Monday, March 27, 2017

SHELL COMPANIES for money laundering, tax evasion, hiding kickbacks, layering PART 28 -- CAPT AJIT VADAKAYIL


THIS POST IS CONTINUED FROM PART 27, BELOW--




The new avenues for combating business fraud are:--

– Beyond Basic Business Information--   Companies collect vast amounts of data about business customers, partners, and suppliers; and today, many new sources of business information are available to enhance insight. 

These new sources include: sales and CRM entries, shipment data, labor market data, sentiment (or opinion) data, government data, merchant data, utility data, social media, and other non-traditional data. 

After discovering the data available from third party sources – as well as from across the organization internally – the next step is to curate the data to derive insights and drive systematic decisions based upon these insights. This process needs to be constantly evaluated and improved, thereby making it virtuous and beneficial at reducing business fraud.

– Anticipatory Analytics. With the help of powerful and factual analytics programs, companies can analyze their combined or united data-sets to gain insight into their business customers and partners. 

Buried within the mounds of data are “red flag” patterns or indicators of potential fraud. Anticipatory analytics sift through the noise to uncover fraud signals—that is the likelihood that fraud may occur

—to help companies identify risks and target appropriate actions to minimize those risks. Analytics can provide a warning of potential payment delinquency, never paying and first payment default, or ceasing operations by customers.

Companies recognize that they are increasingly vulnerable to this costly fraud threat, but they are uncertain how to implement cost-effective controls that can reduce fraud risk without slowing sales or driving away legitimate customers.

Scam, hoax, misrepresentation, deception, cheat, sting, swindle, con. These are all terms that apply to fraud. The perpetrators of business fraud typically obtain cash and/or goods through normal business transactions but with one important twist: They never intend to pay. Essentially, business fraud is stealing carried out through carefully planned misrepresentation and deception.

In a bust-out fraud scenario, the perpetrators create a seemingly legitimate company by using traditional “proofs of right.” 

Once established, the fake company applies for credit from multiple vendors, enticing them with the expectation of a mutually profitable business relationship.
The fraudsters then draw upon the maximum amount of credit approved by each vendor.

In a “straight-roller” bust-out fraud, the perpetrators make no attempt to pay. As their invoices go past due for 30 days, 60 days, 90 days, and so on, they may offer promises of payment or excuses while they complete their scam, but they never pay. 

In more complex bust-out frauds, the perpetrators may pay some or all of the initial invoices in order to negotiate for an even higher credit limit. They will then “max out” their new, more lucrative credit ceiling and then disappear without paying.

The enemy in any conflict has an equal say in the methods and approach they deploy. Criminals are constantly adapting their tactics, seeking new ways to mask their activities, so they can strike and then disappear before their victims catch on to their scams. Government and business must be equally adaptive.

– Anticipatory Analytics Not Only Predicts, But Prevents Fraud. Identifying and preventing fraud requires the ability to distill and then transform into insight the subtle signals from multitudes of data.
Companies can take advantage of new technologies and services that cast a light on fraudsters hiding in the shadows.

During annual fraud forums, members exchange lessons learned and identify emerging trends and best practices among corporations and government agencies. They also identify available tools and techniques that reduce the risk of business fraud without placing a burden on legitimate businesses at the point of sale.

There is no silver bullet for eliminating bust-outs and other types of business fraud, but  companies can stay ahead of fraudsters’ changing tactics and schemes with a multi-layered approach that leverages new sources of information, anticipatory analytics, emerging technologies, robust employee training, and collaboration with other public- and private-sector stakeholders. 


The term "shell company" generally refers to limited liability companies, the vulnerability of the shell company is greatly compounded when it is privately held and beneficial ownership can more easily be obscured or hidden. 

Lack of transparency of beneficial ownership can be a desirable characteristic for some legitimate uses of shell companies, but it is also a serious vulnerability that can make some shell companies ideal vehicles for money laundering and other illicit financial activity

Anti-corruption/fraud/AML/sanctions compliance program risk assessment.--- Used to assess an organization’s program—including policies, procedures, training, internal controls and monitoring—an assessment can help determine the level of potential risk exposure facing the business.

An effective assessment is based on regulatory guidance, as well as leading industry practices and includes quantitative and qualitative risk models covering areas such as anti-corruption, anti-fraud, AML and sanctions. 

These models can be integrated across the broader compliance function to provide a holistic view of potential risks inherent in operations.

Customer/vendor due diligence. ---Automated programs can be designed to efficiently identify shareholders of a potential customer/vendor—including those linked through a chain of intermediary companies or directorship—by using global corporate registries and other sources of information.

Should automated screening identify certain customers or vendors, more traditional business investigative services can be used to help further verify the ultimate corporate structure/beneficial ownership, as well as the potential reputational risks of a relationship. Investigative services can include searches of global corporate records databases, which draw information from a number of key local government agencies.

Transaction monitoring and data analytics. ----Systems implemented by institutions are only as good as the analytics that support them, which is why organizations should consider combining human interaction with analytics technology and techniques. This combination can help detect potentially improper transactions—either before the transactions are completed or after they occur.

This process involves gathering and storing relevant data and mining it for patterns, discrepancies and anomalies, such as payments to offshore jurisdictions, potentially restricted entities or other high-risk entities. 

