Detection and Prevention Tips

• Fake charities and crowdfunding: Fraudsters create fabricated charities to divert funds to fundraising schemes.

• Financial exploitations occurs in the wake of a disaster as scam artists form illegitimate charitable organizations. (link to charity navigator).

• Feed homeless: What to look for when using charity navigator when deciding if a non-profit is one you want to donate to.

• Celebrity: Scam artists impersonate well-known legitimate celebrity organizations by creating links to a website that steals personal information.

• E-donation: Scammers create an email donation scam requesting funds in the form of bitcoin.

• Charity scam: The #1 reason why illegitimate charities prosper is due to well-designed websites with phone numbers that are spoofed.

• Natural disaster: Charity navigator researches organizations and informs the investor of financial information.

• Federal agencies warn the public of scams related to Covid-19 and crowdfunding.

• Past due bills: People who want to help the impoverished pay their bills have fallen victim to a fraudster’s illegitimate websites designed to divert donated funds to their personal accounts.

• Fraudsters take advantage of supply chain issues by creating nonexistent companies, then not delivering the product or not delivering what was advertised.

• Mobile fraud warning: a substantial increase in fraudulent text, phone call, email and recorded calls is due in part by the millions forced to stay home during the pandemic.

8 RED FLAGS TO WATCH – CHARITY

• Front business: a name that is similar to a real charity, with a slight variation. Ex. National versus Regional, Association versus Alliance, Society vs Community.
• Is their a lack of transparency in how donations are used.
• Mounting pressure for a donor to give money.
• Guaranteed sweepstakes or lottery winning in exchange for a donation.
• Calls or emails thanking the recipient for a donation they didn’t make (elder fraud)
• Other ways to research a charity. Use the charity’s name with any of the following: complaint, review scam, scheme, rip-off.
• When looking for legit charities use coronavirus or Covid-19 paired with best charity or highly rated charity.

• Background reports can be obtained from GuideStar and BBB Wise Giving Alliance for info on nonprofits and charities. The IRS has a tax-exempt organization search found under their tax-exempt organization search.

• Pay by credit card, not check (easily washed) or virtual currency like bitcoin.

• Keep records of donations made by credit car to ensure your bank statements reconcile.
  90% of your donation must go to the nonprofit cause, not administration costs.

• Your payment is made out to an organization not a person.

• Examples of crowdfunding platforms solicited by people include Kickstarter GoFundMe and Indiegogo.

• The NYTimes reported a 60% increase in GoFundMe schemes in March 2020.

• Healthcare related schemes showed crowdfunding platforms claiming that sprays, creams, foods and supplements kill the virus or protect from infection. Mask sterilizer that uses UV light to kill covid.

• Read between the lines: GoFundMe states that less than .1% of campaigns are fraudulent, however they don’t have the resources to conduct a fraud investigation to determine legitimacy.  

• Fraudsters create illegit organizations then divert the donations intended for people to help people pay their bills. 

• Protect yourself from fraudulent crowdfunding schemes by: assuming it is fraudulent and being extremely cautious before handing over payment info.

• To detect a scheme: claiming that donations to individuals are tax deductible and making claims about cures for Covid.

• There's no timeline for product development or specifics on how donations will be used.

        Ask questions: 

        What happens to product launch if it is unsuccessful? What happens to donor money?

        Research with words of scam, review, complaint and the project name.

        Always conduct due diligence on org’s and people asking for money.

• Fraudsters capitalize on the pandemic with malicious intent to exploit world wide concerns, misinformation, product shortages and economic changes with adverse consequences.

• Two of the most infamous strategies used to exploit through investments include: cashing in on cures and equipment and 2/ alternative investments that impact stock exchanges.

• Pump and dump schemes create a need to buy, increasing the price of the stock, then selling their won shares at the inflated prices. An investor loses money when the pump becomes a dump.

• Investment schemes that contain unverifiable info of a products ability to cure or prevent the spread of the virus.

• Penny stocks are at a high risk for pump and dump schemes related to Covid-19.

• Pump and dump schemes aren’t restricted to microcap stocks.

• Misleading claims that products can cure or prevent Covid manipulate businesses who are misinformed to alter their operations.

•  Any claim that focuses on Covid cures/equipment in demand needs to be verified independently before investing.

• High pressure, pointing fingers: high pressure sales pitch “act now…limited time.” Or information received in the form of an unsolicited call or email.

• Ask for salespersons name and securities licensing registration info to independently verify. Research claims made by people and organizations in sales pitches.

• Check publicly traded company’s business filings.

• Contact securities regulators with any questions about a pitch or offer.

• Pitching solutions to recoup stock market losses, transferring funds to a more secure investment are how fraudsters exploit economic uncertainty.

• Investment alternatives need to be investigated especially when the pitch includes precious metals and digital currency or ICO.

• Scams that involve precious metals begin with purchasing long term assets, promoted as low-risk with high rate of return compared to the volatility of the stock market. Includes gold or silver coins, bullion, diamonds and other semiprecious stones.

• Precious stones can often be substituted for fake or lower-quality products. Sometime the product isn’t delivered.

• Scams that include high quality metals or stones guarantee exaggerated returns and charge over the top fees not disclosed.

• Fraudsters operate fake crypto exchanges to take victims money or claim that crypto funds include a portfolio of crypto’s vs individual trading fiat currency.

• Initial coin offerings or ICO have been exposed as fraudulent – pump and dump, Ponzi in multi-level marketing schemes. Any ICO initiated in relation to Covid needs to be ignored.

