FraudJournal Blog

April 9, 2014

“My website was hacked & on sale…”

Filed under: Author's Post,Fraud,Fraud Alerts,Fraud Schemes,Fraud Trends — fraudjournal @ 2:43 PM
Tags: ,

There are multiple stories of identity theft, embezzlement and other sad stories of lives undone and upturned by fraudsters. What you don’t usually find is a well written article from the victim stating the shock and surprise of finding out via ‘luck’, from someone who was paying attention and informed them. You also don’t usually find a well written article that helps you understand the seriousness of the situation and the long and required attention to details to doggedly follow the trails and fight the good fight of stopping and retrieving back their life and this case, their livelyhood.

Please take time to read through this person’s website article by Jordan Reid of Glamshackle Glam. She is articulate and shows the fiery spirit of an entrepreneur fighting for the right to make a living online.

Keep up the fight against fraud. Trust but verify.



April 7, 2014

NW Security Breach Creates Nightmare for Seattle Archdiocese Volunteers

Filed under: Uncategorized — fraudjournal @ 2:55 PM

Three of the well-known and national entities, the FBI, the IRS and the Catholic Archdiocese (of Seattle), are now working together to determine the what, why, and how one of the largest security breaches has occurred. This event has become the poster-child for a growing tax fraud problem in the northwest. Victims of the security breach have been alerted to review their credit scores, and to do some research to verify if they are indeed, victims or potential victims of fraudsters using the “tax refund fraud scheme.”

Major news stations have been following this situation; KIRO-TV is quoted as saying that, “as many as 90,000 staff and volunteers in Western Washington” could possibly be vulnerable or actual victims. This is just an estimate and there are no figures from any source to provide an actual number. And the rumor is that there may not be a way to get close to a number.

KING 5 mentioned on their website that their research shows that “at least 80 people from six different parishes across the Puget Sound had their tax returns falsely filed.” One individual stated that due to a name change years ago, and that the IRS had decent filters in place, the false return attempted with her former information was caught quickly. Others may not be as lucky.

While the IRS is referring to this situation as the largest of its kind on the West Coast, the IRS Commissioner John Koskinen states that in 2010 and 2011 this type of fraud took a jump in activity with the epicenters being in Florida, Georgia and Washington D.C. and is now working its way from east to west.

The fraud community is very familiar with identity theft, tax scams and in general, fraudulent behavior. However, even we are shaking our heads at the level and complexity that fraudulent behavior is moving both locally and nationally. The age of digitized information and limited training have resulted in the ability for hackers, data miners and phishers to locate, sell and/or use someone’s information.

While fraud insurance is on the rise as a product of choice, the greatest and most effective method to reduce identity theft is old-fashioned awareness and prompt review of one’s activity.

The March 20th, 2014 posting by stated that Washington, D.C.’s government watchdog mentioned that the IRS has been dealing with approximately 20,000 tax payers who claimed to have been targeted by fake IRS agents via the phone. Individuals refusing to comply are threatened to be arrested or worst deported and or the loss of a business and/or driver’s license. All of which J. Russell George an IRS Inspector General, stated, “that real IRS agents usually contact people first by mail….and they don’t demand payment by debit card, credit card or wire transfer.”

For those of you in the ‘fight against fraud’ or wanting to stay informed, please take time to help your elderly, friends and family and community at large about the need to diligently protect your information.

I have been targeted by someone looking over my shoulder and memorizing my card number. It is easy to get relaxed and not pay attention to those around you or your information, let alone having it stolen through a security breach.

Here are the links for more information and how to respond if you are concerned about your possibly becoming a victim of this situation.

And to end on a funny, albeit morbid quote from Oregonlive, “As for when the cause and culprit come to light, God only knows.”

May your compass point remain truth-true my friends!

Seattle Archdiocese


IRS Site

July 30, 2013

The Cost of Over-Trusting

I recently worked a fraud case that involved a bookkeeper and a small but over trusting business owner. Often, these individuals who are entrusted with the keys to kingdom, are truly key to the success of small businesses. They are the watchdogs of the kingdom. They are there when you need them, they keep the facts managed and ‘ticked and tied’ for future reference. So what goes wrong?