Further, non-rules-based analyses can uncover new patterns, trends, fraudulent schemes and scenarios that traditional approaches may miss. Findings from the analyses can be translated into insights to help manage potential threats before they occur, as well as develop a proactive detection environment.

Internal reviews and investigations. ----If the analysis render findings that should be investigated, organizations should consider conducting retrospective reviews and investigations to help answer the who, what, when, where, how and why questions that give rise to an inquiry—whether self-initiated or as a result of a regulatory, judicial or law enforcement request.

From an AML/sanctions perspective, lookback analyses can include identifying relevant transactions that exhibit potentially suspicious activity, which additionally may help modify and improve ongoing transaction monitoring and management reporting practices.

13 percent of property-casualty insurance industry losses each year are attributable to fraud, to the tune of $40 billion.

The Coalition Against Insurance Fraud is a coalition of insurance organizations, consumers, government agencies  and legislative bodies working to enact anti-fraud legislation, educate the public, and provide anti-fraud advice.  

They are also a resource where consumers can find scam warnings, learn where to report fraud, and how to protect themselves.

SOME OF THE THINGS  I WRITE ARE USA SPECIFIC.     

THIS  IS TO GREASE THE BRAIN OF INDIAN FRAUD INSPECTORS ,  THEY NEED TO UNDERSTAND PHOREN JUGAAD TOO.  

ALL THESE THINGS ARE GOING ON IN AN INDIAN CONTEXT TOO.

The Coalition was founded in 1993 after several organizations reported a heavy rise in insurance fraud and a need to stop it.

In 1993, insurance fraud investigators staged several bus crashes in New Jersey USA . The only passengers in the busses were fraud investigators. After the crash, they received over 100 claims from people who jumped on the bus after it crashed or simply drove by the scene and wanted to claim insurance money saying they were injured.

In response to this problem, seventeen organizations formed The Coalition Against Insurance Fraud, contributing $500,000 to finance anti-fraud efforts. At the time, The Coalition estimated that auto fraud cost over $8 billion a year in overpaid claims.

Since then, The Coalition has grown to include over 90 members, including GEICO, National Consumers League, First Acceptance Corp., Healthcare Insight, Property Casualty Insurers Assoc. of America, SAS Institute, Thomson Reuters, Nationwide, and the Virginia State Police.

The Coalition's main mission is to fight insurance fraud. The Coalition seeks to unite and empower private and public groups against the growing fraud problem. Members work to control insurance costs, protect public safety, and "bring this crime wave to its knees.

Three main areas of activity are:----
Government Affairs
To enact stronger anti-fraud laws through local and grassroots campaigns
Create model bills. For example, establishing insurance fraud as a specific crime.
Strengthen anti-fraud bills
Hold major summits
Support prosecutions
Communication
Raise public awareness of insurance fraud, and how public can fight back
Empower and alert consumers
Unite outreach efforts
Sponsor major research and surveys
Publications

Journal of Insurance Fraud in America (JIFA), a quarterly publication containing in-depth analysis of trends, research, and public policy issues that may impact anti-fraud effort

FraudWire, two quarterly digital publications reporting on important developments involving legislative activity and public awareness

Fraud News Weekly, a paid digital publication summarizing weekly trends on legislative and regulatory developments, state and federal court decisions, public outreach and media coverage, the week's fraud arrests, the latest convictions for insurance fraud, civil cases, administrative actions, upcoming meetings, seminars & conferences.


Get a Grip on Fraud: Fraud Awareness Manual, an action guide for creating memorable fraud-awareness event 

The Coalition has published several research studies over the past decade.

Among them:---
Effectiveness of warnings on benefit checks, in 2000, selected insurance companies writing workers compensation coverage in the United States were surveyed to determine their experience and perceptions with printed warnings on the back of benefit checks.

Four faces: why Americans do and don't tolerate fraud, to understand why people accept fraud, and why individuals sometimes won't report fraud even though they understand fraud raises everyone's premiums.

Study includes focus groups and statistical survey. conducted to gain insight on why public tolerance of insurance fraud seems to be increasing. Both qualitative and quantitive research was used to attempt to understand how public attitudes about fraud are formed and what factors influence them.

Insurer fraud measurement, a survey completed by 65 Special Investigative Unit managers, mostly from property/casualty insurers, on their practices involving measuring anti-fraud activities for case referrals, fraud savings and performance evaluations of investigators.

Prescription for Peril, examining unreported and elusive aspects of drug diversion, the role insurance fraud pays in financing prescription abuse, and the high cost to insurers and consumers.

Special Investigative Unit study, conducted to learn how insurers measure the performance of their Special Investigative Units. A review of the measurement systems of 52 insurers found there is little consistency from insurer to insurer in the methods they use in their performance systems.

State Insurance Fraud Bureau Survey, a snapshot of state agencies’ fraud fight by the numbers, aimed at understanding the structure, responsibility, and overall activity of insurance fraud across the United States

The Coalition issues scam alerts for common schemes, elaborating on variations and best measures for prevention and defense. 
Among the topics:----

Agents and insurers: Though most insurers and agents are honest, the Coalition warns against agents who pocket their clients' premiums, sell insurance that is fake or unnecessary, or provide unneeded coverage to boost premiums.

