Professional Documents
Culture Documents
Agenda
Welcome and introductions
Housekeeping notes
David Giles & Kari Crowley, Deloitte
The Money Trail
Brandt Heatherington, i2 Group
Intelligence-led fraud investigations and the
i2 Fraud Solution
What types of tools and techniques are used to derive intelligence from financial
data?
Going forward, how does one implement an effective program and control
environment designed to prevent, detect, and deter fraud and other illicit acts?
Current events
Regulators Shut 2 Failed
Banks in Illinois
CHARLOTTE, N.C. -- Regulators on Friday shut down
two more banks, boosting the number of federally
insured bank failures this year to 36.
The latest banks seized were Strategic Capital Bank and
Citizens National bank, both in Illinois. The Federal
Deposit Insurance Corp. will continue to insure regular
deposit accounts of up to $250,000 at both banks.
Financial intelligence techniques allow organizations to connect the dots through the
generation of new information and the enrichment of existing data.
Following the money is often the best tool for finding ways to maximize operational
processes and, when things go wrong, can be an effective method of uncovering
evidence of illicit activities.
Finding Efficiencies
National Budget
Eliminate Redundancies
Identify Savings
Uncover Fraud
Healthcare Spending
Improved Claims Process
Standardized Cost Structure
During this time of constrained budgets and underperforming markets, the public and private sectors alike are
looking for ways to maximize their missions with fewer
resources.
Disaster Relief
Fraud and Waste Identified
Timely Delivery of
Medical Supplies
Quality of Relief Supplies
Tax Evasion
Trust Schemes
Unreported Income
Hidden Assets
Terrorist Financing
State Sponsorship
False Charities
Weapons Purchases
Finding Efficiencies
National Budget
Healthcare Spending
Improved Claims Process
Standardized Cost Structure
Fraud and Waste Identified
Disaster Relief
Fraud and Waste Identified
Timely Delivery of
Medical Supplies
Quality of Relief Supplies
Tax Evasion
Trust Schemes
Unreported Income
Hidden Assets
Terrorist Financing
State Sponsorship
False Charities
Weapons Purchases
Money Trail:
Investigative Techniques
Management override
Benfords Law
Improper revenue recognition
Unusual relationships
Excessive rights of return
Fraudulent Reporting
Discrepancies in records
Misappropriation of Assets
Channel stuffing
Side letters
Conflicting records
Fictitious sales
Improper expense
capitalization
Revenue recognition
Holding the
quarter open
INCENTIVE/PRESSURE
Source: Fraud triangle was developed by Dr. Donald Cressey in 1950s
RATIONALIZATION
Background investigations
From 50,000 feet to Full Body Scan
Data Source
Level 1
Level 2
PEP/Sanction list
Adverse media
Level 3
Includes Level 1 and 2 research
Discreet source inquiries
Considerations
Number of subjects
[s001]
DIRECTOR [s544]
DBA
[s119]
ISLAND FUNDS
DBA
[s120]
I.C. PARTNERS
DBA
[s121]
I.C.F. GROUP
Focus areas
CURRENT OWNER
[s505]
[s303]
VIN#: 888222FFFW3434
Plate: 773 AAA, CURRENT PLATE [s303]
Plate: 992 BBF, 1998 - 2007 [s304]
Country: UNITED KINGDOM [s303]
STEEL IS
LIMITED PARTNER
[s847]
NO. 8 CLARK
ADMINISTRATORS
IS GENERAL PARTNER
[s547]
CLARK IS SOLE
SHAREHOLDER
[s564]
Corruption
Money laundering
Integrity and
reputation
Fraud
Risk assessment
Clients, agents,
intermediaries
High-risk populations
High-risk populations
Fraud Risk
Assessment
Agents / Intermediaries
Undisclosed interests
Business partners
Intermediaries
Independent sanctions
screening
Litigation / Reputation
Transactions and
monitoring
Sanctions screening
AML transaction
monitoring systems
Related parties
Fraud monitoring
Gifts / Entertainment
Transaction authority
and controls
Suspicious / Cash
transaction reporting
Business partners
Financial controls
Escalations and
regulatory disclosures
Escalations and
regulatory disclosures
Undisclosed relationships
Agents / Intermediaries
Compliance
culture
Assessments and
testing
Corruption
Objective
Identify companies at risk for FCPA violations in increasingly aggressive enforcement environment due to ineffective compliance
programs and controls.