In this case it was an emotional trigger. But often it can be, as one of my colleagues put it, the result of ‘the can that got kicked down the road.’ In other words, they were kicked to the curb for cause and picked up by another. This is catch-22 for fraud fighters and law enforcement. Does a company be made whole and move on, do they prosecute and hope the fight will provide the return of both funds and recovery or do they forgive and forget. I have seen the latter, but in about two to three years, the problem recurs and the battle restarts. It is expensive to dig into the archives of financial data and find the smoking-gun for court or mediation. It easy to outspend the loss easily; especially if the fraudster wants to put up a fight. I have seen this process kill a business as much as the fraudster’s theft.

Most of you who become the triage workers of fraud, are called in at the most dire times. The funds are missing, the staff are up in arms or in total shock, and the frenetic pace begins to solve for ‘x’. The saddest part of this is that the cost goes to the heart; deeply.  After all, how could this have happened on their watch? It can get ugly and fast. But it can be the rally cry that unites and brings amazing change and recovery to a business too. This is where the dynamics of the culture of a business really show.

An interesting statistic that was bounced around during a recent conversation with colleagues is the magic number for long-term entrusted employees and contractors that embezzled seems to be around the ten to thirteen year mark. That isn’t to say that a long-term employee or bookkeeper will always go to the dark side, but the cases keep showing up at around that mark of entrusted access to the financial details of the company.

So what is the moral of this post you ask? The moral is that it is the level of trust, not that you trust. Trust is an imperative part of running a successful business. But the rules of fraud are ‘trust but verify’. Whether your family, friends or business; you need to trust at some level. There are no hard-fast rules to avoid fraud. At some point, in some way, you will become exposed to fraud either personally or through others. But you can make all effort to reduce your risk by creating the ‘tone at the top’; by leading by example. Those around you will notice that you take a ‘vested’ interest in your affairs, both at home and at work. They also know that to hide the fraudulent activities requires greater stealth and complex methods to avoid detection. Unless they are in need of a mission with impossible thrills, they will think twice about theft. And the business owner, participating regularly in the financial activity, will notice those subtle changes that trigger their inner red-flags and respond accordingly. In this case it would have been the timely review of the bank statements that would have triggered questions early on.

But remember too, many who come into a serious need, whether perceived or real, will steal to survive. It is human nature to survive at all costs – however most of us have a loadstone of truth that prevails. But these triggers often include gambling or other addictive issues, a burden of medical needs, family financial crashes or a perceived shame. The perception of shame could be feeling below the financial level of others, not having stories to share around the water cooler. Many embezzlers have large egos that require a certain level of attention to life style, and will generously share their loot to impress others.

In retrospect, most victims of fraud and can and often do trace back to the beginning event that most likely was the root cause of theft. But hindsight is always the more painful way to learn a lesson. So those of you in the trenches, take time to educate your friends, family, peers and local business community on the cost of over trusting. Help them put into place those necessary internal controls that establish boundaries and steps of precaution. Wave that hypnotic watch and have them repeat, “Trust but verify, Trust but verify” until you know they get it deep into the psyche.

Stay safe friends and educate, educate, educate.


April 24, 2013

ZeekRewards – How The Cons Play on Fears and Hope

Filed under: Uncategorized — fraudjournal @ 5:21 PM
Tags: , , , , ,

Mitch Weiss, PA Writer at USAToday, posted an article “ZeekRewards scam leaves N.C. town millions poorer“, on March 30th this year to share the pain and embarrassment of the residents of Lexington, North Carolina. In this touching article there are the warnings, voiced anger and frustration, and lessons of how fraudsters repeatedly use various scams on the public. The key word of choice from all victims is “…we trusted…” him or her or the company or the family.

Trust is a word that comes from the source of our soul. It is what we use to describe a direct connection to any person, place or event we choose to open ourselves towards, and here is the caveat, with an anticipated return or reward for this ‘trust’. Unfortunately, the very nature of trust indicates that any return is actually not promised; it is solely in the hand of those or the individual we trust. We trust our family, friends, neighbors, employers or employees and the list go on. Which brings me to my point; why do we do this? Have we become so disconnected from our instincts that we are unable to see the snake in the grass, the odd reflection in the mirror, or the subtle nature of the predator in wait.

Any investigator will tell you that truth is like fake gold; the shimmer albeit indicative of gold is not the promise of gold. Truth requires both patience and quiet of mind to hear it. It is that quiet glint that says to you, wait…you need to check this again. One of the victims in this article thought she had done her due diligence. She drove to the location to verify it was indeed a valid business entity and saw the line outside the door of people willing to offer funds to invest while the getting was good. But here in lies the rub, her first instinct was right, her second action was not based on instinct but on desire to join the crowd. And cons love crowds. Why? Because crowds are easier to control. Because collectively they become the bait-ball that predators can take a run at.

