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IIA ACFE Fraud Seminar November 13, 2013 Cutting Edge Tips in Todays World of Fraud Christopher J. Rosetti CPA, CFE, CFF, HSG Community Focus | Statewide Impact | National Network

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2 Agenda Introduction Metadata Trendy Websites Questions

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3 To Good to Be True My Twin

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Why You Are Listening to Me Today

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Cuba

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WTC

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WorldCom Contact Information

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9 Where Else FBI Academy Morocco, Puerto Rice, Greece, etc. Gracie Mansion CNBC

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Frank Knows Fraud

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So Does Bruce

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12 Fraud and People Fraud is perpetrated by people! Fraud is oftentimes limited by ones imagination There is no right way or wrong way to Perpetrate a fraud Technology assists the fraudster Technology assists the investigator

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Abbreviated History of Fraud

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Gregor MacGregor

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George C. Parker

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Carlo ???

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Grammy Award Winning Artists

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Pride of the Yankees

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Bernie Madoff

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20 Technological Advances Checks Telephone Photocopiers Fax Machines Computers Accounting Software Internet Smart Phones

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21 MacPuter

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WHY DO YOU HAVE TO BE ACTIVELY AWARE OF FRAUD? Fraudsters and criminals are doing more information and knowledge sharing than the anti-fraud professionals that are tasked with finding them. You can not assume that because you were a DOS expert in the 90s that your computer skills are still sufficient to catch a fraudster let alone identify their schemes. Fraud comes in many different shapes, sizes, and colors. If you are not actively aware, you may be sitting right next to fraud and not even know it.

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23 IRS E-filing Started in the 1980s 78,000 returns filed the first year Went nationwide in 1990 Decreased filing errors Decreased IRS postage costs Increased audit efficiency Increased opportunity for fraud

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24 Metadata Hidden information embedded in computer files but not generally visible in the ordinary display or printing of the document Digital DNA Keeps track of changes to documents, including Word, Excel, Power Point Reveals information about the creation, alteration and transmission of a document Types of Metadata (MAC, Document and Digital) Identifies times and dates of changes Deleted text

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25 BST Valuation and itigation AdvisorsBST Valuation and itigation Advisors Examples of Metadata Stored in Documents Your name Your companys name The name of your computer Names of previous authors Document revisions Hidden text of cells Comments

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Properties

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27 BST Valuation & Litigation AdvisorsBST Valuation & Litigation Advisors Document Illustration Metadata regarding the last 10 users of a document is captured and stored and is valuable when an individual denies ever seeing a particular smoking gun document.

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True Story Metadata reveals Merck edited out negative test results from Vioxx drug study during 2007.

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29 Email Example Plaintiff claimed she was discharged in retaliation for making a sexual harassment complaint. Defendant produced a memo, dated before her complaint that listed her on a list of employees to be let go in a planned seasonal layoff She contested the authenticity of the email with the memo. The memos Metadata confirmed its date of creation, prior to her complaint.

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30 Another Email Example Terminated employee fabricated an email to suggest that a manager with whom she had a romantic relationship had made the decision to terminate her. Metadata exposed the terminated employee as the author of the document.

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It's risky, of course---if we're caught, it could mean many hours of community service.

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32 Williams v. Sprint/United Management Co. Terminated employees brought a class action suit Sought Excel spreadsheets with all Metadata intact, including embedded formulae Court Ruled the Metadata was discoverable

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Extra Credit

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34 What to Know About NFP Frauds NFP are more susceptible to fraud than other organizations 85% of all frauds involve asset misappropriation Cash is the most common asset misappropriated Cash is primarily misappropriated via: Purchasing Fraud Schemes Expense reimbursement schemes

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Trend Setter

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ACFE 2012 Report to the Nations Asset misappropriation schemes Most common87% of cases Least costlymedian loss of $120,000 Financial statement frauds Least common8% of cases Most costlymedian misstatement of $1 million Corruption schemes Just over one-third of cases Median loss of $250,000

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37 What They Do Create Shell Companies Create Fictitious Invoices Create Fictitious Websites Create Fake Telephone numbers Create Virtual Operators Create Fictitious Resumes

