Tag Archives: scams

Massive Betrayal of Trust

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Photo by Mamnaimie Piotr

On September 8, the Consumer Financial Protection Bureau (CFPB) put out a press release that it was fining Wells Fargo Bank $100 million for secretly opening deposit and credit card accounts, without customer approval. In addition to the CFPB fine, Wells Fargo was fined $35 million by the Office of the Comptroller of the Currency, $50 million by the City and Country of Los Angeles and will have to pay approximately $5 million in restitution to customers. This fraudulent behavior occurred on a massive scale and, based on the CFPB’s investigation, resulted in:

  • Employees opening 1,534,280 unauthorized deposit accounts;
  • Employees submitting applications for 565,443 credit-card accounts, without the knowledge or consent of the people in whose names the applications were made;
  • Employees creating fake email addresses in order to enroll consumers in online-banking services;
  • Employees requesting debit cards for customers, without the customers’ knowledge or consent, and creating PINs to activate these cards.

All of the above has happened only since January 1, 2011. That is about five years in which these shenanigans were going on. During this time, Wells Fargo fired about 5,300 employees but it does not appear that the bank did a lot more than that to change the culture and systems in order to keep these practices from recurring, or that it took any steps to do right by the customers who were affected. To boot, the executive who oversaw the unit where this all happened left without having to pay back any of the almost $125 million that she earned with the bank. To understand why employees engaged in these dishonest practices, it is important to understand how they benefitted.

Wells Fargo is valued at over $250 billion, making it the most valuable bank in United States, by this yardstick. Wells Fargo was also considered to be the king of cross-selling. Cross-selling is a practice where banks sell more than one service to a customer. For instance, say you open a checking account with Wells Fargo. If the person that you open your account with convinces you to then open a savings account, a credit card account and a mortgage, all of that is cross-selling. At Wells Fargo, employees were paid and received bonuses based on the number of different services they were able to sell to customers. At times, employees would have to work unpaid overtime hours in order to reach these goals and would be threatened with losing their jobs if they did not do enough cross-selling. These employees were told to do “whatever it takes” in order to meet sales goals and this turned out to include engaging in the fraudulent behaviors I noted above.

With the pressure to perform in order to increase earnings, through bonuses, or merely keep a job, the retail employees, at least 5,300 of them, found many opportunities to game the system. Controls at Wells Fargo, when it came to ensuring accounts were valid and authorized by customers, appears to have been very lax. For instance:

  • Employees were able to sign up customers for banking services and would use fake email addresses that used wellsfargo.com as the domain name, such as 1234@wellsfargo.com or none@wellsfargo.com. Doesn’t that seem rather brazen? It also seems like a security shortfall on the part of the bank, that the application process wouldn’t flag an email that doesn’t exist in your own system.
  • When employees opened fake deposit accounts, they would fund these accounts by transferring a customers money from an authorized account to the fake account. Sometimes, as a result of the transfer, the authorized account would incur insufficient balance and overdraft fees. Also, the fake accounts would also incur fees and Wells Fargo would withdraw money from the authorized accounts in order to pay these fees.
  • In a similar manner, credit card accounts opened, without the approval or knowledge of customers, would incur annual and other fees. At times, these customers would find that they were in collections and their credit scores had been affected by accounts that they did not even know they had.
  • Some customers actually received credit cards for accounts that they had not authorized. When these customers contacted Wells Fargo to complain about these cards, they were told to simply destroy the cards. Destroying a credit card does not close the credit card account, nor does the shredding of a card do anything as far as the shredding that your credit profile may have taken.
  • In order to meet quarterly goals, employees would hold back applications for account openings. The manual applications, that included sensitive personal information, would be stockpiled in an unsecured manner and the accounts would only be opened in the next sales goal period, in a practice referred to as sandbagging.
  • Wells Fargo also misled customers by telling them that they could not get one service without getting a bundle of other included services. That would be like opening a checking account and being told that you cannot do so unless you open a savings account and get a credit card with the bank.

With how widespread these practices were, it seems that employees were sharing knowledge about how to best bulk up their cross-selling numbers, without actually cross-selling. Also, when customers complained about fees, it is unclear how much of a follow-up there was to discover if what had happened was a mistake or not. Then, when Wells Fargo discovered this behavior and fired an employee, the bank did not take any steps to let the impacted customers know that their information had been used to open accounts in their name and, if applicable, charge them fees. The bank did not go back and refund customers the fees they had been charged, unless the customer raised a stink about them. When I was discussing this case with my husband and explaining how customers were negatively affected, he had a tale of his own. He has a credit card (not Wells Fargo) and the company changed his credit card information, without letting him know. When he sent payment on his account, they accepted the payment, without telling him that the account was closed, and then charged him interest and fees on the balance that had been moved to a new account. He, not the credit card company, had to figure out what had happened and he, not the credit card company had to calculate the monies that needed to be refunded to him and make sure that the company was not just holding money on a nonexistent account but actually crediting it to his account.