• Prevention of COVID investment alternative schemes need to: scrutinize claims of guaranteed returns “low-risk” and “high-reward”.Research persons and companies who promote opportunities. Avoid commission or bonus opp’s to recruit additional investors.

• Devious people intent on stealing your money have the awareness and knowledge of the weak links in the alternative payment methods.

• Alternative methods for transferring the value of currency can be stored via cryptocurrencies, reward points and specific online virtual economies.

• All currencies that store value can be converted. A fiat currency is backed by a government or group of nations. Ex’s include Yen, pound, US Dollar, and Euro and float on the foreign exchange markets. Fiat currencies are valuable due to trust in the issuing government.

• Mining is the process by which networks of computer users solve complicated mathematical algorithms over time using specific software.

• Mining coin: when a bitcoin user completes an equation, a bitcoin is received.

• 4 legit ways to obtain bitcoin: buy and sell on exchanges, accepting bitcoin to pay for goods and services, participation in mining.

• A wallet is similar to a bank account where users receive and store bitcoins. These transactions receive an ID Number with personal info needed for due diligence purposes.

• The ID of Bitcoin users: provide real identities at the account opening. Submit their info to websites where they conduct transactions. Transaction details can be traced on the block chain. Pot account numbers on social media profiles, crowdfunding appeals or advertisements.

• As of 2022, Bitcoin is the opt crypto – yet still has a dramatic price instability.

• Regulators treat crypto as property, financial instruments, securities and currency to pursue legal actions, leading to oversight and taxation.

• Other types of non-bitcoin crypto: ether, ripple, monero, Litecoin and USdollar.

• Ether is built on the stipulation of an if then statement. E.g. purchase is made and payment is held in the account until the item is delivered.

• Ripple is a faster and more efficient payment system that has its own currency named XRP.

• Monero has a near untraceability and anonymity appeal however it has become popular with dark web users as the origin of its users make them appear to come from all over.

• Litecoin has faster transaction speeds, lower fees and is the direct competitor to bitcoin. USD crypto: USD coin is redeemable for $1 and are backed by fiat currency.

• Data protections: online storage requires users to input their private keys for their bitcoin wallet. If a hacker gains access to the keys the currency can be transferred.

• Thumb drive: cold storage of private keys involves offline platforms to store their crypto, USB drive, SD card, hardware or paper wallets and physical coins.

• If there isn’t a way to track virtual currency transactions, then monetary controls and anti-money laundering laws cannot apply.

• Crypto transactions cannot be reversed and without knowledge of users identity.

• Fraud in crypto occurs thru illicit transactions that were transferred to accounts to receive the cash.

• Investment fraud using crypto is in the Bitconnect indictment orchestrated as a global ponzi scheme.

• Bitcoin is used in money laundering where stolen assets are sold on the black market website.

• Coins are targeted for pump and dump schemes. They originate in chat rooms, message boards and other venues with hype about its value. This causes a mass influx of investment in which scam artists sell their coin and take their profit. The coin collapses in value and investors lose.

• A blockchain is a database that records transactions across a payment system making it difficult to defraud.

• Options for exchanging value include virtual economies, special purpose currencies, prepaid cards and loyalty points.

• Gaming platforms or virtual economy participants spend time in a game slowly earning in-game currency using credit cards, paypal, yet are still at risk for fraud.

• Gold farming is a scheme with the gaming to rapidly earn in-game currency, then sold on the black market for real currency.

• Laundering money through gaming platforms occurs when there are several accounts and transfers from one account to another to hide its origin.

• When a virtual economy expands its value and participants, other and various forms of fraud will occur.

• Special purpose currencies may present a point card resulting in a buy 5, get 1 free or discount offer.

• Frauds with prepaid gift cards are difficult to track once the purchase is completed and are often used in a credit card theft scheme.

• Retailers insist on using cash or PIN operated debit cards to prevent converting illicit cc fund into cash. 

• Elders vulnerable to scams involving the purchase of prepaid cards. Con artists request them to load funds and then pay in advance all the while asking for the card info.

• Easy ways to make money involve the use of ads in social media posts. Individuals who use prepaid cards more likely to click on links and follow the instructions for the fraudster to steal their money.

• Vanilla and green dot are two examples of prepaid debit cards in which the victim is promised more money added to the card in exchange for a $25-50 fee if they give the card info and PIN.

• Bank of America was fined $100 million for internal fraud control failure on prepaid debit cards.

• Loyalty accounts aren’t as secure as financial institution accounts due to a lack of fraud prevention mechanisms like multi-factor IDs.

• Gaining access through phishing or hacking is how a fraudster obtains access to loyalty point accounts.

• Calgary dollars are designed to supplement the Canadian dollar and used for bus tickets, restaurant bills and rent. 

• Community service credits are exchanged for community events – sports, cinemas and museums.

• A fraudster can call a user pretending to be a rep of the card or loyalty program asking for pin and card info. 

• Ransomware extortion is a form of malware that lacks an operating system and restricts access until a ransom is paid.

• Ransomware involves accusations of the user viewing illegal videos, downloading pirated media or forbidden/illegal contact.

• Ransomware targets larger entities for a bigger payout.

• Ransomware occurs in the form of a trojan virus via pop up ad, banner ad, email link or malicious website.

• Mobile devices can be affected if the user clicks on a link sent via text message.

• Past attacks occurred on Microsoft’s operating system in 2017 when a virus took advantage of a security flaw.

• Controlling people may make it clear that there is a consequence for unpleasant behavior.

• A person may be tempted to commit a crime, however is influenced by a jail sentence, embarrassment, parental disapproval, or the taint of a criminal record.

• Individuals are less likely to engage in crime if all their needs are met. Conversely, not having a job, no money to pay bills/rent/food may look at crime as a way to make ends meet.

