FraudJournal Blog

May 6, 2010

Fraud-America’s Financial Termite Infestation

Filed under: Author's Post,Fraud,Fraud Trends,Insurance — fraudjournal @ 5:12 PM
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One of the reasons I started this Blog was to keep people educated, connected and supportive of those fighting fraud. I share trends and information to keep everyone updated and to initiate discussions. One of the latest discussions is a direct reflection of the economy and the impact on those that investigate and prosecute fraudsters.

As law enforcement and the legal system becomes more and more inundated with fraud cases, and their budgets and manpower continues to be reduced, fraud victims are finding they are left on their own to do the leg work to get their cases heard. Insurance companies no longer cover fraud loss without a conviction, and financial institutions consider fraud the cost of doing business. This puts the general public and business owners in limbo as they try to determine whether it’s worth it to prosecute or just be made whole by mediation/restitution; which means the fraudster gets to go on to greener pastures.

The best way I can describe this scenario is to consider fraudsters as financial termites that eat away at the foundation of our economy. If the house next to you does not to their due diligence to reduce the risk of or stop fraud, the infestation is able to travel from house to house to house until they bring down an entire area. And just like pest exterminators, fraud fighters want to go after the top termite. The little soldiers that get sent out to search and destroy definitely do their damage, but they can get replaced on a regular basis.

And this scenario works for identity theft, white collar crime both big and small, and terrorists (which many fraudsters are connected with). Osama Bin Laden doesn’t have to walk into a bank to get money. He just has to get his soldiers to commit ID theft enough times to fund a beginning of a cell’s activity. Does this pop your eyes out of their sockets yet? It should.

At a recent fraud conference, I spoke with investigators, detectives, and other CFE’s about how they were dealing with the increase in fraud. Most of them looked like they could cry. Or get spitting mad. They were embarrassed that they couldn’t even provide a fraud victim with a decent answer of when and how they would be able to get to their case. “It’s physically and mathematically impossible for seven detectives to investigate over 8,000 cases a year,” Sergeant Justin Newsom stated to Amy Johnston of KVUE News in Austin, Texas, in an article from December 16, 2009 on the internet (1). Yes, that was in 2009.

So what is the purpose of this post you ask? Well, it is to let you know that fraud is on the rise and the general public needs to understand that a case number is no longer sufficient to get their fraud case handled or paid by insurance companies. Each State, City, County or Town has their own criteria for what makes a fraud case sexy enough to handle. Just like the FBI, if its big dollars and they can pull down more than one individual, they are more likely to get the case to go up the ranks to get funded for handling. That means, those cases that seem big money to you and me, may not meet the criteria and end up being set aside when they have more time or more funding or manpower.

In January 10, 2010, Levi Pulkkinen of the Staff posted an online article reporting on MV Maersk Inc. getting hit by an embezzler to the tune of an estimated $263,000 dollars. You may remember the company as they were hit by pirates off East Africa last April. The embezzler, a Sumner resident (located in Western Washington State), did so from about June 2006 to June 2009, when she was terminated. Prosecutors stated she repeated the frauds at least 116 times. (2)

So my request, nay my expectation after you all read this, is to do your homework. Take a hard look at your business and personal life. Do you know who to contact if you suspect fraud? Where would you go to report fraud? How at risk are you? And what can you, the general public and hard working Americans do to help your fellow fraud fighters? If it means contacting your local and state government then do it. If it means contacting someone show can assess your fraud risks, then do it. Take a moment, and consider what you would do to protect your home from termites, and then how that translates into fraud control in the house of American business and personal safety.

Here are the articles referenced and some sites for more information/education:

  3. For references for find a CFE for fraud risk assessments
  4. For information on Consumer ID Theft information
  5. For more information of fraud scams

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