As a result of this case, in addition to the fines that Wells Fargo has been ordered to pay, there are steps the bank has been ordered to take in order to improve the culture and strengthen the system so that this kind of behavior can be prevented, detected and corrected in the future. This includes:

  • Employee training to prevent “Improper Sales Practices” and improve integrity at the bank;
  • Creating monitoring processes and policies to effectively deal with customer complaints;
  • Creating systems to ensure that customer approval is received before accounts are opened on their behalf;
  • Revising the basis for how employees are paid and reviewing sales goals to ensure that they are not unrealistic and do not impose unreasonable pressure on employees.

Wells Fargo will continue to be monitored for five years, to make sure that they comply with the CFPB’s consent order.

On your part, with all your accounts, you can check to make sure that they accounts that you have are ones that you have authorized and that transactions made in your name are valid. Some steps that you can take are:

  • Review your credit report on a regular basis to make sure that all accounts listed are ones that you know about. Several financial institutions offer free credit reports to customers. If this is not an option for you, you can visit the Annual Credit Report website. On this website, you are entitled to credit report per year, from each of the three major credit reporting companies. A strategy to employ is to check a report with one agency every four months;
  • Check your bank statements regularly (at least monthly) for any transactions that are incorrect. Even if it is a small amount, look into a transaction. That small amount could be an indication of something bigger;
  • If you receive a card in the mail that you did not apply for it, follow-up on it and make sure that it is cancelled. Then check your credit report again.

On the Wells Fargo website, the Chairman and CEO states that “Everything we do is built on trust.” It seems that many employees have been playing lip service to that value and we know that, even with trust, it is important to verify. Take the time to check in on your finances. There may be mistakes that need fixing and there may also be pressured employees who are trying to get ahead or merely hold onto their jobs by engaging in dishonest practices.

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Cheating Mysteries

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When I first started running long distance, my goal was to run the New York Marathon. After I completed the Chicago Marathon, things changed a little. Of course I still held my breath every year, hoping to make it into the New York Marathon. But I also had another distant dream – qualifying for the Boston Marathon. It was a distant dream because I would need to run a qualifying time in order to get into Boston and my pace at that time was nowhere near one that would get me into Boston. Over the last few years, my pace has improved and qualifying for Boston has become a more attainable dream. Over the years, I have also come to know more runners and have found that many of us aspire to qualify. I know I am always in awe of a person who has qualified for Boston – it is no mean feat.

With the line of work that I am in, I should not have been surprised, but I was, when I read a recent Runner’s World piece about people who cheat to get into the Boston Marathon. I wanted to run the New York Marathon because I was inspired by the runners who ran past my block, the runners who would touch all five boroughs that make up the city that I call home. I enjoy running races in cities and towns that I have never been to, as I find it a great way to visit and discover new places. When I think about Boston, I don’t necessarily think about running the race itself. The power of Boston, for me and for many that I speak with is in what it takes to qualify. That is the challenge. So, when I read about people who cheated by getting someone else to run a qualifying time in their place, or by cutting a course, I was baffled. Where is the joy in telling someone that you achieved something that you didn’t or that you had someone achieve on your behalf? When I speak with fellow runners, I tend to speak with like-minded people who are just as baffled as I am.

This article reminded me that just because one cannot understand the motivations of a cheater, it does not mean that the cheating will not happen. The fact that many of us cannot understand this motivation is exactly what those that cheat bank on. If no one can imagine how or why someone would fake qualifying for the Boston Marathon, the chances are high that a person will get away with faking in order to qualify for the Boston Marathon. This is something that we all should be mindful of, beyond the realms of the Boston Marathon. Way too often, a business owner or manager will forgo instituting checks and balances in their company, because that business owner can’t imagine that anyone that works for them could be the kind of person that would defraud them.

It is important to take steps to keep from being blindsided by your world view. Precisely because you can’t imagine how a person could behave in a fraudulent manner is why you should seek out the services of a forensic accountant, whose job it is to both imagine how a person could defraud you and how to prevent and detect such actions. We all hope that people will be honest, but it is a sad truth that for various reasons, people will cheat. In the context of the Boston Marathon, perhaps some people feel that they are so close to a qualifying time that a little cheat is not such a bad thing. Maybe some people hunger for praise, even if they have not earned it. Maybe some people just don’t think it is a big deal to cheat in order to get into Boston and see it as a victimless crime. In the context of a business, some people may face personal pressures that they feel push them to fraud. Some people may feel that they are not sufficiently appreciated by their employer and may, therefore, feel justified in taking from that employer. No one is immune from the pressures or motivations that lead to fraud, but what we can do is take steps to make it as difficult as possible to be defrauded.