• Business owners may convert or divert deposits to personal accounts, claiming it was a loan, the money was theirs and they can’t steal from themselves.

• Business owners would claim deposits directed to cash or personal accounts were mistakes. They rationalize that their mistake should be a lesser violation.

• When a fraudster becomes desperate for money, going into a lot of debt, making poor decisions, squabbling with clients, losing employees, it’s a sure bet that financial problems are adding to the pressure.

• Steal Sweaters: People who steal increments of $ from their employer intend on paying it back, however they still don’t see themselves as a criminal.

• Coins stacked in a line: Employees who steal rationalize misconduct by claiming to protect their families, or longevity with the company. Some cast blame on the employer for unfounded and dishonest business practices.

• Embezzlers face a choice between values and conduct. When the theft turns to 10 or more crimes, perps will maintain their image of a law-abiding citizen.

• Challenging a criminal’s reason for misconduct makes them question their behavior although they still feel they are honest.

• Criminals who re-emerge into law-abiding citizens, may report their behavior to law enforcement, cease thieving money, leave criminality, gamble or commit suicide.

• Some criminals who continue to commit crimes typically take larger amounts in fewer attempts.

• An absconder has the take the money and run philosophy and are usually unmarried/separated, live in hotels, own little property and associate with few people.

• Absconders lack strong social connections, have a lower position in their company possibly absolving them from positions of trust. 

• A perp who: removes the responsibility for their actions may have an “I don’t care” attitude or that they came from a family of criminals.

• In the 50’s, a man named Cressey found his study revealed that embezzlers were of high socio-economic status; thieves, were lower status and would find multiple ways of cheating people for money. 

• Individuals who participate in crime do so out of pure pleasure of committing the crime.

• Problems in thinking cause a criminal to act irrationally and impulsively, not weighing their decision, and not considering the fines, jail time, divorce for their actions.

• There are theories that a crime is normal and based on the available opportunities to explain its pervasiveness.

• How is it determined how a crime will occur? There must be a criminal, a target and a weak or absent guardian.

• Business crime occurs when an employee accesses the cash drawer without supervisor oversight or sign in permission.

• High testosterone and adrenaline mixed with excessive alcohol consumption has been linked to increased aggression.

• Particular psychological traits link criminal behavior to specific types of crimes.

• Parental neglect and abuse can be predispositions toward criminal conduct and as a product of psychopathologies and mental illnesses.

• Society that demands people to be exact replicas points to a conformist society in which progress would be halted.

• When society provides little to no moral guidance, this creates a divide, breaking down the connection between person and community.

• Be discerning with who you associate with as you learn the behavior from your peers which can either support the law or go against it.

• Have you been working in an environment where manipulating the financials is a norm and expected? A person is more likely to be influenced by the crime than stand against it.

• Manipulating the financials may be awarded at a company while the employee who follows the law is fired and blacklisted.

• When a society negatively labels a person, that individual accepts the label and over time it can become a self-fulfilling prophecy.

• If a person is treated as deviant by someone influential, it can absolutely affect their behavior.
  In society a labeled person who is called a lowlife, worthless or addict they may be too humiliated to ask for help.

• Treating people with addictions – alcoholics, drug addicts, gamblers, promiscuity or smokers – as people who need support will likely seek treatment.

• Financial motivation for white collar crime according to the FBI, is “to obtain or avoid losing money, property or services to secure a personal or business advantage.”

• White collar criminals differ from those who engage in street crime.

• Companies lose 5%or $928 Billion of their revenues each year to fraud.

• The cost of white-collar crime: loss of jobs, personal finance hardships, mortal detriment of selling contaminated food, suicide of breadwinner, distrust in community leadership, dangerous neighborhoods.

• Fraudsters look for a reason to blame the victim to escape accountability.

• Fraud cannot occur unless the person has the capability to recognize an opportunity and take advantage of it, again and again.

• An incentive to commit business fraud is pure satisfaction and revenge, damaging the employer’s reputation and finances.

• There are ethical complications in statements such as, “this is the way its always been done,” particularly when an ethical or moral decision arises.

• Unethical companies may encourage their employees to bend the rules and engage in immoral conduct is just doing their jobs. This is how corruption becomes the norm, facilitated by the leader in the organization.

• When deviant and criminal behavior is viewed as normal and accepted, individuals are likely to conform.

• Your intuition will warn you when you are about to do something wrong. It could be a constant nagging thought, a reminder of a bad decision that you made in a dream about the future, a nauseous feeling or upset stomach, a strong pull not to go somewhere or to travel.

• Greed is one of the motivations for fraud.

• The emphasis that society places on reputation, achievement, material success and job satisfaction may lead people to engage in fraud.

• Blaming victims: “you asked for it,” telling someone that they were assaulted because of the way they were dressed, “you should have known better (saying their gullibility or naivety is the reason),” “had it coming, (is a phrase a perp uses to seek revenge for a perceived slight),” and “deserves to be taken advantage of, (due to past abuse placing them in a vulnerable position).”

• The key to fraud is using deception to carry out a crime by suggesting a lie and vanquishing the truth.

• Individuals who appear to get away with white lies, move to bigger lies, and if cheating is involved, the guilt and shame is overridden and only feel positive feelings.

• The cheater’s high coined by researchers at Harvard and University of PA found the greatest high when there wasn’t an identifiable victim.

• Those who cheat are likely to cheat in the future as they block out ethical standards of conduct.

• Psychopathy and sociopathy describe a personality disorder characteristic of a lack of empathy or remorse.