Auto repairs: Auto repair scams have been known to involve purposely damaging cars in order to inflate repair costs, padding existing repairs, or cutting corners by doing low-quality work.

Bogus health plans: A tough economy can make individuals more vulnerable to buying too-good-to-be-true insurance plans

Contractors & adjusters: The Coalition warns against fraudulent contractors who appear after natural disasters to offer repairs, fraudulent contractors may add damage to increase costs, illegally lower deductibles, receive pay and disappear, or do work without a license.

Discount medical cards: these cards offer discounted medical treatment or pills, but fake cards may provide no coverage or discounts

Drug diversion. The abuse of prescription drugs.

Medical identity theft: Medical identity schemes involve stealing someone's social security number, medicare number, medicaid number, and other identifying information in order to file insurance claims on their behalf for illegal gain.

Staged auto crashes: The Coalition warns against people who claim nonexistent injuries after crashes in order to exploit their insurance coverage, fraudsters may purposely crash into unsuspecting drivers, or stage a crash that is entirely set-up in person or on paper.

Workers' compensation: The Coalition warns against employers who do not purchase adequate coverage for their employees, and employees who fake injuries for paid time off.

An investigation led by the Department of Financial Services’ Division of Insurance Fraud revealed a large-scale premium fraud scheme in which these six individuals created multiple shell corporations in order to systematically conceal payroll amounts for the purposes of obtaining low-cost workers’ compensation policies. by grossly deflating accurate payroll amounts, members of this fraud network fraudulently secured low cost workers’ compensation insurance policies.

Payroll amounts were concealed through the use of check cashing stores, which circumvented proper bookkeeping measures.

After securing certificates of insurance, organizers would ‘rent’ the certificates to work crews for a fee. Since the policies were obtained fraudulently, employees were not covered and therefore left vulnerable to high-dollar medical costs in the event of an on-the-job injury.

To further their scheme, organizers would print and provide fake business cards to these work crews, who were instructed to present them to workers’ compensation compliance investigators who routinely conduct compliance checks at job sites to ensure proper coverage is in place.

This cycle of fraud would continue until an insurance policy expired or was cancelled, at which time organizers would open another shell company under a different name and begin the process again.

Shell companies are owned by straw owners, or individuals who, for a fee, agree to serve as the legal owner of a business because they have a clean criminal record. These businesses, however, were alternatively run by organizers who directed the day-to-day activities and operations of the illegal activities.

Fraud audits are a blend of new methodologies and traditional audit tools. Within a company's accounts payable file, shell companies are being used to steal millions of dollars from companies or to conceal bribery payments which violate anti-bribery and corruption laws. A shell corporation is a legally created entity that has no active business or an entity used to conceal the true identity of the real company operating through a shell company.

In essence, a shell corporation exists mainly on paper, has no physical presence, employs no one, and produces nothing. Within more sophisticated concealment strategies the perpetrators may employ the use of an office or employees to provide the illusion of a legitimate business entity.

Shell corporations are frequently used to shield identities or to hide money in cases of money laundering, bankruptcy, bribery, and fraudulent conveyances. Scandals range from thousands to millions of dollars and always result in embarrassing moments for the company and management.

Fraud concealment involves the strategies used by the perpetrator of the fraud scenario to conceal the true intent of the transaction. Common concealment strategies are: false documents, false representations, false approvals, avoiding or circumventing control levels, internal control inhibitors, blocking the access to information, geographic distance between documents and controls, and both real and perceived pressure.

An important aspect of fraud concealment pertains to the level of sophistication used by the perpetrator. Inherent fraud schemes aren't thought of in terms of complexity; rather it is the level of sophistication used to conceal the fraud scenario that is the focus for the fraud auditor.

 On its most simplistic level, without a concealment strategy, the inherent fraud scheme would be visible. Fraud concealment sophistication should be rated on both the perpetrator's ability to hide the transaction and the auditor's ability to detect the transaction. To aid in the determination of the sophistication of the concealment strategy level, we use a rating scale of low, medium, and high.

There is a correlation between fraud detection and the sophistication of the concealment strategy. When the perpetrator's concealment strategy is more sophisticated than the audit methodology, the fraud goes undetected. Therefore, fraud is revealed when the audit detection is more sophisticated than the concealment strategy. The key is to identify what are commonly referred to as red flags of the concealment strategy.

There are four categories of red flags: data, documents, internal controls, and behavior. The categories are intended to aid the auditor in identifying the red flags in an orderly fashion, whereby, the auditor should not view the process as a right or wrong exercise, but instead know that certain items can occur in multiple categories.

The process of detecting shell corporations is a two-step process. The first step is to conduct fraud data analytics interrogation routines, which are designed to locate vendors that are consistent with the data profile of a shell corporation or transactions that are indicative of a shell corporation. The second step is to perform audit procedures which are designed to pierce the concealment strategy or reveal the truth.

The data mining strategy is a two-fold process. The first step is to build the data profile for the fraud scenario. The second step is to understand how the sophistication of the concealment strategy impacts the fraud data analytics.

Shell companies often times have non descriptive names. One search is to look for names with a limited number of constants in the name. Obviously, the country or language the search is performed in will impact the variable. Shell corporations often use mobile lines when no physical office exists. Also searching for pass-through fraud schemes, duplicate telephone number search is an effective tool, when the pass-through is associated with an existing supplier.