Identify strategic/equity investors exposed to potential successor liability claims for failure to perform adequate FCPA due diligence.
Due
Diligence
Approach
Potential Impact
Money laundering
Objective
Identify vulnerabilities in business operations that expose the risk that funds are being used to facilitate money laundering
Conducting enhanced due diligence on high risk clients as part of business as usual practices as well as forensic transactional and
KYC lookbacks.
Due
Diligence
Approach
Potential Impact
Fraud
Objective
Incorporate fraud risk factors and schemes in corporate risk assessments to capture factors that may directly impact operations,
transactions, etc.
Link risk assessments across the organization regardless of focus (e.g.., Fraud, Operational, Anti-Corruption risk assessments)
Establish and update understanding of business relationships within and external to the company
Be prepared to address fraud events when they occur
Industry
Quality/integrity of management and employees tone at the
top
Private vs. public company requirements
Due
Diligence
Approach
Potential Impact
Illustrative examples
Risk Area / Diligence Finding
Impact
Outcome
Corruption
Economic and trade sanctions
Integrity and reputation
Money laundering
Fraud
Key takeaways
Following the money can be an effective way to identify both
opportunities and risks.
As evidenced by the recent legislation, the Federal government and
private sector alike recognize that identifying and eliminating improper
payments and fraud is imperative to an organizations fiscal health.
Advanced technologies and algorithms are important tools in the effort
to detect and deter illicit financial activity.
Recent investigations and enforcement actions by DOJ and the SEC
demonstrate an intensifying focus on white collar crime, including
actions against individuals
Invest in risk assessment, compliance, prevention and detection
Know your business partner!
i2 Fraud Solution
Capture, management & analysis of intelligence
Cyber fraud
IP analysis
Transaction timeline
mapping
An increase in the number of fraudulent mobile insurance claims from new FIU
In-house single point claims system could not cross-reference data sets which required manual
analysis of data involving millions of records.
Map and cross reference all data sets to show hidden fraud by individual and organised rings.
Instant connection of 5,000 fraud alerts to over 100,000 customers and 1500 individuals connected
to false claims and organized fraud rings
"Upon utilizing i2 products, we revealed far more useful intelligence that allowed
us to not only detect more fraud, but more importantly, we were able to stop it.
"One of my main concerns when purchasing an intelligence system was cost and
after sales support, both of which have been outstanding with i2."
GIE (French economic interest group for bank cards) alerted to 44,700 payment authorizations
over three days for test authorization amounts ($1 to $2) on a US e-commerce website involving
25,548 stolen credit card numbers
Fraudulent use began several days later and banks were alerted when victims disputed the
charges
Solution:
IP addresses, domains and bank information involved with the suspicious transactions were
loaded into a central analysis pool. This covered several years of bank data involving 25,000,000
records
One fraudulent site alone in this ring was responsible for almost $300,000 or 192,000
Links are established using IP addresses, emails, pseudonyms, bank cards and addresses
Result:
One principal group of 1233 members is identified as well as 27 sub groups and organized
criminality established
A major US insurance company was presented with a suspicious $250,000 claim for a stolen
Ferrari
Suspicious of fraud, analyst checks US customs to discover that the car was exported several
weeks prior to claim
Tracked car to Italy and procured service records signed for by a female lawyer who initially
connected claimant to the export company
Further analysis proves the lawyer to be the claimants wife using a different last name
During the Iraq War, manual tracking and billing processes made it easy for some
military personnel and local contractors to fraudulently bill the government
Without much of the data in electronic format, it was difficult to pinpoint relationships
between people and places
A contractor was hired to enter the data and trace the patterns
Data was complicated and transactions were global and carefully hidden
Through use of data correlation and visualization tools, intricate relationships were
discovered which illustrated who was taking bribes, what units were involved, and to
whom illegal contracts were being awarded
Visualization enabled comparison of legal and illegal operations and exposed how
illegal activities were hidden
Created solid evidence and open-and-shut cases
Out of 3 years of investigation only one case went to trial
Over $80M USD recovered thus far; $80M total expected
Fraud Resources
Need more info on fraud? Visit www.i2group.com and click on
Fraud under Solutions
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