 

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The Best! The Worst!

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Today is marathon Sunday in New York City and, for years now, I have lived less than a block from the marathon route. It is one of the most exciting days of the year for me and I love walking down to the end of my block to join the over one million spectators who line the 26.2-mile route to cheer on the runners. All too often, New Yorkers are thought of as people who just don’t care about others. Per the stereotype, it’s just keep out of our way, don’t look us in the eye and don’t do anything that will slow us down and we won’t have any problems. Marathon day is a day when I am reminded that the city is a city full of people who do things like come out to cheer and high-five strangers as those strangers test their bodies and spirits. I love it.

There are moments, such as the marathon, that bring out the best in people. Disasters, as sad as they may be, also bring out the best in people. People come out and give time, money and other resources to help those in need. Tragically, disasters also tend to bring out the worst in some people. Some among us see disasters as a great opportunity to take advantage of others, for personal gain. Some of the fraudsters are blatant in their unscrupulous ways because they are targeting the desperate among us. A current example is the migrant crisis in Europe, where refugees, seeking to escape dangers at home, will give up all their resources in the hopes of reaching a safer place. Instead, some hand over money to greedy criminals who then lead them into more danger and, sometimes, even death.

Other fraudsters are more slick in their strategies to profit from the suffering of others. In recent months, natural disasters such as fires and tropical storms, have left many in the United States needing assistance. Just in October, while communities in South Carolina were struggling to recover from flooding damage, warnings were being sent out because of an influx of fake charities. These counterfeit charities, preying on the generosity of those wishing to do something to help the displaced and impacted, were taking people’s money and doing nothing to help those in need. Just a couple of days ago in New York, a company agreed to pay a settlement of $700,000 for pretending to collect secondhand clothing to help charities. Instead, this company sold the clothing, paid almost nothing to the charities and made profits of over $10 million dollars, it is estimated.

Because, even in situations where we should be helping others, there are those who are looking to help themselves at the cost of those around them, it is important to be vigilant.

  • It was Halloween yesterday and parents were checking to make sure that the treats that their kids collected were safe for consumption. Yes, people may appear to be doing good things, but it is only smart to make sure that everything is above-board.
  • Even though it may seem like a drag, check up on who you are giving your money or time to.
  • The name may sound familiar, but make sure it really is who you think it is.
  • If you feel uncomfortable about something, it is okay to say no. There are many opportunities to give back to those in need and you will find the opportunity where you are sure that what you are doing is benefitting those who need it.
  • Don’t give your personal information to anyone.
  • If you believe that you have been scammed, contact your local authorities and report it.

Giving is a vital part of what makes us communities. Just make sure that you are giving to the right people and not the unscrupulous scammers around. You know, like that obnoxious person in the neighborhood who decides that they just have to cross the street as the runners are passing by. Don’t give that guy the time of day.

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Always Looking…

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A while ago, I was listening to an episode of This American Life. I had to use Google to find the show because I couldn’t remember most of the show but I did remember one part of the episode. A guy comes home from a party and goes to use the bathroom. He lifts the toilet seat to find a rat looking up at him from inside the toilet bowl. A rat. Ira Glass, the show’s host goes on to inform us that finding a rodent in a toilet is not as unbelievable as one might think. It turns out that there are circumstances under which rodents can find their way into the pipes that become one’s toilet bowl. I can’t rightly remember exactly what these circumstances are because I was panicking too much to pay any real attention.

I am terrified of rodents. I can squash a cockroach without a second thought, I have been known to allow snakes to slither across my arm but the sight of a rodent has been known to reduce me to tears, while taking cover on whatever higher ground I can find. So, upon hearing this story, my deep-seated fear led to a modification of my habits.

I am a terrible sleeper; I have long been a terrible sleeper. Once I have woken up in the middle of the night, my body will use any excuse to decide that it cannot go back to sleep. Therefore, on the occasions that I need to get out of bed, on order to get water or use the bathroom, I do everything in the dark. I don’t want the stimulation of light. I even keep my eyes closed as much as possible. However, post This American Life, I have changed one thing. Now, I flash the bathroom light on for just long enough to lift the seat and inspect the toilet bowl for any intruders.