Search for a correlation between first invoice date and the creation date. Payments are transferred either by wire or address. The routing number can be used to correlate to prospective individuals. The theory is simple; the perpetrator is smart enough not to use their personal bank account but would use the same bank for their shell corporation bank account.

Insurance companies have always relied on technology to fight fraud. The III reports that 95 percent of insurers say they use antifraud technology, but about half say a lack of information technology resources prevents them from fully implementing it. The invoice number pattern is one the most critical data fields for our fraud data analytics.

The reason is simple, the perpetrator creates the number. The pattern and frequency analysis is critical for the search for false billing schemes. The low-sophistication scheme will most likely have a sequential pattern of invoice numbers. For the pass-through scheme, the invoice number pattern will depend on whether the pass-through entity has one or a few customers. 

Compare to date of payment to the invoice date using a speed of payment analysis.   Look for vendors where all amounts are below a threshold requiring two approvals. Google Maps: Online maps can determine what physical structure is located at the known address and whether the address is consistent with the entity structure.

Often, the created entity scheme will use the address of a personal residence. Remember that many small businesses operate from the owner's personal residence, so, in this case, reference checking may be preferred in order to reveal that the entity does not conduct business. Real companies tend to have insurance.


The fraud testing procedure would consist of a request of the certificate of insurance. Fortunately, such a request is a normal control procedure in many companies, but for fraud audit purposes, the need is to examine the certificate to take note the date of coverage and types of coverage. Shipping documents: Documents such as, a billing of lading indicates the source of the shipment, therefore providing verification.




TO BE CONTINUED-


CAPT AJIT VADAKAYIL
..

Sunday, March 26, 2017

SHELL COMPANIES for money laundering, tax evasion, hiding kickbacks, layering PART 27 -- CAPT AJIT VADAKAYIL


THIS POST IS CONTINUED FROM PART 26, BELOW--




  
US federal authorities arrested two people in Virginia and two in Georgia who allegedly were part of a sophisticated operation that involved stealing identities and producing fake shell companies that could apply for high-balance credit cards.

The group would bill credit card companies for payments to its own shell companies, then route the money through various entities and sometimes out of the country.

Organized under the umbrella “the Deutche Group,” the conspiracy involved people in India, Thailand and Britain as well as in the United States.

The conspirators would advertise jobs for Deutche Group on Craigslist, and then steal personal information applicants gave them.

They also set up online companies offering airfare and hotel deals,  then pocketed the funds and used stolen credit cards to book trips.   Some travelers were stranded partway through vacations when their itineraries were canceled by fraud alerts.

When such fraud alerts led credit card companies to challenge charges, the group used digitally created images of credit cards and passports to back up their spending.

The group even set up its own bank in India and attempted to join the Visa network so they could approve their own fraudulent transactions.   One Indian co-conspirator tried to hide the illegal funds by buying diamonds with stolen credit cards.

Amit Chaudhry of Ashburn was arrested . He is accused of being the mastermind behind the U.S. operations. According to prosecutors, his siblings and other relatives and associates in India helped steal identities and create shell corporations.

To date, prosecutors have identified 353 fake companies associated with the scheme.

Chaudhry was running his own Northern Virginia-based company, Knowledge Center, which US authorities say did both legitimate IT training and supported his illegal activity. 

According to prosecutors, a woman Jacqueline Green-Morris would overbill or fraudulently bill her company for training provided by Chaudhry’s firm.

Carding is a term describing the trafficking of credit card, bank account and other personal information online as well as related fraud services.   Activities also encompass procurement of details,  and money laundering techniques.  Modern carding sites have been described as full-service commercial entities.

It is important to first know the difference between synthetic ID fraud and what is commonly known as identity theft.

Identity theft is where a fraudster uses your identity to impersonate you. A combination of your stolen information is used mostly to obtain credit or goods and services.

Synthetic identity fraud occurs when a fraudster creates fictitious identities using a combination of stolen real identities with fabricated information. Typically, a fraudster will use a valid government issued Social Insurance Number (SIN) with a fictitious name and mailing address.

The true danger of synthetic fraud is its anonymity. It may take months if not years to detect and the losses are significant.

Synthetic IDs provide a means for terrorists to not only obtain and transfer illicit funds but also provide the anonymity to acquire government IDs and passports, cell phones, air tickets and supplies to carryout their operations.  

For example, in May 2014, Canadian officials learnt terrorists on “no fly lists” were using synthetic identities to purchase airline tickets. The scheme included the use of fictitious names to obtain passports for an infamous murder suspect and major drug trafficking groups.

In 2013, the FBI discovered $200 million credit card scam involved the creation of 7,000 new identities. Closer to home the CBC reported in 2014, synthetic ID fraud costs Canada a billion dollars a year. 

Today, synthetic identity fraud accounts for 80 to 85% of all identity fraud in the US according to the Federal Trade Commission. By 2018, Equifax says synthetic ID fraud will have risen to $8 billion in credit card fraud losses annually. 

Another key factor that’s driving the growth of synthetic identity fraud is the exponential growth in the availability of credit and speed of credit decisions made today. Consumers want instant access to goods and services. 

