Investigative services used to detect fraud
October 20, 2019
Most private investigators are unfamiliar with how to actually investigate fraud or even how to identify fraud. Unfortunately, most law enforcement officers are unable or unwilling to spend the time or effort to investigate fraud.
First of all most people, including law enforcement officers, do not know the definition of fraud. According to the Association of Certified Fraud Examiners (AFCE) fraud is: “fraud can encompass any crime for gain that uses deception as its principal modus operandus. More specifically, fraud is defined by Black’s Law Dictionary as: A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.1 Consequently, fraud includes any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means”2. That’s the technical definition. The practical definition is better understood by illustration.
Internal fraud, also called ‘occupational fraud’, is when someone uses their position or occupation for personal enrichment by deliberately misusing or manipulating an organization’s resources or assets.” Simply stated, this type of fraud occurs when an employee, manager, or executive commits fraud against his or her employer. They might simply be committing expense account fraud or they might be stealing cash, or stealing inventory.
Another example of fraud would be External Fraud. This type of fraud is referred to as ‘external’ but often has an internal component, i.e. someone on the inside is assisting someone on the outside. Dishonest vendors might engage in bid-rigging schemes occasionally with help from someone on the inside providing them with proprietary information, billing the company for goods or services not provided, or even to the level of demanding bribes from employees. Dishonest customers might submit bad checks or falsified account information for payment, or might attempt to return stolen or knock-off products for a refund. In addition, organizations also face threats of security breaches and thefts of intellectual property perpetrated by unknown third parties. Other examples of frauds committed by external third-parties include hacking, theft of proprietary information, tax fraud, bankruptcy fraud, insurance fraud, healthcare fraud, and loan fraud.3
And then there is the more publicized type of fraud known as “Fraud Against Individuals”. There are many different schemes used to commit fraud against individuals including the well-publicized “dating scams”. For a good lesson on dating scams please take a look at D.L. Garren’s book “Who is the Real Man Behind the Screen?: Online Dating: How to Protect Your Heart and Money” available through Amazon. There are also numerous Ponzi schemes, advanced-fee frauds and phishing schemes that you hear about every day. The bottom line is there is something that’s legal there are people out there that will find a way to do it illegally.
A proper fraud investigation takes time and that’s the biggest drawback that people have to reporting fraud. A review of internal books is necessary, interviews have to be done, subpoenas may have to be requested. BUT, for the amounts of money stolen per year it just has to be done. According to the most recent “2018 Report To The Nations” by the ACFE, there’s over $800,000 median loss to the average company from misappropriation and small businesses with less than 100 employees occurred a median loss of $200,000 per victim. That’s a lot of money.
We also conduct investigations into trademark violations, theft of proprietary information, trade-secrets investigations and more.
We can offer guidance, vulnerability surveys to help people identify their weaknesses and provide investigative assistance. Call us. We do not charge for consultation.
1 Bryan Garner, ed., Black’s Law Dictionary. 8th Ed. (2004), s.v., “fraud.”
2 Association of Certified Fraud Examiners, (https://www.acfe.com/fraud-101.aspx), “What is Fraud”