Similarly, the first time I read about ATM skimmers led to more research and various modifications in my behavior. ATM skimming is hardly new, but technology has helped criminals get better at it. ATM skimmers are basically machines that read and steal the information on the magnetic strip of your credit or debit card. This information is then used to steal your money. Thieves attach skimmers to the face of an ATM and, as a result, when you stick your card into what you believe is the ATM, you are actually passing it through a card reader that is recording all the information on your card. Older model skimmers used to be clunky and unwieldy and all but the most distracted ATM users could spot that something odd was attached to the ATM they wanted to use. Nowadays, however, the attachments are more sophisticated and harder to spot. Often, the skimmers are paired with a hidden camera that is there to record you entering your PIN, giving them all the information that they need in order to clone your bank card.

When I use an ATM, before I use it, I go through a routine that may look odd to anyone passing by. I move my hand over the card slot and try to see if I can move it or if it is firmly fixed in place. I look it over and step back to see if I can spot anything out of place. I also look around to see if I can see a camera. Once I have done the physical check of the ATM, I slide my card in and make sure that I cover up, as much as possible, the keypad as I enter my PIN. I am pretty sure that it is not a foolproof method of avoiding card skimmers, but I do know that taking these precautions has helped people spot these machines and avoid getting their money stolen. Just a few days ago, a card skimmer was discovered at a subway station in Manhattan. In addition to the precautions I take when I use the ATM (this would also apply for those of you who drive and use the Pay-At-The-Pump facility to pay for gas) I also check my bank and credit card accounts just about daily. I have already shared my story about how I learned how important it is to keep track of my finances. The risks brought about by card skimmers increase the need to check up regularly on finances.

So I continue with my little tics. I flash the light and lift the seat carefully. I shake, rattle and roll before I use my card to get money out of the cash machine. So I do a little dance before I get things done, but it is way better to be safe than to have your bottom engaged in combat with a rodent, or to find that your accounts have been cleaned out by a wily crook with a card skimmer and a tiny camera.

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It’s Not Worth It

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A forensic scientist made it into the news for all the reasons a forensic expert never wants to make it into the news. Annie Dookhan, a former chemist for the state of Massachusetts, who provided evidence and expert testimony, was caught forging a colleague’s initials. Once confronted, she admitted that she had forged the signatures of other co-workers and had also been falsifying lab test results for years. As her case unfolded, it turned out that she had broken all kinds of rules and left red flags of her unprofessional behavior all over the place and yet she was able to continue, unchecked, for several years.

To make her resume look more impressive, Dookhan padded her resume with a Master’s degree, in science, that she did not possess. An attorney, speaking about forensic science, described it as a “wild, wild west” and, looking at the case of Annie Dookhan, you could easily believe that. However, this does not need to be the case. When working with a forensic CPA, Certified in Financial Forensics (CFF), you can easily verify any qualifications claimed. CPA licenses can be verified via the relevant state boards and the CFF credential can be verified through the AICPA, who issues the credential. These certifications convey a level of knowledge, experience and expertise so you should check to make sure you have engaged someone who really is whom they claim to be.

Dookhan’s work seemed too good to be true and it turned out that it was. The average monthly testing output of her peers was 50 to 150 samples. Annie Dookhan tested 500 samples a month and she did this without claiming any overtime. A supervisor complained that he never saw her in front of a microscope and another coworker claimed that she would weigh samples without resetting the scales to zero. Despite these and other complaints, nothing was done for years. She continued to deliver several times more test results than any of her colleagues, without any reasonable explanation for her high numbers. In 2010, a coworker found seven separate instances in which Dookhan identified a drug sample as a certain narcotic when it was something else. The coworker explained this away as honest mistakes. When she was finally caught, Dookhan admitted that she routinely tested only five out of every 25 samples. She had been identifying drug samples merely by sight and not carrying out any tests, a practice known as “dry labbing”.