• Psychopathy is rare in the general population according to a study in 2008, however, convicted criminals have an estimate of 15-25% of psychopathic personalities.

• Psychopaths lack empathy, are prone to deceptive behavior and have overactive egos, are arrogant and feel superior to others. 

        BEHAVIORAL RED FLAGS: Lacking insight into their behavior, inability to reflect or have awareness. High degree of self-absorption. Ex. Knows how to get under your skin to get a reaction and will intentionally cause you anger, pain and frustration, over and over, again and again. Episodes of anger outbursts, quickly escalating to rage and slamming or breaking things, especially when flaws are outed.
Lacking empathy and compassion, the inability to place oneself in the shoes of the person they are hurting or abusing. Others using deceit, domination or intimidation.

• Question: did you take the money? Deceptive: did I take the money? (stalling) I would never do something like that. (using absolutes) Why would you think I took the money? (using guilt and shame)
  If an answer is shrouded in confusion.- A question follows a question.- Diverting attention away from the topic.- Implying guilt or shame.

• Deceitful people use “misunderstanding, misinterpretations, and ambiguous words. Some of these words are usually, kind of/sort of, generally, virtually, basically, somewhat.

• When divulging the events of an incident, truthful people will tell a story, with a beginning, middle and end, with the height of the event in the middle. Expanding on trivial details indicates deception, although, the right type of details – such as what they were wearing, eating, or doing – are ok. Swearing on the bible, a grave or to a deity indicates deceit, as well as words that try to prove their honesty – “honestly, truth be told, truthfully, believe it or not,” are indicators of deceit.

• Signs of deceit do not guarantee a person is lying, yet, when observed in context of the circumstances, all signs, comments and behaviors lead an investigation to the truth.

• Elders targeted for fraud:  are more trusting, will pick up a ringing phone, they own more assets, become vulnerable due to cognitive decline, Alzheimer’s/dementia, degenerative disorders, or Parkinson’s.

• Elder men are 19% more likely to lose money to investment scams.

• Elder scams persuade thru promises of wealth, money, celebrity endorsement of supplements, claims of trusted brands, and further their scam through high pressure sales, intimidation to get compliance.

• Con artists instill fear “something’s wrong with…,” “recoup the loss of your investment,” or “if you are a sudden widow and need cash now,” and most commonly with the pandemic, “your personal identification information is on the black web.”

• Offering of free medical equipment, healthcare aid – such as a free cane or brace – just pay shipping and handling.

• Jury Duty, student loan, IRS tax debt scam – Warrants out for your arrest due to failing to respond to a jury duty notice, past tax debt, defaulting on student loan. CASE – facilitated by inmates in GA state prisons charged in money laundering scheme.

• Types of scams: puppy, work from home, stimulus scams, tech support.

• A chronic victim is one who is deeply seated in the belief the scam will work in their behalf, and trust the scammer over their family.

• Weber, LLC, a firm specializing in Elder fraud states that financial exploitation is the improper use of any adult’s funds, property, or resources by another individual, including fraud, false pretenses, embezzlement, conspiracy, forgery, falsifying records, coerced property transfers or denial of access to assets. Source: NY social services.

• Elders are vulnerable to extortion, missing funds or valuables, inappropriate use of their home, phone, food or cell phone, transfer of real property or cash, the refusal of caregivers to use entrusted money to meet the elder’s needs, or charging excessive fees as part of a hidden agenda as mentioned by Webber, PLLC.

• Mandated Reporting Laws are individuals who are nursing home employees, doctors, nurses, pharmacists, social workers, in-home therapists, counselors, clergy and police.

• BEHAVIORAL RED FLAGS FOR ELDER FRAUD: (Source: Webber, PLLC) Is dependent on others, someone driving them to appointments, isolated from family or resources.

• Confusion in daily living, recent beneficiary changes, memory deficiency, inability to pay bills or obtain groceries. 

• Negative cash flow in one or more accounts, decreasing deposits over time, 

• Increasing withdrawals over time, Large, unknown withdrawals, Transfers to/from other accounts, 

• Frequent new accounts/closing accounts, ownership changes to accounts, 
  checks written to cash, suspicious handwriting on documents.

• CONSTRUCTION FRAUD: Robert McDonald, McDonald & Associates, Inc.,

Potential scammers can include the general or subcontractor, suppliers, government officials, inspectors, procurement team and organized crime. 

Strategically, the general contractor serves as a middleman in the project and in a position to commit fraud by manipulating the bidding or demanding kickbacks.

Subcontractors may take part in collusion schemes, like bid rigging, overbilling and kickbacks. or creating illegitimate vendors for the sole purpose to commit fraud.

Government officials may abuse their position and power by accepting bribes, leaning towards a contract in exchange of votes, campaign money or schemes involved in the procurement process.

Inspectors are responsible for quality control and to ensure that safety standards are maintained in accordance with building protocols. If an inspector finds that a contractor did not follow protocols, the delay will increase costs and delay project completion leaving room for extortion or bribery.

An example, It can take weeks to replace load-bearing beams, and an inspector may be bribed to ignore the issue than to correct the problem which would take longer and cost more in the long run.

 In procurement, an individual’s duty is in purchasing and can be in a capacity to manipulate the bidding process.

Construction projects seem to be vulnerable to organized crime syndicates and racketeering through bribes and extortion, creating problems with ways to solve them, influencing trade unions and public officials and by threatening bodily harm.

Mistakes made during the design phase aren’t noticed until late in the project resulting in change orders, delays in completion and increased cost.

RED FLAGS in design: favor one contractor over another, overestimation of resources to allow for kickbacks, larceny or personal gain, extorted money from government officials, or bribery.