As such, financial institutions are relying on credit scores like never before to meet these expectations. The use of automated score based solutions are ubiquitous and have created situations where human intervention in a credit process is entirely eliminated. 

Fraudsters can use any random SIN to manufacture a synthetic identity. However, they target the SINs of the elderly and deceased, impecunious and minors, in particular.

The elderly over time require more assistance and care and as such risk losing their SINs and the deceased, don’t see their credit reports

The impecunious such as the financially distressed, homeless and students with little or no money are easily able to sell their SINs to fraudsters without understanding the implications.





There are several ways that fraudsters can exploit the credit process using synthetic IDs. The two most common are when applying for credit with a lender and the use of authorized user option on credit cards:

1.      Applying for credit

Fraudsters can manufacture an endless combination of fake identities. With a SIN they can add a name, date of birth and an address they control.  The fraudsters can target a large number of financial institutions and apply for credit at virtually the same time. The initial applications will probably be declined, but new credit files will be created at the credit reference agencies for each application.

With this new credit file, the fraudster will apply for a new credit with another financial institution and concurrently repeat this process with other synthetic identities and other financial institutions.

The fraudsters will also be able to establish accounts with phone and utility companies as well as create social media profiles.

When a financial institution runs a credit enquiry, the credit reference agency will confirm that a credit file does exist. Although such a file will not have a credit history, there are financial institutions or credit card companies that offer small amounts of credit without the requirement of a credit history.

With a new credit account, the fraudster will make legitimate payments to build and establish a good credit history. The fraudster can eventually apply for more credit cards, retail store credit accounts, the list can go on.

2.      Authorized users of credit cards

Adding authorized users to credit cards such as a spouse or child is a common occurrence.  The fraudster can exploit this process by targeting card holders with a good credit history to add unknown/synthetic identities to the credit card for a few days. These synthetic identities inherit the card owners credit history.

The synthetic identity can be subsequently removed but the credit reference agencies maintain the credit history. The fraudster can than apply for credit lines.

In both instances, a fraudster is able to increase the spending limit on a credit line by paying off small purchases with the intention of obtaining larger loans. Eventually, the fraudster will “bust-out” the entire credit line, acquiring a large loan with no intention of paying it back.

The insurance industry is also susceptible. Fraudsters can take advantage of the automated credit application process available to car dealers with synthetic IDs with a ‘good’ credit history. The cars once obtained, are shipped abroad and a claim is made for a stolen vehicle.

The nice thing about using a synthetic identity to commit fraud is that there’s no pesky credit card holder calling to report unauthorized charges on her statement. The fake identities can be created or purchased on the Dark Web.

With credit cards, fraudsters often buy gift cards or smartphones that can be turned into cash easily. Luxury automobiles are another popular purchase with synthetic identities and internet purchasing, although in some cases you have to wonder what dealers were thinking when they received a purchase over the internet with instructions to deliver the cars to a port. 

Fraudsters pay the shipping with fraudulent credit cards to ship the vehicles overseas, often to China where they can sell for two or three times the North American price.

Organized crime groups are able to exploit weaknesses in credit reporting to use a synthetic ID to acquire financing for the purchase of vehicles at multiple dealers throughout the same day.  A fraudster using a synthetic ID can go from dealer to dealer in one day and apply for credit without each dealer knowing about previous or same-day inquiries.

Very patient criminals developing credit over several years can use one fake identity to obtain not just credit cards, loans and cars but even mortgages. Then, at some point individuals who have looked like model borrowers bust out — maximizing every bit of credit, buying things with counterfeit checks and selling assets like cars that they have acquired using phony credentials and then disappearing.

Typically, fraudsters will use a real Social Security number (SSN) and pair it with a name not associated with that number.  Fraudsters seek SSNs that are not actively being used, such as those of children and the deceased. In some cases, an identity fraudster may create a completely fake identity with a phony SSN, name and address.

Synthetic identity fraud makes up 20 percent of credit charge-offs today and 80 percent of losses from credit card fraud. Total losses remain unknown because banks don’t like to publicize them, but a New Jersey ring in 2013 stole more than $200 million and Canadian authorities estimate fake IDs cost $1 billion there.

Bankers said the fake identities can be supported by fake pay stubs, fake businesses and phony references.

Synthetic identity theft is fraud that involves the use of a fictitious identity. Identity thieves create new identities using a combination of real and fabricated information, or sometimes entirely fictitious information. Fraudsters use this fictitious identity to obtain credit, open deposit accounts and obtain driver’s licenses and passports.

Typically, fraudsters will use a real Social Security number (SSN) and pair it with a name not associated with that number. Fraudsters seek SSNs that are not actively being used, such as those of children and the deceased. In some cases, an identity fraudster may create a completely fake identity with a phony SSN, name and address. This would be categorized as synthetic identity fraud since there is no theft involved. For the purposes of this article, synthetic identity theft or fraud will be treated as the same.

This type of theft has been emerging as a major fraud activity over the past five to seven years. The size of the synthetic identity theft business is estimated to be in the billions per year across North America.

Synthetic identity thieves target children’s SSNs because they are inactive and will generally remain unchecked for up to 18 years. Children generally have no public information associated with their SSN, making them a prime target. 