Granted, several coworkers found ways to rationalize the many red flags raised by Dookhan’s behavior. However, there were several fellow workers and supervisors who raised the alarm about Dookhan, voicing their concerns and observations to their superiors. Nothing was done about this for years and then when, in 2010, Dookhan’s work was audited, the audit was hardly anything that would be considered an audit. None of Dookhan’s samples were retested; the auditors merely reviewed her paperwork. This is a classic example of a poor tone at the top. The management at Hinton State Laboratory Institute, where Dookhan worked, received reports of an employee who appeared to be skirting proper procedures and who was definitely, mysteriously outperforming her colleagues by unbelievable margins, yet they seemed reluctant to do anything about this. From Dookhan’s own admissions, she, at times, intentionally changed negative sample results into positive ones. She was also accused of recording inflated weights of samples so that the accused was facing stiffer penalties. She often manipulated test results in favor of the prosecution. This may have made the lab, and Dookhan in particular, a preferred expert for the prosecution. Perhaps the lab liked the business they were getting because of their reputation and management was unwilling to jeopardize things. If management was not interested in enforcing rules and standards, it should not be a surprise that they were so shamelessly flouted for so long. The fallout has been far-reaching. Dookhan tested over 60,000 samples and every one of the results from these tests is now open to being disputed. Some people have already been released from prison, as cases may now have to be retried. The work of everyone in the lab is also under investigation as it is now clear that there was poor oversight and supervision at the lab and it is also possible that Dookhan may have contaminated the work of others. Dookhan was sentenced to three to five years in prison.

Anyone seeking the services of a forensic accountant must never seek an Annie Dookhan. On the face of things, it may appear fantastic to have someone who produces unreal results, is always on your side and invariably tells you what you want to hear. However, you should be encouraged if you work with a forensic accountant who is not afraid to give you the facts, even when the facts are not in your favor. In the long run, what will stand up in court and keep everyone out of trouble is work done without cutting any corners, manipulating the truth or violating the law in any way.

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‘Tis The Season

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A recent typhoon ripped through parts of the Philippines, causing unimaginable damage. People lost their homes, they lost their livelihoods and some even lost their lives. This tragedy has inspired many around the world to do what they can to help those affected by this typhoon. This tragedy has also inspired those with less noble intentions to do what they can to exploit the moment for financial gain. It is very important, therefore, when giving to give not only generously, but also smartly. As we are in the midst of the holiday season, which is also the time of the year when most charitable giving occurs, a lot of these pointers will apply to any giving that you do. I am sure that you would not want to find out that what you thought was a charitable gift was actually going to fund an ignoble stranger’s lavish lifestyle.

First, it is vital to know to whom your donation is going. At a time like this, you are very likely to be inundated with pleas from organizations. The pleas will be very good at laying out how dire things are right now; that is because things are dire. And because things are so dire, it is all the more important to know that any donation you are sending is actually going to help. Not all charities are created or managed equally. And, depending on the cause, not all charities will spend funds in the way that you would like them to. For example, some charities have funds that are dedicated to helping those affected by Typhoon Haiyan, while others may solicit funds using the typhoon as a draw, but not actually spend the money on that. Also, some charities spend a greater portion on their nonprofit work than others do. Fortunately for you, there are several resources that you can use in order to research charities so that you can make an informed decision about where you want to send your money. Examples are Charity Navigator, CharityWatch and GuideStar. Here, you can find tax return information, ratings in various categories and find out more about the leadership of the nonprofit.

Make sure your money is going where you think it is going. Recently, it came to light that many calls that appeared to be coming from a charity were actually coming from a for-profit telemarketer hired by the charity. What makes this a less than ideal manner in which to give to a cause is the fact that the telemarketing companies charge very high fees and, at times, the charity ends up handing over just about all the funds raised by the phone call campaigns and very little, if any, of the donations solicited are used for charitable causes. With this in mind, it makes more sense to cut out the middleman on the phone and donate directly to the charity, either via their website, by sending them a check directly or by calling them and making your donation. In this way, you will know that the majority of the money that you give will be used for good. And when you do give, be sure, also, that you are giving to the charity that you think you are giving to. Sometimes fraudsters will use a name that sounds similar to a legitimate charity and even so far as to create fake websites. Again researching the charity can go a long way to not getting scammed. It would be tragic to find out that you gave your money to The Rad Cross, not the Red Cross. Just be sure you know exactly who is getting your money, not kinda sorta.

When your donation is in response to a tragedy or disaster, find out what the most effective way to give is. Most of the time, with time being of the essence and the needs of those affected being so diverse, sending cash to a charity that is providing relief is the smartest option. There will be news reports of how people have lost everything and need food and clothing, among other things. If you pack a box of food and clothing, it may create logistical issues and delays. Sending clothing means that the charity will have to sort through the clothing, separating it by gender and size. They may have to clean this clothing and then determine how to get the clothing to people who it will actually fit. All this takes up a lot of time and money to do. Nothing is more mobile than money and this money can then be used to get exactly what is needed. Food has similar challenges, including navigating food safety issues. Of course, there is a time and a place where food and clothing donations are appropriate – around the holidays there are often coat and food drives. With these, it is helpful to know that a lot of clothing donation bins that you may see actually belong to for profit entities that then sell your donations for their personal gain. Be aware of this as you give and check to make sure that the bin belongs to a non-for-profit organization.