RED FLAGS of the bid phase: collusion by multiple contractors, division of market, providing information in exchange for kickbacks.

RED FLAGS BUILD PHASE: Labor and materials billed beyond amounts needed, inflated change orders, substandard labor, materials or workmanship, and assets stolen.

RED FLAGS in the completion process: project is prematurely finished, discounts and rebates are not reported and/or the inspector is bribed to approve certifications of completion, occupancy or other standards.

RED FLAGS IN LUMP-SUM CONTRACTS:  increase in profits so that contractors can replace agreed upon materials with substandard resources or improperly installing material to save time and money. 

Red flags in lump sum :Kickbacks, billing separately for material and labor costs, and excessive change orders.

RED FLAGS IN COST-PLUS CONTRACTS: inaccurate cost estimates may occur in part by inexperience or dishonesty of the contractor. 

RED FLAGS IN COST PLUS CONTRACTS: An unwillingness to be cost efficient may change the final cost significantly and is negotiated with a clause, detailing splitting the savings below the maximum price.

RED FLAGS IN UNIT-PRICE CONTRACTS: Due to the unknown final cost of the project in circumstances where the amount of work needed is difficult to define, signing these contracts without a list of or an incomplete list of total cost estimates can invite manipulation of numbers.

When materials are tested for quality control, some contracts may have incentives  or penalties awarded according to those results, although if the testing firm is the hired contractor it presents inherent risks for bribes. 

Corrupted testers may inform contractors of when sampling will occur, replace samples with known test passers, and even remove samplers if testing is performed on-site.

Change order abuse is a scheme that is furthered by collusion in which a (low bid is submitted to win the contract, then the contractor increases the price with subsequent change orders. With the lack of oversight, this is a highly sought out manner to access funds or create kickbacks.

Legal change orders comprise errors in design, weather conditions, omitted materials or specs, improvement in time or cost, building code changes as noted by Robert McDonald of McDonald and Associates, INC.

CHANGE OF ORDER ABUSE: Find the cause of excessively low bids, educate employees on the topic, and determine if additional costs are necessary or excessive based on analysis of cost and pricing data.

RED FLAGS OF CHANGE ORDER ABUSE: Multiple justifications for excessive change orders especially with the same contractor, a person who acts outside of their scope of job duties, a repeated pattern of orders that increase the price, scope or length well after the awarding of the contract. Finally, vague and ambiguous details clarified by an order.

The right to audit clause discourages fraud during the project as it states that the invoices and records can be audited during the construction phase – at any time or throughout. The clause can outline how funds are used, and to audit subcontractors, two measures to prevent the contractor from limiting the scope of the audit.

RED FLAGS OF BID ROTATION SCHEMES: some bids are purposely inflated, others are in line with others, while some contractors do not bid and others withdraw theirs. Some contractors agree to give an awarded contract to a losing bidder as a way to improve their cash flow.

RED FLAGS OF BID SUPPRESSION: Refraining from bidding or withdrawing a bid. Conspirators further by bribing outside companies not to bid. The awarded contract is the consolation price for the suppressed bidder. intimidation or threats of violence tactics to obtain compliance.

RED FLAGS OF COMPLEMENTARY BIDDING: A co-conspirator knowingly submits a bid that is higher than the agreed price. Other conspirators will submit bids that are exorbitantly high, deliberately fail to meet the requirements or disregard the acceptable terms of the buyer and submit a bid anyway. 

RED FLAGS OF MARKET ALLOCATION SCHEME: Colluders divide a market into sections that are excluded from competing, the submission of bids from fraudulent and nonexistent companies, a supplier may only sell to other contractors who are in on the collusion.

RED FLAGS OF BID RIGGING: High and low bids appear from same contractors, the same contractor wins more bids than others, multiple change orders after bid awarded, bid prices fall with a new competitor, submission of high bids, qualified contractors don’t submit bids, a contractor changes to a subcontractor, last minute bid submission.

PREVENTION OF BID SCHEMES: To discourage collusion, expand the bidding pool, keep accurate bid records, eliminate subcontracting by losing bidders, implement a reserve price.

RED FLAGS OF CORRUPTION: Corruption occurs in private and public sectors, nonprofit, for profit and governmental agencies in the form of bribery, kickbacks, illegal gratuities, extortion, conflicts of interest.

RED FLAGS of Illegal gratuities are rewards given after a decision has been made and requires that proof was given for or due to an official act.

ASSET MISAPPROPRIATION: In construction, the theft of lumber, the creation of a fake or ghost employee, the larceny of a couple hundred dollars or stealing time on a timesheet are examples of asset misappropriation.

MISUSE OF COMPANY ASSETS: Misusing company assets such as electronic equipment, construction or company vehicles, or resources is a form of fraud when not being used for the project, yet instead depriving the company from using them, stealing outright or borrowing.

MISUSE OF COMPANY ASSETS: There is more waste, breakage of materials or resources that occurs during the course of a construction project making it difficult to discern if theft has occurred. Some of the most frequently stolen items include: lumber, copper, steel and fixtures.

MISUSE OF COMPANY ASSETS: Some industries have specialty tools, equipment and software that are prohibitively expensive for individuals to purchase let alone rent, especially is proper certification or credentials are needed. This temptation may cause dishonest employees to use them for a side business or for work on their home.

FINANCIAL STATEMENT FRAUD: Overstating the number of assets and revenues combined with understating expenses and liabilities involves the manipulation of the books designed to present the company is performing at a higher level than it is.

Using substandard materials or condoning substandard workmanship can result in a fire, as a result of faulty wiring. If inspection reports were falsified, this can threaten the structural integrity and safety of a structure. With all of these, an owner can fall below the required building codes.