Much like the great Ponzi scams of the century, once the fraudster is caught, they will always say, “…you shouldn’t have let it get this far”. And they are right. But only on that point, they are still accountable for their actions and not our gullibility. However, there is always someone who cries “…the Emperor has no clothes on!” And they are quieted or ignored because we seek the lucky find that changes our lives and makes life easier to live. Its more fun to boast we struck it rich than do the work.

So I ask you then, is a mindful life really that difficult? Are we that fearful of poverty or keeping up with the world or the lack of opportunity that we are driven like lemmings to follow the barker of the carnival of promises and cures? When are we as the general public also responsible for our unwilling to slow down and ask the hard question; what is impulsing me to take this chance? What am I risking? And does the rush of my fellow friends and family a good thing or a fear of missing out.

It is sad that when we are down in the spirit, hurting and in need of hope that some group or individual offers the promise of false hope at the cost of our hearts. However, in times of broken hearts or wishful thinking, this is the most important time for us to stop, look, listen to our heart of hearts and ask the hard question…what impulse am I following.

Be safe my colleagues and friends. There are no promises of fame and fortune. What we sow we shall surely reap. It may take time if we dawdle here and there, but the universe can only send us what our hearts ask for – an easy ride with no foundation or the gradual and stable building of a future.


April 13, 2013

What Makes a Fraud Investigator a Professional – Experience or Education

Fraud Fighters Become Cool!

As the economy continues to sequester most of us, fraudsters seem to be engaged in an all out frenzy of activity. Today you can’t seem to get away from reports of economic losses caused by embezzlers, identity thieves and scams on the vulnerable. This has resulted in a public outcry of “not on my watch.” And the response is government agencies, such as the IRS and FBI, are hiring people proficient in IT and financial fraud. Companies now search for individuals trained in fraud-risk-compliance. So who are the next wave of fraud professionals? Where are they coming from? And, how does this effect those of us already in the trenches?

First, the next wave are a mixed set of young professionals and re-established professionals. Many are students who have been drawn in by television shows such as CSI, NCIS, Bones and the numerous real-life drama shows on forensics and assorted documentaries. Others are established professionals that are either looking forward to making a career change, enhancing their current position or putting out a shingle as self-employed. What was once a profession of unknown behind the scene investigators has become the “now” profession. I am often asked about fraud fighting and how to get into the field. Most of my answers tend to result in raised eyebrows or dropped heads of frustration once they learn that the road requires not just a degree, but years of work and life experience and a high level of intuition and common sense. It’s not glamorous and a win every time. There are no hero medals and it’s tedious and requires high attention to detail. Something which I find many young professional are frustrated with in the beginning.  If you Google what it takes to be an expert, you find it takes close to 10,000 hours of practice or work experience for anyone to become considered an expert in their field of choice.

Second, quite a few colleges challenge this by advertising they can get you there with a degree in forensic accounting, criminology or fraud expertise. Many students are now able to earn their business or accounting degree with an emphasis in fraud. Some earn a certificate or added credential/degree in fighting fraud. I endorse educating the masses on how to thwart the creativity of thieves but it does not replace experience.

Learning the theory of detecting, deterring and defending against fraud provides a good base from which to launch the beginning of a career through internships and mentored case work. Expertise allows one to think outside of the box because experience has repeatedly engrained their understanding to a level that is second nature while maintaining their ethics to work within the required rules and regulations. And with time and diversity of experience, either across the board or in a specific arena of understanding, there remains the levels of novice, advanced, master and expert.

I Have a Point – Honest…

Here is my point; fraud work is a field that requires not just classroom education but repeated experience, careful mentoring and the passion to roll up ones sleeves, get into the dirt of the devil’s activity and all the while remain clinical. It is about making a difference while serving the public.  As individuals seek out the next trend in careers, they look for what brings income while raising peer acceptance. Young professionals seek out the career goals that take them forward in both income and position. And those that are stymied by hiring freezes and worse sudden income loss seek out ways to reinvent or augment the current situation. This means that there are many more people focusing on the world of fraud fighting but lack the necessary level of skills. This concerns me.

This is not about being competitive. It is about the safety of the public including those impassioned to enter the field of fraud fighting. There is a high level of liability that fraud work brings. Technology growth is constantly challenging our knowledge base not to mention the ever-growing level of global connection. The subtleties of culture, ethics and business models come with job maturity and work diversity. Knowing when someone is being polite by not looking you in the eye verses being nervous and avoiding eye contact can change the way investigative interviews are conducted. One must also consider the sequestering  of public agencies and enforcement officers resulting in the near stuttering to a stop of processing growing crimes.