There are causes and issues that will greatly benefit from your gifts and donations this holiday. It may feel tedious that you need to research the causes that you wish to give to but that is because we live in a world where we need to be on the lookout for greedy scam artists. If you can give, give with your heart but don’t forget to consult with your head first.

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Way Outside The Box

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Shock Absorber

I studied economics in college and in class we learned a lot of theories about things like supply & demand, consumption, and maximizing utility. Those lessons came with graphs and diagrams that were all very logical and pretty to look at. To know that there was an explanation for everything was both exciting and comforting. Learning that a change in the money supply would result in a provable response from the market was a powerful lesson. Everything worked just so, and followed the lines of the diagrams. The power of economics was amazing – all very logical, like a math problem (I also studied math and statistics, so I enjoyed how everything fell in place). It all made sense!

After college, I spent a few years in Zimbabwe and, during that time, I did a stint at an investment bank. I had studied various aspects of economics including micro- and macroeconomics, econometrics and neoclassical theory and so I was ready to step into my analyst position where I took market information and used it to explain and predict market activity. What I found, however, was that sometimes things worked according to the models that I created and the other times the market went rogue. When that happened I was stumped. What was wrong with the people? Why didn’t they act according to the graphs and predictions? Why weren’t they behaving in a logical manner? I wasn’t sure at times, whether to be upset with the people or with the economic theory that didn’t sufficiently warn me about the propensity of people to do what they are not supposed to do.

I left the bank to work in audit, at Deloitte. Just before I started there, an incident had occurred. A client, who was committing fraud, offered the audit manager a bribe to ignore the fraud and issue a clean audit report. When the manager refused to accept the bribe, the client tried to kill the manager. At work, my fellow employees were puzzled by this behavior – for one thing, it would have made more sense to try to bribe the audit partner, as that was who would sign off on the audit report. Was this client’s plan to kill every manager who took over the audit until he found one who was willing to not only take the bribe but also convince the audit partner that the books were fairly stated? It didn’t make sense.

I have found over the years that, unlike most of my mathematics problems, there are many incidents where human behavior does not make sense. A recent example is Scott London, a former senior KPMG partner who, although he earned a seven-figure salary, gave away insider information to his golfing buddy in exchange for a watch and jewelry that he could have bought himself and for about $50,000, cash that was small change in comparison to what he earned. He risked his career, reputation and, possibly, freedom for no good reason.

Why would he do that? It is a question that comes up just about every time a fraud is exposed. We are shocked by the lengths that people go to in order to defraud businesses and what they are willing to risk in their schemes and it is very likely that the fraudsters bank on our unwillingness to believe that anyone could do what they are doing. Often a fraud goes on for a long time because even when someone suspects that something is amiss, they cannot get their minds to go to the place the fraudster occupies. We have preconceived ideas of what a criminal is and so there are many that we don’t suspect:

  • We can’t believe that someone who has been a longtime, respected member of our community could steal from us.
  • We are stunned to discover that a friendly and fun coworker is defrauding the company.
  • In cases such as that of Rita Crundwell, the fraudster is the kind person who helps out when we are in trouble. How could that person be embezzling money?
  • The person fleecing the company could be the person who wins employee of the year awards because they put in long hours, never take vacation time and are always doing more than is expected of them.

At times, in order to see fraudulent behavior, we have to first shrug off our preconceived notions of what kind of person will commit these actions. In this way, we won’t shrug off any red flags or odd moments. Many times after a fraud is uncovered we hear people say things like:

  • He would say things sometimes and I would think maybe I heard him incorrectly;
  • I just assumed she had inherited money from a relative who had passed away;
  • When he started explaining things, he made it sound so complicated that I decided maybe I thought something was wrong because it was too difficult for me to understand.

Humans are odd creatures. We have the power of choice and sometimes that means that a person will make a choice that is absolutely illogical to you. For instance women will wear shoes that break their bones and disfigure their feet and, not only will they wear these shoes, but they will also play hundreds of dollars, sometimes thousands, for these foot-deforming shoes. For many, there is no good reason to destroy your feet in the name of cute shoes but for many others it makes enough sense for them to do it. I know this as a runner who has seen how wrecked we look at the end of a race – bleeding body parts, hobbling, missing toenails – and yet how absolutely triumphant we are. We often don’t make sense.

At times when things pop up that we don’t make sense, we need to be able to keep from thinking that the error is with us. Instead of creating explanations that make sense to us, at times it is important to step outside our boxes and open our minds to the possibility of the unimaginable. If it appears off, it may well actually be off and not be your imagination. It turns out that no one is too smart, too rich or too nice to commit fraud.