Hiring undocumented workers is illegal and unsafe even though many are highly competent and have accrued years of experience, yet not provided with bona fide training leading to improper installation.

Paying undocumented workers can bring about some of the following schemes: fraudulent disbursement, tax evasion, workers compensation fraud and identity theft.

Counterfeit parts are not immune to just the construction industry, but to other industries – food, car parts, computer repair, electrical or plumbing equipment, beauty salons. Case example: An entrepreneur is duped by a fraudulent wholesaler claiming the product is organic, when it is not. The same owner is scammed by a food broker who steals a pallet worth of food product, only to sell it at three times the cost, embezzles the profit, closes his business only to open up in a new city, with a different name and all assets under family members. The large chain grocery store who partners with the broker is unaware of the scam and unknowingly assists the broker to distribute the product along the east coast. The investor – the grocery store, not only lost its investment and had its integrity questioned, but dealt with the fallout of all the other entrepreneurs who were subject to this scheme. 

Commonly sold counterfeit parts include capacitors, circuitry, microchips, steel, seamless pipe, breakers and valves and can be made so well that the imitations are difficult to discern from the real thing. Packaging, labels and other markings can take a blasé product to an excellent imitation.

Original equipment manufacturer parts or OEM are standards that procurement professionals need to implement to ensure the correct parts are used.

• RED FLAGS OF CONFLICTS OF INTEREST: Employees who show high interest in a specific customer, vendor, supplier or resource, accepts contracts, products, services that aren’t related to the course of doing business (buying bakery items for a plumbing business), acts outside their scope of duties (bookkeeper that tallies inventory), declines a promotion to another department, unexplained increase in wealth, displays favoritism by payment of unjustified high prices, purchase of unnecessary products, accepts high-priced, low-quality work, has undisclosed outside business, accepts inappropriate gifts, travel or entertainment, does not disclose or file conflict of interest or financial disclosure forms, and has a special influence with third parties.

• RED FLAGS OF BEHAVIOR: Struggles with addictions to smoking, drinking, drugs, food, increase in debt, gambling/playing the lottery, has high medical expenses, change in personality/appearance, and living beyond their means.

• A lack of internal controls that contribute to fraud or schemes in the workplace include: no clearly defined separation of duties, job descriptions, no guidelines regarding gifts or entertainment, poor enforcement of policies especially in key functional areas to include purchasing, receiving and storing data or inventory.

• Individuals in the following positions are most susceptible to conflicts of interest: insurance claims adjusters, purchasing personnel, sales personnel, government officials, finance industry professionals, economists, stockbrokers and employees of media organizations.

• With the rise of cryptocurrencies, ransomware is prominent due to the complex encryption techniques.

• Fraudsters who demand payment in cryptocurrency or through prepaid cards scare tactics to extort money, a scammer can impersonate law enforcement to fine, jail or impose criminal charges.

• Ransomware attacks can copy all the data on a victim’s device or network, then threaten to make it public or sell the data if ransom is not paid.

• Worms are computer programs that replicate itself and spreads to other computers.

• For businesses to keep up to date with cybersecurity best practices it is recommended that the policies be updated regularly and evaluated via a risk assessment, planning and developing a framework for mitigating risks.

• It is vital for security and management to stay current with major attacks and software/hardware vulnerabilities, especially after it is discovered or exploited. Many of the data breaches and attacks could have been prevented if the affected organizations had kept their operating systems up to date.

• Preventing unauthorized access refers to the limitations that one has physically in a secured location, meaning they are disallowed from entering a room or building, while logical access controls refer to gaining access to software on a computer. 

• Installing a firewall is a software program that blocks access to an internet site or email, and are designed to control the interface between the network and the internet, 

• All storage devices need to be scanned for computer viruses as this protects the system from malware.

• Cybersecurity training on the fraud risks facing the company and information the employees of the policies that the company has to monitor, detect and prevent cybersecurity threats. 

• Install anti-malware on company issued mobile devices to protect and prevent further unauthorized access to the company network. Employees need to be blocked from accessing the network with their personal devices or offered limited access.

• Back up data at a separate site especially if the company is located in a natural disaster prone area. 

• The process of restoring data needs testing to ensure there are no deficiencies or  delay. Testing and auditing need to ensure this process is done confidently.

• Unnecessary costs, service or equipment to healthcare programs or patients through reimbursement for unjustified services or services that do not meet the recognized standards for healthcare is called provider fraud.

• Provider fraud is prevalent as providers possess the knowledge of medical terminology, procedures and techniques, needed to avoid being questioned; and insurance companies contact healthcare programs for billing, instead of the patients. 

• RED FLAGS OF PROVIDER FRAUD: It is fraudulent to bill for services not received or for services that aren’t covered by insurance. Likewise, billing for separate procedures with multiple charges, when instead, if billed as a whole is less expensive. A surgery that lasts 4 hours may be replaced with a more extensive and involved service that is not only expensive, but not required and may be a 15-hour service.  

• What can patients look for on their medical history? Services that weren’t rendered – look for surgeries, inpatient treatment at facilities, treatment for chemo.225a. disease, therapies – physical, occupational, nutritional, expensive medicine for conditions you don’t have. These fictious services can cause a higher health insurance premium, denial of health or life insurance coverage and even denial of disability insurance.

• Data mining and predictive analytics extract information from large amounts of data to isolate activity that is unusual. 

• The implementation of special investigation units (SIU) are professionals who have experience in coding, law enforcement, and detecting improper billing.

• Fraud examination is an investigation into the financials of a company or a person, and follows a set of procedures that strive to resolve allegations of fraud from origination to resolution.  