Unless a victimized minor’s parents are tipped off by a bill collector, the child begins receiving credit card offers in the mail or the child is denied a driver’s license or college loan, the fraud may not be discovered.

The true impact of child identity theft, which has been increasing over the past 10 years, will be realized as the victimized youngsters approach college age, start applying for college aid or have difficulty getting their first jobs after high school when negative information appears in a company background screening. 

Armed with a new credit account, the fraudster will legitimately use the credit account and make payments to establish good history. The fraudster will leverage the positive credit history to obtain more credit cards, retail store credit accounts and car loans.

The authorized user process is how most synthetic IDs are created. Adding authorized users to an account is legal and allowable by credit card issuers. It is typically used for legitimate purposes, such as adding a spouse or a child. 

Credit card issuers, both stores and major card companies, are often the point of entry. A fraudster might apply for a department store card and get rejected. But that application goes on a credit bureau record, so the next time he applies his name will be on file and he may get a store credit card.

Fraudsters exploit the authorized user process and actively recruit cardholders with good credit to add unknown people/identities to their card, often for just several days. 

Using this technique, often referred to as “piggybacking,” the legitimate cardholder receives a fee for adding the authorized user identity to his or her account. A credit card is not issued to the authorized user; it simply sits on the credit account for a period and “inherits” the card owner’s credit history.

Once the trade lines have reported to the CRAs, the synthetic identity can be removed from the account as an authorized user, but the credit history is retained. The fraudster will then apply for credit with multiple card issuers. With multiple credit lines successfully obtained, the fraudster will max out all the credit lines by buying gift cards and valuable merchandise such as smartphones and other electronics that can be easily sold.

In this example, the fraudster could also execute a bust-out scheme in which the credit lines are maxed out, paid down with worthless or counterfeit checks and maxed out again before the check payments are returned. This creates an exposure of as much as two times the original credit limit. Well-organized criminals may be able to repeat this process more than once.

Card owners who are recruited to add authorized users will have as many as 50 in their account at once. Card owners may believe they are donating their good credit history to help others establish or repair their credit. There are many credit repair/piggybacking brokers who bring together donors and those who need credit assistance. Accounts that continually produce identities tied to fraudulent activity are known as pollinator accounts.

For example, a synthetic ID had a credit file created in June 2014 and used an address tied to a retail shopping center. In August, a seasoned trade line with a credit limit of $55,000 was added to the synthetic ID. Within two months of adding the authorized user, the synthetic ID amassed $200,000 in unsecured credit, making out over $140,000.

Criminals understand that synthetic identity theft is generally an easy and lucrative scheme to employ. There are many factors that contribute to the problem, but the authorized user process and availability of credit from some of the major card issuers play key roles in this.

Synthetic Identity Theft is a type of fraud in which a criminal combines real (usually stolen) and fake information to create a new identity, which is used to open fraudulent accounts and make fraudulent purchases. Synthetic identity theft allows the criminal to steal money from any credit card companies or lenders who extend credit based on the fake identity.

Banks can fall prey to synthetic identity theft since much of the information criminals provide them with is legitimate. For example, a criminal might get away with applying for a credit card using a fake name but a real, stolen Social Security number. The criminal racks up charges with no intent of repaying them, and the credit card company loses because it can’t collect payment from the fake identity that established the account.

Sometimes financial institutions can’t even tell that synthetic identity theft has occurred because the criminal will establish a history of using the fraudulent account responsibly before becoming delinquent in order to look like a real person experiencing financial problems and not an outright criminal who racks up charges and becomes delinquent on the account at the first opportunity. This type of fraud is called “bust-out fraud.”

From the criminal’s point of view, “bust-out” business fraud is an ideal scam. You can target multiple companies—both large and small—in a single operation; your fraudulent activities fly under the radar of most traditional antifraud controls; and you can abscond with the stolen cash or goods before your victims even realize they’ve been scammed.

Synthetic identity theft is by far the most common type of identity fraud and is a major source of losses for financial institutions. It’s difficult for banks to detect because their fraud filters aren’t yet sophisticated enough to catch it. When the synthetic identity thief applies for an account, they might just look like a real customer who has a limited credit history.

In some cases of synthetic identity theft, the criminal will rack up fraudulent charges, then use the real pieces of information used in creating their fake identity to pose as a fraud victim and get their credit line restored. Then, they use the additional credit to commit further theft.

In another form of synthetic identity theft, illegal immigrants ( the types Hillary Clinton loves ) will use Social Security numbers that they’ve invented or that belong to someone else to obtain financial services. While still a form of fraud, these synthetic identity thieves aren’t looking to steal money from financial institutions, they’re just looking for access to bank accounts and credit cards that facilitate getting paid and making payments and purchases.

Crimes like these are not always committed by the lone wolf. Often, there are large fraud rings generating IDs and building histories by the thousands, each of which can be purchased on the Dark Web when they reach maturity. 

In 2013,  US federal authorities shut down an enormous synthetic identity fraud scheme that created 7,000 false identities. Overtime, the criminals behind this particular fraud obtained more than 25,000 credit cards that resulted in more than $200 million in losses.

What’s more, as the crime has evolved over time, its perpetrators have figured out how to speed up the process.