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38 What to do? Listen to me! QuickBooks Edit function Review cancelled checks Review credit card statements Require credit card statements as documentation

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THE INFORMATION & TOOLS ONE STOP SHOPS

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Book of the Month Club

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BST Valuation & Litigation AdvisorsBST Valuation & Litigation Advisors Interesting Websites http://www.alibisnpaybacks.com/ www.falseexpenses.com www.alibinetwork.com www.paladindeception.com

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42 What They Offer Receipts on authentic thermal paper!!! A toll Free hotel telephone number confirming your checked in at the hotel Rescue calls to get you out of a meeting Virtual doctors offices Fake travel documents and confirmations Virtual employment Shopping service

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43 Internet Alibi

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44 Another Web Sites Services Have alibis validated by live operators Choose between local or out of town alibis Call in sick service Escape a date Printable doctors services Virtual doctors services Virtual travel agency And prepare just about anything you can imagine!!!

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45 Advertisements Politicians have spin doctors, celebrities have publicists, corporations have lawyers and public relations departments, investment banks have analysts, now regular people have ALIBI NETWORK. Visit our E-Store to help us protect your interests.E-Store

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46 More Services Call in Sick Service. Call In Sick Service provides clients with a cast-iron sickness alibis. We would call a place of your work for you and pretend to be your doctor /dentist or a spouse, etc. and tell your boss that you cant come in. So you will not have to fake it on the phone! This is even useful for our clients who are self-employed freelancers, business owners, etc. Escape-a-Date Service. You were looking forward to a perfect date when she suddenly told you she was married. Our service allows you to set-up a save me from my date phone call at a predetermined time. We will call you at the time you wish and if married dating is not something you are into, we will set the tone for an immediate getaway.

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47 These People Mean Business Your Problems: 1.You dont have the resources (money, people, time) 2.You believe your auditors are the Special Forces of Forensic Accounting 3.You are very trusting 4.You believe that fraud could never occur because you have internal controls 5.These people are very convincing and/or confrontational 6.The Board is not familiar with their fiduciary responsibilities or the possibility of fraud 7.You dont have the big guns

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Shell Companies

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Create Fake Website

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50 Creating Fake Websites Choose a domain name (e.g., IAMAFRAUDSTER) Choose a web host (e.g., Go Daddy) Build your website Get more detailed info on www.ehow.com

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FAKE WEBSITES DETECTION Use Whois lookups to determine the owner and when the website came online. Compare the services, invoices, and other pertinent information to the go live date. Look to see if there is contact page that lists a physical address and/or phone number, or corporate offices. Use search engines to identify the location of the office to see if it is mail drop, post office box or registrars office. Use www.archive.org to view the website history of the site to determine its length of use and appearance over time.www.archive.org

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PURCHASE A LOCAL NUMBER

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EXPENSE ACCOUNT FRAUD The Criminal Mind 1. I want or need extra money and I want to use my expense account to do it, I will need to know, Where I can get fake receipts How to make fake receipts What are the best expenses to fake

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54 Interesting Website Descriptions False documents Print fake receipts Fake receipts generator Create phony sales receipts Fake receipt printing service The accounts payable network

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55 Fake Receipt Website Offerings

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56 Sample Advertisement

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57 Fictitious Expenses

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58 False Receipt Story

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FAKE RECEIPT MAKERS

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INVOICING PROGRAMS

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HOTEL INVOICE TEMPLATES

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66 Fake Airline Confirmation Dear Mr. Client, Ticket Information Passenger(s): First Name, Last Name *AIRLINE NAME* record locator: 35GKTKT Ticket type requested: electronic (e-ticket) Our record locator: AJVAPVHQ9825T72NA Airline ticket number(s): 6413ADVCAD6SV54 Tuesday, XXXXX, 2006 *AIRLINE NAME* Flight #####. LOS-ANGELES INTERNATIONAL AIRPORT (LAX) to BUSH INTERCONCTINENTAL (IAH) Departure (LAX): Date, 4:10 PM CDT (evening) Arrival (IAH): Date, 9:27 PM CDT (evening) Class: COACH Seat assignment: XX