• A fraud examination is conducted only with significant predication, involving evidence gathering, interviewing witnesses and subjects, writing reports, testifying and assisting in fraud detection and prevention.

• A Certified Fraud Examiner investigates if a fraud has occurred and whom is responsible. Fraud is assumed until evidence proves otherwise. There is also an assumption that the case will end in litigation.

• Obtaining documents to contribute to evidence include forged signatures, counterfeit or fake items and cards, and bank/credit card/investment statements, loan/mortgage/leasing applications.

• Making assumptions or hypothesizing theories is necessary in order to solve a fraud without complete evidence.  In complex cases, the investigation begins with an assumption, known facts and then is tested to determine if it is provable. 

• As evidence is obtained and reviewed, interviews are conducted, usually beginning with the person at fault, then transitioning to individuals known to be involved with the fraudster.

• The ability to ascertain facts from witnesses, and reporting the results accurately are of equal importance. It is vital for the fraud examiner to have strengths as a lawyer, accountant, criminologist and investigator.

• Communicating findings in a formal written report must be done accurately and understandably to unrelated individuals to the case, conveying credibility and accomplishing the objectives of the case.

• The responsibility for preventing fraud lies with senior management, implementing the recommendations from the fraud examiner.

• Forensic accountants have extensive experience in mining and analyzing large amounts of data. They can independently value financial impacts and economic damages, and in the nonfraud scope their experience in business valuations and disputes, divorces, bankruptcies and litigation support services are an appeal to civil cases.

• Julie Ann Callicutt is with the client from origination to resolution, assisting in fraud detection and prevention.

• Numerous posts on Instagram and Facebook offering various ways to make money by sending and receiving funds through one of the apps.

• Sending money to various people to various locations. 

• Fraudster’s find ways to hack into a person’s bank account and steal their funds using cash apps, Venmo and Zelle.

• Fraud increasing with cash app according to Google play app. BBB increased complaints of fraud and scams with PayPal.

• After a fraud report incident, the consumer will ask their bank to partner with the cash app by putting protocols into place to stop and shut down any future activity. This is a statement from a Zelle administrator.

• Fraudsters find money mules to deposit funds into the apps, the move them from one account to the other, in an effort to hide the source of funds.

• Fraudsters, exploit the ease and anonymity of moving money through these apps.

BANK FRAUD – LAW OFFICES OF SETH KRETZER

The definition of fraud is the intention to misrepresent the truth or withhold important information that causes financial harm to another person.

Common types of bank fraud: 1. check fraud. Deliberately forging or bouncing checks. 2. Stealing debit and credit card numbers to make unauthorized purchases. 3. Faking identity to obtain access to a safety deposit box or to make a ACH transaction.

Accounting fraud occurs in business in which “cooking the books” make a company appear more profitable than they are.

Loan fraud is found in both personal and business transactions, and is found when a person lies on a credit application to receive a high loan amount or steals the identity of another to take out a loan.

Wire fraud involves a fraudster stealing the username and password of a bank customer and then wiring the money to themselves. A scammer can also claim to be in desperate need of money and approach a person on the street, call or text them, asking for money.

In romance scams, a person may claim to be from another country, convince a person from the US that they have fallen in love and demand them to send money frequently in the form of wire transfers or cryptocurrency payments so they can save money to come to the states for the face-to-face meeting. 

Phishing fraud is when a fraudster uses email, phone calls, text or dumpster diving (going through trash to find personal information) to obtain a victim’s banking details, by keeping the victim on the line.

ATM fraud occurs with there is a reprogramming of the machine to install a skimmer to steal card details.

Punishment for bank fraud includes jail time and fines

Source: AMERIPRISE

Advanced fee fraud involves promising the victim a large sum of money in return for an up-front payment. Even after making the payment, the fraudster will trump up additional reasons for new fees. Common scams involve winning the lottery, IRS, inheritance money, vacation rentals, work from home opportunity, check overpayment and loans.

Debit card fraud obtains funds fraudulently and can involve a lost/stolen card, compromised or counterfeit cards, and pre-paid debit card scams.

Financial advisor imposters’ goal is to obtain your personal financial information to take control of your money. Victims believe they are investing money and are led to fake company websites, social media or email links to download tracking info to obtain info.

Investment fraud target retirees as they are known to have large amounts of money saved and thus are suitable targets for ponzi, pyramid scams, pump and dump, offshore investing, and prime banks.

Financial exploitation is the illegal use of an elderly or vulnerable population’s funds, property or assets. The vast majority of reports to Adult Protective Services involve family members who have a trusting relationship with the victim.

Financial exploitation is the unexplained disappearance of funds or valuables, sudden appearance of uninvolved relatives claiming their rights to a relative’s possessions.

Unexplained sudden transfer of assets to a specific family member or friend outside the family, or abrupt changes in a will, a financial account or the beneficiary of an account are other examples of financial exploitation.

Substandard care being provided or bills unpaid despite adequate resources and evidence of forgery for financial transactions or titles of possessions.
SOFI.COM

Fraudster’s can set up a fake financial institution or impersonate a bank. When they hack into your account and steal the money that is bank fraud.

Hiding illegal income through a complex series of transfers are intended to make the dirty money appear legitimate. Banks who play a role in any of the stages of money laundering are complicit in this fraud.

If you are a victim of fraud through your financial institution, it is important to quickly alert your bank to report the identity theft to ensure you are not losing any money.

Money laundering convictions vary by state and depends on how much was stolen and the type of activity was used to steal the money. It must be proven that a person charged with bank fraud willfully and knowingly committed the crime. 