One way they’ve learned is to piggyback onto a legitimate cardholder’s account as an authorized user. Similar to the ways in which fraudsters use social media to convince people to deposit bad checks or receive a fraudulent wire transfer, synthetic identity artists persuade cardholders to add them as authorized users, sometimes for as little as three days.

A second, albeit more intense, method is to work with company “insiders” as part of a data-furnishing scheme. In these cases, the company – either fake or legitimate – essentially makes up and supplies false information on fake people to the credit bureaus to help build the credit histories of these synthetic folks.

Fortunately for lenders, synthetic identity fraud detection and prevention strategies have evolved, as well. Digital technology, neural networks and predictive analytics powered by machine learning and artificial intelligence are helping to more quickly scan large databases like those generated by data-furnishing front companies.

Synthetic identity fraud makes up 85 percent of losses from credit card fraud today!

Synthetic identity theft is committed in a variety of ways, ranging from simple (changing a few details like address or using a "new" Social Security number to create a new credit profile mixing "legitimate and fake data to create synthetic identities,"

As more ornate scams, where the bad guys set up SHELL companies that report to the three credit reporting agencies on huge portfolios of fictitious consumers (all of them synthetic identities) with unusually perfect credit histories—a sort of pump-and-dump scam


Minimize your exposure. Caution is the watchword here. If you get a call or an email asking you to authenticate sensitive information, hang up or hit delete, go online to find the correct contact information for the organization that called, and call them back directly. 

Bear in mind there is one big trade-off when you use social media and do what most folks do—over-share life events: strangers can glean a great deal about you. 

Protect your passwords, make them long and strong, properly store documents that can be used to hijack your identity, and seriously consider freezing your credit, which prevents creditors from accessing your credit reports. Monitor your accounts. 

Keep track of your credit score, as a sudden drop may indicate identity theft. Check in on major accounts daily. If that's too much work, sign up for free transaction alerts from financial services institutions and credit card companies. You might also want to consider subscribing to a credit and identity monitoring program.

Synthetic identity theft — like the very sophisticated malware that infects systems and stealthily spreads its tentacles through personal, business and government networks— is extremely hard to detect and often harder to unravel.

DURING DEMONETIZATION PERIOD HOUSEWIVES USED TO GET TELEPHONE CALLS ASKING FOR ATM PIN CODES—WITH THREATS THAT IF IT IS NOT REVEALED IMMEDIATELY  THEY WILL CANCEL THE ATM CARD






There is a WEE decline in debit/ credit card-related security incidents in India recently. The reason may be the increased usage of mobile payments, particularly UPI payments. UPI-based apps, introduced in August 2016 , directly deduct the payer’s bank account and credit the money to the payee on a real time basis.

Earlier, the only way to make payments on a real time basis was to use cards or net banking.

So now it is time to focus on UPI related security incidents ( Indian are famous for JUGAAAD ) — in their updates to the RBI . Though designed to be secure, UPI relies on ‘device fingerprinting’ and a four- or six-digit manual code to authenticate transactions.

IT IS THE DUTY OF THE FINANCE MINISTRY THAT EVERY DIGITAL FRAUD IS RECORDED AND ATTENDED TO

WHEN YATRA DOT COM CHEATED ME—I HAD TO RUN FROM PILLAR TO POST. 

EVEN REPORTING BY EMAIL TO CBI MADE NO DIFFERENCE.    SUCH IS THE CALLOUSNESS .

FINALLY I RESORTED TO A BLOGPOST,  WITH A DIRECT THREAT TO SCREW UP THEIR BRAND FOREVER  — AND HEY PRESTO , MY MONEY WAS RETURNED  EL PRONTO  .

JUST GOOGLE “YATRA DOT COM “

WHAT DO YOU SEE  ON PAGE 1 ?


A phony California business acquired a state business license, leased warehouse space, built an e-commerce website, created a false corporate history, and established other Proofs of Right that persuaded at least 50 companies to extend credit to this seemingly legitimate business operation. 

The companies included medium and large businesses, including Fortune 500 companies, that leased equipment and sold office suppliers, computers and electronics, and other consumable goods that are easily re-sold. 

Once the credit agreements were in place, the fraudulent business quickly borrowed against its limits and then disappeared without paying for the goods it obtained from its unsuspecting creditors. All together, the victimized businesses were exposed to over $2.8 million in losses.


This scenario is being replayed throughout the United States and abroad. In today’s digital age, fraudsters have little trouble creating the trappings of what appears to be a legitimate business. 

They often operate from a virtual office address, use the Internet and online services to establish a virtual phone number, answering service, government business registration i.e., LLC and licenses, favorable, yet fake financial statements, made-up trade or payment references, and even steal the identity of another business with favorable credit history. 

They carefully research each targeted company to understand, for example, how the company verifies creditworthiness and how much credit they can request without triggering a more rigorous background check. 

This new generation of criminals has essentially blown up the traditional model for verifying a new business customer’s Proof of Right and legitimacy.  


ONLY JEWS MAKE MONEY OUT OF CARBON SCAMS 





Master,

You are absolutely on dot.

It is really ridiculous to know that world is running behind CO2 reduction as Carbon footprint reduction...

All carbon forms put in one basket...

Don't know where are our Chemistry students / scientist / carbon experts... Who should ideally call the shots with their expert comments on Carbon emission forms and showing the complete picture of Carbon cycle...

