d Increase perception of detection
Segregation of duties
Anti-fraud (Ethics) policies
Rewards system
Job rotation/cross training
Mandatory vacations
Surprise Audits
Implement internal controls now ~ regardless of the size of the company.
Separate staff duties immediately. A trusted employee is valuable
Best Practices:
p y p ybut never let any one have “the Keys to the Kingdom”!
Trust no one! Just because an employee has been a valuable employee does not mean that they would not steal from you.
Trust your gut instinct. If something does not feel quite right, ask questions.
Look at financial documents from 3rd parties.
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World’s Fastest Growing Crime!!
Identity Theft:
Identity theft and identity fraud are terms used torefer to all types of crime in which someonewrongfully obtains and uses another person’spersonal data in some way that involves fraudor deception, typically for economic gain.
-U.S. Department of Justice
For the 13th year in a row, identity theft was the #1 consumer complaint to the FTC.
In 2012, identity theft reports increased by 32% to 12.6 million cases.
Approximately 7% of adults in the United States ff t d b id tit th ft were affected by identity theft.
Florida, Georgia & California top 3 states. Florida double the reports than California.
70% of victims reported difficulty removing information stemming from ID theft from their credit report.
Children 35% higher risk than adults.Smart phone owners 33% higher risk than general public.
Most at risk?
general public.Persons with personal information on a social media site.Deceased people account for 25% of all identity theft.College students because they have good credit.Victims of data breaches have 9.5% higher risk
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50% of victims discover their identity has been stolen
within three months.
15% of victims do not discover their identity has been
Discovery Is KEY!!
15% of victims do not discover their identity has been stolen for 4 or more years.
Over 50 million Americans are utilizing a credit monitoring service.
44% of consumers view their credit reports using AnnualCreditReport.com or CreditKarma.com
Personal Information is Everywhere!
Billboard campaign in Western PA features deceased’s name, address, date of birth, partial DL number and partial signature.
On the Internet…
Public records on the InternetFree and easy access from homeInformation such as property ownership, tax assessments and civil court documents.
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At Work… Businesses and places of
employment. Co-workers and visitors
have easy access to information.O tgoing Mail information.Outgoing Mail
Trash Cans Post it notes
Skim information from transactions inside a store. Paper mail theft. Hacking computer networks and databases.
Most Common Theft Methods:
Redundant IT equipment (external memory sources).
Shoulder surfing Dumpster diving
Department of Veteran’s Affairs,Blue Cross and Blue ShieldSC Department of Revenue
Hacked…
SonyTwitterAdobe Systems (October 3, 2013)CitibankChaseApple I-Phone
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Medical identity theft
Child identity theft
Types of Identity Theft
y
Senior identity theft
Government identity theft
Financial identity theft
25,000 Americans are victims of medical
identity theft each year. The most difficult identity theft to detect.
Medical Identity Theft
Thieves steal identities for the purpose of receiving free medical care and as a result create a false medical record for the victim.
Consequences include: Incorrect treatment for victims; False health insurance claims filed;
Denial of legitimate medical claims.
Child Identity Theft
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Minor’s identifying information used by another person for imposter’s benefit.
Perpetrator may be family member or someone known to the family.
Daycare workers, nannies, school employees, babysitter, relative family friendrelative, family friend.
Targets children because of the length of time it takes to discover the theft.
Children were targeted by scammers 35 times more often than adults, with 15% of the victims under the age of five.
In 2010, reports of identity theft targeting people 50 and
older represented about 28 percent of the total 236,765 cases.
Senior Identity Theft
More susceptible to acts of deception and manipulation.
Worked diligently their whole life to achieve good credit.
Seniors rarely check their credit reports.
Also known as Documents/Benefits Theft Stealing personal information to obtain government assistance
such as: Social Security retirement benefits;
Government Identity Theft
Social Security retirement benefits; Social Security disability benefits; Medical insurance; Welfare benefits.
Stealing personal information to obtain fraudulent income tax returns.
2012 IRS identified 642,000 fraudulent tax returns. This is a 3 fold increase over 2011.
SSA and IRS do not make initial contact using email.
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Individuals or businesses can be affected.
Personal information everywhere!
Financial Identity Theft
Billion dollar business.
Most common type of identity theft!