Grassroots Solution?

I would like to challenge state and local government agencies to consider establishing internships for professionals (with proper vetting of course), to handle the back load of financial crime work. I would like to see a community grassroots approach of the educational system with the work programs that allow work experience that offsets educational costs, which would provide serious young professionals the opportunity to gain real-life lessons-learned experience. By establishing a contractual agreement of a time period for and vetting, we could put many individuals into the field with both mature and novice experience together. Establishing a certification program that also requires work experience for credentials and a mentoring process that signs off on professional understanding will provide both work, education and strongly enforced ethical standards for work ethics and case work. It takes the overwhelming level of paperwork and case load to a more manageable level and helps ensure that new professionals are properly trained and given the diversity of case experience.

What are your thoughts? How would you provide a means to education coupled with mentoring and job opportunities while maintaining the high level of expected ethical standards? Sound off!


April 10, 2013

Stealing From the Dead – Time for Change?

Filed under: Uncategorized — fraudjournal @ 1:04 PM

The Annual ID Theft Season

Tis the season to file  your taxes – Hooray. Just kidding. Most of us try hard to avoid this process until the last-minute. This year, Congress took so much time to act that the IRS had to actually rewrite forms, software codes and delay the initial processing of tax returns. This in turn resulted in tax preparers becoming challenged to meet the deadline of April 15th after having lost nearly a month of preparation time; not to mention the allowed delay of brokerages and financial institutions to get out their documents to their clients.

So what has this to do with “stealing from the dead” you ask? If you ask any Enrolled Agent (EA) or Certified Public Accountant (CPA) preparing the annual tax return, they will roll their eyes and become flush with anger that the social security numbers of deceased clients are available to the public for ten dollars from the Social Security Administration.

An Attempt to Stop Fraud Begets Fraud

Unfortunately, what was started to help fight identity fraud has resulted in aiding and abetting fraud. Fraudsters, who seem to hold a wealth of creative talent, have realized that for a nominal fee they can get the social security number of recently deceased individuals, file a fraudulent tax return with a sizable refund and then disappear. Once the spouse or family get around to filing the return, the IRS is unable to honor the second, albeit true taxpayer, the refund of taxes paid. The return is processed but without the final step of refund money. And this happens each year and has become a growing problem. It will take an act of Congress, literally, to change this process and you can help. Contact your representatives and congressional representatives to enact the removal of this easily accessible master list from the general public. Sound off!  Make it a grass-roots action!

Here are some links to review for more information.

April 3, 2013

Pursuit Magazine’s “Thirty Rules to Live by for Private Investigators”

Filed under: Uncategorized — fraudjournal @ 12:44 PM

I find great delight in sharing insights and ‘lessons learned’ from those out in the field. Private Investigators deal with a multitude of information and people on a daily basis. Dealing with clients often requires keen insight into the psychology of emotions and motivation not to mention education of the realistic process of investigation and the costs involved.

Much like their government counterparts, detectives and agents, the process of investigation requires careful attention to detail. The devil is in the details is an often made statement regarding how important it is to be mindful of our policies and procedures during any case of investigation and engagement we encounter. And mindful of how we present our selves to the world. Most business owners often learn the hard way that they must wear multiple hats and not doing so can result in burn-out and worst of all, mistakes.

Please take time to read this list of “Thirsty Rules to Live by for Private Investigators” from Pursuit Magazine as it contains some important information, most of which many of you have already learned the hard way, but if not you have a chance to gain knowledge before any hard knocks hit you from the sidelines. Take care and always be mindful of your choices in life. And thanks to my friend K. Paxton in Oregon for sharing this with me today.



March 23, 2013

“What’s your fraud IQ” (Journal of Accountancy) Mar1.2013

The recent news articles and discussions regarding the over testing or improper testing of students to measure their progress in the basics brought to mind how much education each of us as fraud fighting professionals maintain to continue our professional certifications; those lovely alphabet letters that follow our name. As a fraud fighter, I tend to feel that these letters mean little without the experience and ability to apply said education to my professional work. I could have lots of alphabet soup after my name, but without the ability to apply this knowledge to each case and think outside of the testing box, I have just become adept at passing tests. Which brings me to my point, and I do have one, once we take the path to become credentialed, how do we know we are or have maintained our ‘fraud IQ’?