Money laundering punishment with fines of $500,000 or twice the value of the assets involved and a sentence of up to 20 years in prison are one such example, while more severe penalties can involve a fine up to $1,000,000 and 30 years in prison.
HC scams.

Perpetrators of Healthcare Fraud include health care providers, patients, durable medical equipment suppliers and pharmaceutical companies. 

Provider Fraud: causing unnecessary costs to health care programs or patients thru reimbursement for unjustified or excessive services. Services that do not meet the recognized standards of care are also fraudulent. 

Common schemes: a. billing for fictitious services: billing for services not rendered causing a false medical history. Example: filing fraudulent Medicare claims of $20 Million for services not provided or necessary. 

Falsifying patient records to bill for homebound services. For non-covered services: billing for services that are not reimbursable by labeling them as covered services. 

Also changing the billing code to reflect a service that is covered. Example: Cosmetic surgery disguised as high-dollar elective procedures. Tummy tucks, eye lifts, rhinoplasties, and nose jobs billed fraudulently as abdominal reconstruction surgery. 

A doctor's sudden wealth had the FBI suspicious.

Unbundling services: Each procedure has its own code and is bundled into a single code for special insurance rates. It becomes illegal when there is attempt to increase profits by billing separately for procedures. Example: Ordering a blood test, and billing all four tests separately instead of under one code or conducting the lab tests on various days and submitting separate claims.

Upcoding services: Submitting an insurance claim for a higher level of service than performed.  Example: filling a prescription with a less expensive generic, while still billing for the more expensive drug. Or, falsely claiming that an established patient is new as providers are reimbursed more for new patients.

Unnecessary costs, service or equipment to healthcare programs or patients through reimbursement for unjustified services.

Provider fraud is prevalent as providers possess the knowledge of medical terminology, procedures and techniques, needed to avoid being questioned; and insurance companies contact healthcare programs for billing, instead of the patients. 

RED FLAGS OF PROVIDER FRAUD: 

It is fraudulent to bill for services not received or for services that aren’t covered by insurance. 

Likewise, billing for separate procedures with multiple charges, when instead, if billed as a whole is less expensive. 

A surgery that lasts 4 hours may be replaced with a more extensive and involved service that is not only expensive, but not required and may be a 15-hour service. 

FRAUD PREVENTION: What can patients look for on their medical history? Services that weren’t rendered – look for surgeries, inpatient treatment at facilities, treatment for chemo. Disease, therapies – physical, occupational, nutritional, expensive medicine for conditions you don’t have. These fictitious services can cause a higher health insurance premium, denial of health or life insurance coverage and even denial of disability insurance.

SOURCE: ACFE When patients submit a medical bill that they have already been reimbursed they will resubmit the same bill with a photocopy, yet change the dates and amounts.

Fraudster patients may submit multiple claims for multiple surgeries, office visits or dependents that at not covered by insurance.

What should insurance companies look for on a fraudulent medical bill? If the dates on the patient’s medical file do not match the dates of service.

When patients submit multiple claims without notifying the insurance company that the claim has already been paid, this healthcare fraud can involve both the concealment of claims and misrepresentation that the expense hasn’t been compensated.

Medical identity or third-party fraud is when there is an unauthorized use of an insured’s insurance by another party. Do not share your medical coverage with another who cannot afford medical care.

If a thief steals your information, they can obtain services with the stolen identity. This leads to mistakes in electronic health records, causing misdiagnosis or incorrect treatment due to the fraudster’s compromising the legality of the health records.

RED FLAGS: A person who claims to be the policyholder is unable to verify their identity with both a copy of their insurance and identification card.

RED FLAGS: Note the height, weight, eye color and other physical attributes on identification card with the patient’s historical medical documentation.

Doctor shopping is when a patient obtains controlled substances from multiple providers without the multiple providers knowing.

Doctor shopping fraudsters lie about their symptoms, deny receiving previous meds, intentionally cause harm to themselves, claim to lose prescriptions.

Addiction to a substance causes a personal to use a medicinal drug for recreational purposes, therefore inciting doctor shopping fraudulent behavior.

Doctor shopping scammers will purchase multiple drug prescriptions to sell drugs illicitly.

RED FLAGS: A patient “routinely” attempts to fill prescriptions ahead of schedule with the excuse that they have misplaced the prescription or it was stolen.

RED FLAGS: A patient will refer to prescription drugs by their commonly used street name rather than by the proper medical title.

DIVORCE HC FRAUD: Hiding divorce is a scheme carried out by a primary beneficiary who lists their former spouse as a covered dependent after a divorce is finalized.

Cost, convenience and coverage, and lack of desired doctors in a COBRA plan may be reasons a divorced couple does not report their change of marital status.

CASE:  A couple hides divorce from an employer. When Blue Cross found out, they had paid claims in $1,000,000 to the ex-husband, while the wife embezzled $100,000 from her employer. A charge of embezzlement was incurred on the wife.

RED FLAGS: Covering an ex-spouse and kids under their employer-sponsored health care plan did not inform their employer that they are divorced.

RED FLAGS:  A couple finalized their divorce more than 36 months ago, but former spouses are still covered under the same health insurance policy.

FRAUD PREVENTION: Prescription drug monitoring programs are electronic databases that track controlled substance prescriptions, allowing communicating about patient histories to be viewed before prescribing medication.

FRAUD PREVENTION:  Data mining techniques through outlier detection software, isolate unusual or repetitive billing patterns with patients that indicate potential fraud.

Advancements in technology make it easier for fraudsters to create and alter fraudulent medical data, however technological advancements make it easier for fraud examiners to catch this type of fraud.