WHO??Retail Merchants and Their EmployeesRestaurant EmployeesBank EmployeesDrug AbusersTerrorist GroupsOrganized Crime MembersIllegal ImmigrantsYour Family MembersYour Co-WorkersYour EmployeesNeighbors
WHERE?? Your mailboxYour trashRetailersRestaurantsGrocery storesHospital or health care Hospital or health care facilitiesDiscarded/stolen computersInternetYour motor vehicleATM machinesOn the telephoneSoftware sharing programs
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HOW??“Phishing” Theft of your trash (“Dumpster Diving”)Purse or wallet theftDishonest employeesPublic RecordsShoulder surfing“Pharming”Skimming devisesCounterfeit documentsEBay & Craigslist scamsWedge
Identity Theft Schemes Database Hacking Social Engineering Dumpster Diving Skimming “Spam”- Spywarep py Dishonest Employee Radio Wave Credit
Cards Counterfeit Cards Counterfeit Checks Counterfeit Docs
CARD SKIMMINGSuspect uses a “wedge” to store information. contained on credit card strip.
Downloads info later to computer.
Uses info to create counterfeit cards with your personal information.
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ATM SKIMMING
INSTALLING SKIMMER AT THE DRIVE UP ATM
CREDIT CARDSMagnetic strip on back made up of tracks similar to an audio tapeInformation read by swiping card through a reader device
Information includes:Your nameAccount numberIssuing bank
Standard ATM machine?
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False front is attached to ATM with card reader to copy magnetic strip info
on your card
Look at the pamphlet holder…
Note the hole in the side…
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Camera/transmitter housed inside
Camera can view keypad and monitor and send wireless picture up to 200 meters.
Digital Robbery Thermal Imaging Allows ATM Theft From a Distance
ATM pins can be stolen using a thermal imaging camera.
When ATM users press keys to enter their PIN, they leave behind a residual heat from their fingers.
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“ TOOLS OF THE TRADE ”
Consumers’ Rights for Unauthorized Debit and
Credit Card Use
Fair Credit Reporting Act (FCRA) governs consumers’ right for fraudulent use of credit cards. Electronic Funds Transfer Act (EFTA) governs consumers’ right for fraudulent use of debit cards.Consumer protection is stronger for credit cards:
Charge-back rights; Credit dispute rights;
Credit line available now.
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Debit and Credit Cards Not Equal
Debit Cards:If you report within 2 days
of discovery, loss is limited to $50;
Credit Cards:Regardless of report date,
loss is limited to $50.
If credit card company has a If you report between 3 -60
days, loss limited to $500;
After 60 days, no protection for fraudulent use of card!
p yzero liability policy, you still must report losses within 60 days of the fraudulent charges.
Safeguarding Information
Keep only what personal information is necessary.
Properly dispose of sensitive material by shredding it
Conduct background checks on all potential employees.
Regularly educate and train employees on security issues.shredding it.
Utilize anti-virus software and firewalls.
Limit access of sensitive information.
security issues. Require strong
passwords that are not to be shared.
Have a plan to respond to security incidents.
Social-Media and Identity Theft
Fraudsters are taking note of personal information such as your birth date on social-media sites.
Use the highest privacy setting available.
Do not accept friend “invites” from strangers.
ANTIVIRUS SOFTWARE!
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Promptly remove mail from mailbox and deposit outgoing mail in secure receptacles.Empty your purse/wallet of extra credit or ID cards including your social security card
PREVENTING IDENTITY THEFT
including your social security card.Make a copy of all items in your wallet and keep in secure location.Examine all credit card and bank statements each month.Do not use birthdates, phone numbers or house numbers as PIN.Never write down your PIN.
Report stolen credit cards or any transactions that you did not make immediately.Never respond to unknown or phishing emails.Shred all solicitations, bills and document with any financial information using a cross cut shredder when discarding.
Make inquiries on unexpected bills. If providing financial information over the
Internet, ensure the information is encrypted and the site is secure (https:)
Never give out information over the phone. Always shield your hand and the screen when
using the ATM machine, even if no one is aroundaround.
Consider placing a fraud alert on your account with all three major credit bureaus.
Never leave transaction receipts behind. Order and review your credit report once a year
at WWW.ANNUALCREDITREPORT.COM or WWW.CREDITKARMA.COM
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Equifax………………1-800-525-6285Experian……………. 1-888-397-3742
IMPORTANT CONTACTS
Transunion………….1-800-680-7289FTC…………………. 1-877-FTC-HELP
www.ftc.govIFCC…………………www.ifccfbi.govFor victims of fraud on the Internet
When it comes to preventing white collar crime, internal controls are essential!Regardless how small your company is…never allow one employee to control all of its vital functions!
REMEMBER . . .
employee to control all of its vital functions!~ ~ ~
Get good anti-virus software on your computer and smart phone.Monitor your credit report at least once a year.
~~~Use common sense…if something sounds too good to be true…it’s a scam!
Detective Jackelyn WeibelAllegheny County District Attorney’s
Office1444 Hillsdale AvenuePittsburgh, PA 15216g ,
(412) [email protected]