The ongoing issues regarding the students’ continual testing and preparation for the testing are important; “when does an education become a required process instead an education of how to apply knowledge?”  And so I ask myself, am I honestly building my skill sets or am I just meeting my requirements to maintain my CPE credentials. If tested, would the result be a true measurement of my abilities or instead my ability to accurately recall information. Can you accurately measure an individual’s ability to apply information by the methods of current testing?

I think the article of “Whats your fraud IQ” posted in the Journal of Accountancy dated March 1, 2013 is an interesting way to find out how you test. How would you approach these questions? How would you redesign this test? How much do you really remember? Should CFEs test like Auditor’s – in case work scenarios? What to do you think? Talk amongst yourselves.


March 12, 2013

Should Forensic Accountants Be Considered Private Investigators?

I must say it is nice to see Forensic Accountants become acknowledged by the general public as a potential solution to detecting, defending and even more importantly deferring, as much as possible, fraudulent behavior in the workplace and home. Even shows such as NCIS have given a nod, however slightly, to Forensic Accountants (often noted as FA). Most Certified Fraud Examiners (CFE) have some working knowledge of accounting and this has become more emphasized in our annual training. And many private investigators have to review financial information in order to follow through with their engagements with clients. Which brings me to my question for the general fraud community, should Forensic Accountants become Private Investigators and licensed within their state as is required by some states.

While most states have specific regulations that professionals who “investigate” as a profession must be registered and licensed as private investigators, FAs and CFEs for the most part have not been included in this group. Recently, private investigators have raised their voices to urge any and all individuals that claim to or state they investigate be required to follow state law and become licensed as a private investigator.

I agree that investigative work requires knowledge of state laws and regulations to keep both investigator and the general public safe from unqualified professionals looking to merely increase revenue and try out new trends of services. CFEs are required by the Association of Certified Fraud Examiners (ACFE) to maintain training and must pass a 4-part exam and submit recommendations prior to being allowed to take the exam. This includes: Investigation, Financial Transactions, Criminology, Law.

Having said this, many CPAs have become FAs in order to build a more diversified portfolio of services such as fraud prevention, fraud risk consultations and forensic accounting. I do have concerns with CPAs who provide forensic accounting services that are not CFEs. Not because they are educationally lacking in work financial knowledge or work experience, but there are legal ramifications to consider when performing investigative accounting. The rights of both sides of the case, claimant and defendant, have legal rights of process and must be acknowledged according to the rules and regulations of the law.

And so I ask, “Should Forensic Accountants and Certified Fraud Examiners be considered Private Investigators”, and if so, “Should Private Investigators be required to be certified in bookkeeping or accounting 101 before handling financial case work”? There is the opportunity to collaborate in wonderful ways, but do we think this will be the end result or is this a turf war? The question has some merit. What do you think?


May 10, 2012

A New Twist to Foreclosure Rescue Fraud

Dear Fellow Fraud Fighters;

The FBI and FTC need our help. Please take some time to become educated about this new scam and get the word out to your colleagues and community to stop this new twist on “foreclosure rescue fraud” because it is a serious threat to distressed homeowners and it is called Forensic Mortgage Loan Audits. Many of you may have heard of this or even come across this, but it has started to increase at an alarming rate.

This fraud is about selling “hope” and they are relying on the buzz word “forensic” to sound credible, necessary and effective and legal. They call themselves:

  • Forensic loan auditors
  • Mortgage loan auditors
  • Foreclosure prevention auditors
  • Forensic attorneys

Yes, forensic attorneys. By using public information, these so-called “rescue” professionals send out mailings to exploit distressed homeowners by lulling them into the false sense that a forensic audit will indicate if their loan was not in compliance, and by not meeting the state and federal mortgage lending laws they can help the homeowner:

  • Avoid foreclosure
  • Expedite the loan modification process
  • Reduce the loan principal
  • Cancel the loan
  • Lease the home to be able to buy it back over time
  • Make mortgage payments to them and they will work with the lender
  • Transfer the property, deed or title to them
  • Offer to purchase home at a price inappropriate for housing market
  • Pressure to sign documents without proper time to review or read thoroughly

Although this scam is preying on the financially strapped homeowner, the elderly and military veterans and their families are being targeted also. As you all know, a mortgage cannot be eliminated by a report, lenders are not required to modify a loan because of this report, the lender is not required to modify a loan and a report will not force a lender to negotiate the terms of a loan. There is no report that is guaranteed way to stop a foreclosure.

Please contact the FTC or FBI with any concerns or questions.

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