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A Little Secret Is Okay

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We live in an age of information and that’s generally a great and amazing thing. Pretty much wherever I go, I can access sports scores or be that obnoxious person who brings Google in to resolve a debate. Sometimes the age of information is not so great, like when the internet convinces me that the itchy throat I have may kill me. That information is so easy to come by and that we humans are social animals may contribute to how willing people are to share the information that they have. When that sharing leads me to a new, delicious and easy way to prepare the mountains of kale in my refrigerator, then that is fantastic. There are, however, moments when it makes sense to keep some information to myself.

The other day a friend of mine asked me for my opinion on sharing information with a person she does not know well. This person owes my friend money and, instead of sending a check, asked for my friend’s bank information so she could just wire the information. She asked  me because she did not have a warm and fuzzy feeling about sending this information out and I told her that she should go with her gut. It is the same sort of concept as when someone sends you an email telling you that you have won a million dollars in a lottery that you never bought tickets for. In order for you to receive these incredible winnings, the email will say, you should send them information, including your bank information, so that they can wire this money straight into your account. More often, what happens in these cases is that fraudsters will take money out of your account instead of any lottery (that you never entered) putting money into your account.

Granted, banks have many controls in their systems to help protect customers from fraud but it is smart to be proactive about safeguarding your money. You don’t want to end up reacting and working hard to try to get back money that has been taken out of your account. Granted, when you write a check out to someone, your bank account and routing number are listed at the bottom of the check. However, I would think that you have some kind of idea who you are writing the check out to and the check will have some information about who presented that check for payment. Either way, you should never feel pushed into using a form of payment that you are not comfortable with – if there is personal information that you don’t want to share with someone, and your bank account certainly counts as personal information, it is absolutely fine to keep it to yourself. Tell that person to use Paypal, QuickPay, send you a money order or just that check you asked for in the first place. These alternate payment methods that don’t involve sharing any of your bank information were made for people like us who don’t always feel like putting it all out there.

Generally, if there is a lack of trust when it comes to your money, go with what makes you feel warmest and fuzziest. Also, since wires cost a lot more (for both the sender and receiver) than putting a check in the mail, it may make sense to go with what costs you the least. You know, “just because you’re paranoid doesn’t mean they aren’t after you“. Keep your gut happy.

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Get It Covered

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I am in and, healthy body permitting, I shall be running the New York Marathon on 3 November this year. As I have now committed to my training, which is very time-consuming and involves a whole lot of running, you may find that a number of my posts will mention running, in addition to financial forensics.

Before I head out on my long weekend run, I pull out a tube of Beljum Budder skin lubricant and apply it to any part of my body that I believe is vulnerable to chafing. Let me explain how chafing, while running long distances, happens. Long distance running involves spending long periods of time, usually hours for those of us who are not elite runners, engaged in repetitive body movements. This means parts of our bodies will, over and over again, rub, either against each other or against the fabric of our clothing.These small actions can end up rubbing layers of skin off our bodies, causing pain and sometimes bleeding. There are two things that lead me to believe that a certain body part is susceptible to chafing: first is that I have received this information from fellow runners and second is that I have been chafed. Yesterday, for example, I got home to find that I had rubbed skin off my arm, where I had strapped a water bottle, and off my back (I am not sure how that happened). As a result, these two areas have been added to the list of what to protect before heading out on my runs. Once I know that a part of my body runs the risk of being chafed, I protect it. I don’t wait to see if it will be chafed again or if the fellow runner was being too cautious. I protect it all. I try to be proactive about preventing the chafe. This is because, even though I tend not to feel it while it is happening, once the running is over, chafing hurts. A lot. It is something I am very motivated to keep from happening.

This is how it should be with your personal and business finances. At the start of when people steal from you, they tend to take a little at a time. They do this on purpose because they don’t want you to notice that they are exploring, exposing and exploiting the weaknesses in your safeguarding system. They don’t want you to notice that they are stealing from you. They want to get away with it and continue stealing. So you should be proactive about protecting your assets. You should follow a two-pronged approach where you take the steps generally advised and also take firm steps whenever you find particular weaknesses in your system. Some pointers to follow are:

  • If you come across a party stealing from you, perform an investigation to discover the extent of the theft and, if need be, hire a financial forensics professional to perform the investigation.
  • Take steps to prevent future theft. This may include pressing charges against the thief or terminating their employment (if they are employee).
  • Assess your control systems to find where there are holes are and close them. In a company small things like the separation of duties, regular reviews of the financials by more than one party and keeping tangible assets under lock and key go a long way toward protecting assets.
  • Conversely, don’t make your accounting system overly complex. The more complex a system is, the fewer people there will be that understand it, giving potential criminal many ways to hide any pilfering of money and assets they may do.
  • Keep an eye out for employees living beyond their means. For example, if you have an employee who earns $30,000 a year but drives a Porsche, it may be smart to investigate whether or not you are the unwitting benefactor.
  • Protecting your personal finances is important as well. Check your bank and credit card accounts regularly, at least on a weekly basis. I don’t know of a bank that does not offer online access to its customers, so take advantage of it and stay on top of what is going on in your account. If you see a transaction that looks unfamiliar, look into to and call your bank if need be. That’s your money so don’t be shy about making sure you have authorized withdrawals.
  • If you are an individual with complicated or substantial assets, it makes sense to seek the advice and services of a financial professional.

Protect yourself. Take the steps to strengthen the systems you have to keep your assets safe and, whenever you find vulnerabilities, take extra proactive steps. You do not want to find a big gaping hole in your finances. I am guessing that, in the same way chafing does, that big old hole will hurt. A lot.

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Regular Check-Ups

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Several years ago, I received a phone call from my bank. I was surprised to receive this phone call as I was probably this bank’s least profitable customer. I had recently moved to New York, it was my first bank account there and the account was remarkable only in how low its balances could get, especially just after I paid my rent check. The very nice woman on the line was calling to let me know that the bank believed that they had discovered fraudulent activity in my account. The bank noticed that, at least once a week, between $9.95 and $14.95 was being withdrawn from my account. The withdrawals were regular and, every time it happened, the name of the company making the withdrawal was slightly different from before. The regularity of the withdrawals, along with the amounts and the slight name changes, were all red flags for the bank. I was very grateful that the bank had spotted this and, quite frankly, rather shocked. I had assumed two things – first, that I was too poor to rob and, second, that the small transactions going through my account, on the rare occasions that I actually noticed them, were trips to the pharmacy or a lunch that I had forgotten about. It turned out that I was wrong on both accounts and an unscrupulous party took advantage of the lax attitude I had toward my finances. For over three months, at least once a week, money had trickled out of my account. Luckily for me, the bank helped me trace the amounts and credited my account. It seems that, in more recent times, banks are more likely to allow this kind of fraud to continue. They have decided to earn fees from these transactions instead of alerting their customers of these possible frauds.

After this incident, feeling violated by this invasion of my space (and funds) I became very diligent about checking my money. I had been very lucky. Yes, my money was being taken without my knowledge, but I was able to recover most of the funds and I had the bank looking out for me. Not many are so fortunate these days. It is important, therefore, to take steps to minimize the chances of unauthorized access to your bank account or, at the very least, to be able to quickly spot, stop and dispute transactions that you don’t recognize.

  • Be very careful about who you give your personal and financial information to, especially when this request comes via a cold call. Even if the person on the line sounds official, check the credentials. If need be, hang up and call up the organization that claims to be on the phone, using the contact number that you have in your records. If the person on the phone is a valid representative, they will not mind you checking to make sure things are above-board.
  • Check your bank and credit card balances often – at least once a week, if you can. Just about every bank has online banking facilities available to customers. Here, you can review recent transactions and make sure you know what happened with each one.
  • Be aware of the risks to seniors that you know, be they relatives or friends. Because of programs that tend to affect seniors, such as medicare and social security, they are particular targets for the unscrupulous. Fraudsters will call senior citizens and either cajole or scare them into giving up their information. Check in with those who may be vulnerable, either because of advancing age or lack of computer savvy, and make sure no one is raiding their accounts.
  • Safeguard the physical information you have on your accounts. Keep statements and account numbers in a safe place. The last thing you want is to find out that a guest or someone who has worked in your home, has taken your information and used it to gain access to your money. Don’t leave the temptation out in the open – that is only asking for trouble.
  • Should you come across odd activity in your account, be sure to call your financial institution and look into the matter. Time is of the essence here as, often, after a time, it becomes near impossible to reverse a transaction, even if you can show that it was unauthorized.

Once keeping track of your money becomes a habit, it also becomes a very simple exercise. If you check-in regularly, there are only a few transactions to remember at a time. Also if you check-in regularly, you will also become more familiar with your own spending patterns and be better able to spot irregularities. As a bonus, if you check-in regularly, you may also realize that you have bad spending habits that need some rehabilitation. It doesn’t matter how much or how little money you believe you have, there is always enough for someone to take away from you. All of this monitoring of finances may sound a touch paranoid, but paranoid is often better than broke.

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