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67 Fake Hotel Confirmation Dear Mr. Client, This is to confirm your hotel stay at the "Hotel Name" in New York, N.Y. from Date through Date. Guest Information Name: First Name, Last Name Check-in: Date, 3:30 p.m. Check-out: Date, 10:00 a.m. Room type: single Confirmation id: 3#####59######25F Rate $$$$$/night + tax based on a discount rate for (seminar participants, etc.) Hotel Information Name: "The Hotel Name" Address: XXXXXXXXXXX, New York, N.Y. ##### Phone: ###-###-####

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68 Fake Rental Car Confirmation *RENTAL COMPANY* Your Itinerary Number: 644-VPWVH687-AD654 Car Type: Economy (Unlimited Mileage) Pick-Up Date: January 8, 2007 - 7:00 AM Drop-Off Date: January 9, 2007 - 7:00 AM Pick-Up Location: Chicago - Ohare Intl (Ord) Drop-Off Location: Chicago - Ohare Intl (Ord) Driver: First name, Last Name Confirmation #*:PAVHAVH6549DVCD Confirmation Number is assigned by the rental car company that booked your reservation and should be your primary reference number when contacting the rental car company on all issues related to your rental car including pick- up and drop-off. Summary Of Charges Daily Rate (1 x $68.99): $68.99 Subtotal:$68.99 Taxes and Fees:$15.17 Estimated Total Charges:$84.16

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HIRING/RESUME FRAUD, The Criminal Mind 1. I need to conceal my background or my ulterior motive as to why I am seeking employment, My criminal record is a red flag, I want to conceal my previous terminations of wrongdoing, I need to disguise my actual past employment, 2. I may need a corroborating website designed, 3. I need fake references who will pass a background screening process. 4. I need fake diplomas, transcripts, and other related documents.

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PURCHASE A LOCAL NUMBER

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Fraud Does not Discriminate

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CREATING FAKE IDENTITIES TO PERFECT CRIMES 1. FakeID.cc 2. 21 Overnight 3. You Finish It 4. ID-Blog 5. Novelty ID Cards 6. Fake ID 7. ID Chief 8. Fake 21 9. Fake ID Master 10. Real Fake ID

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DIPLOMAS & TRANSCRIPTS

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79 Employment Alibi

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80 BST Valuation & LivisorsBST Valuation & Livisors Internet Dr.

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81 Paybacks and Alibis

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HIRING/RESUME FRAUD DETECTION HR is the first line of defense. HR professionals and hiring managers should be alert to references giving what appear to be canned responses. Ask for an a fax number to send a confirmation. Ask for an email address to send a confirmation or keep in case there is additional follow-up required. Ask for a mailing address for your records. In most instances the above mentioned questions will derail a paid reference service and they will be unable to provide any of the additional information and this should be considered a huge red flag. Contact Universities directly to confirm degrees. Diplomas are unfortunately no longer reliable proof.

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More Fraud

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SICK TIME, DISABILITY, INJURY FRAUD EASY! Check to see if the doctor is listed locally. Ask the employee for an address of the doctor or to write it down on the excuse. Employee delays in bringing in documents (could be waiting to have them delivered). Buy available fake excuse packets and distribute to HR and use as a comparison.

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85 Ramifications False job history one advertisement stated they would provide them with false business cards, work phone, work email and a personal secretary to the extent you are embarrassed about being unemployed. Excuses for being absent, lost productivity Promote purchasing fraud Confirmation of fictitious receivables

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86 Ramifications Taxes, charitable contributions Insurance claims Entertainment expenses (Ragus) Inflate business expenses for tax purposes Support for divorce payments Expense reimbursement for trips Rental Property deductions

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87 Edit News Websites

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88 False Publicity

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89 Easily Make Your Own Unique CNN

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90 Who Am I and Why Am I Relevant?

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91 BST Valuation & Ltigation AdvisorsBST Valuation & Ltigation Advisors What did he do?

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92 Say it Isnt So?

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93 Ramifications Allows us to create websites for companies that dont exist Allows us to create websites for products that dont exist Allows us to facilitate purchasing fraud Allows us to facilitate fictitious sales and A/R schemes Allows us to falsely promote ourselves

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Top 5 Essential Traits and Characteristics

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Social Media Fraud Tools

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96 THE END

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97 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 1 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Who has the First Question? Bueller, Bueller?