Taxing carbon for what?? If Govt cannot explain the complete picture and prove the impact (scientific proof and not just baffling with ignorance) to common people, And how the increased cost would be invested in reducing the impact / offset... Untill then this should be under investigation only...

It is really pathetic to see the modern education...

So what would be next?? A human tax on exhaling carbon??

What should we conclude as the agenda for "Make in India"??

Carbon tax revenue??

Respect,
K




  1. hi k,

    JEWS HAVE BEEN SITTING ON THEIR ASSES AND MAKING MONEY OUT OF THIN AIR FOR CENTURIES

    INSURANCE WAS A NOBLE THING-- AS PER THE LAWS OF MANU

    MANU WAS THE FOUNDER OF INSURANCE LAWS ( DHARMATHAT ) MORE THAN 10,000 YEARS AGO --
    NOT 3700 YEARS AGO BY BABYLONIAN HAMMURABI AS WRITTEN BY THE WHITE HISTORIANS

    THE CALICUT KING HAD CUSTOMS / INSURANCE OUTPOSTS AT ADEN/ SALALA/ MECCA OASIS AND MANY OTHER PLACES .

    MANU HAS BEEN CONVERTED INTO A BIGOT WHO WAS ALL OUT TO POUR MOLTEN LEAD INTO THE EARS OF DALITS ( FOUL LIES ) , BY JEW ROTHSCHILD USING HIS AGENTS LIKE EVR PERIYAR AND BR AMBEDKAR .. YOU SHOULD SEE THE WAY DALIT KANCHA ILIAH NAY SHEPHERD FROTHS FROM HIS MOUTH ON TV …

    IN THE TIMES OF MANU NO CASTE SYSTEM EXISTED- ONLY VARNA EXISTED.

    CASTE SYSTEM AND UNTOUCHABILITY WAS CREATED BY THE WHITE INVADER.

    http://ajitvadakayil.blogspot.in/2011/07/untouchables-capt-ajit-vadakayil.html



    MANU OF 8300 BC HAS BEEN KICKED FORWARD IN TIME TO 1000 BC BY THE BASTARD WHITE HISTORIANS

    THE INSURANCE LAWS OF MANU WRITTEN 103 CENTURIES AGO WERE FURTHER HONED BY CHANAKYA 2300 YEARS AGO.
    http://ajitvadakayil.blogspot.in/2014/08/chanakya-taxila-university-professor.html

    Manu’s insurance laws addressed genuine losses whereby the society collectively bears the loss/damage to one person/family and minimize the adverse effect that loss.

    There are several stories where the King provides monetary help to the persons who suffered loss due to natural calamities and this was nothing but an assurance that the State will look after you at the time of any adversity .

    This assurance is a form of insurance where the money collected from several tax payers has been used to minimize the losses of specific group which suffered loss.

    With the passing time the concept of insurance had been refined and lead to the introduction of documentation to get the assurance of loss bearing for specified purposes.

    ALL OVERSEAS SEA TRADING COMERCIAL LAWS OF MANU ARE LIFTED BY HAMMURABI. MANU CREATED THE FIRST CHARTER PARTIES, BILLOF LADING, CARGO MANIFESTS, WARRANTY LIMITS, RISK MANAGEMENT, RULES OF SAMPLING, RULES OF CLAIMS, LIABILITY CLAUSES, GENERAL AVERAGE AND METHODS OF ADDRESSING COMMERCIAL LOSSES

    WHO KNOWS BETTER THAN CAPT AJIT VADAKAYIL

    MANUs RULES WERE THE FOUNDATION OF SPICE TRADE BY ANCIENT KERALA NAVIGATORS.

    HERE ARE SOME MODERN RULES FOR WHICH MANUs RULES WERE THE BASE.

    http://ajitvadakayil.blogspot.in/2010/12/bill-of-lading-on-chemical-tankers-capt.html

    http://ajitvadakayil.blogspot.in/2010/12/cargo-claims-and-losses-on-chemical.html

    http://ajitvadakayil.blogspot.in/2010/11/sampling-procedures-chemical-tankers.html

    http://ajitvadakayil.blogspot.in/2011/10/commercial-matters-on-chemical-tankers.html


    capt ajit vadakayil
    ..
Established in 1988, the Association of Certified Fraud Examiners (ACFE) is a professional organization of fraud examiners. Its activities include producing fraud information, tools and training. The ACFE grants the professional designation of Certified Fraud Examiner.



The ACFE is the world's largest anti-fraud organization and is a provider of anti-fraud training and education, with more than 80,000 members. The Certified Fraud Examiner (CFE) credential denotes expertise in fraud prevention, detection and deterrence. 

CFEs are trained to identify the warning signs and red flags that indicate evidence of fraud and fraud risk. CFEs around the world uncover fraud and implement processes to prevent fraud from occurring. The ACFE runs a fraud museum containing exhibits linked to famous frauds, which is open to the public. 

America's Guide to Fraud Prevention, written by famous con man Steve Comisar, is on display in the ACFE fraud museum. The book is considered a piece of fraud history. Steven Robert Comisar (born 1961) is an American convicted con man and extortionist.  Comisar is in federal prison and is scheduled to be released April 16, 2018.


Comisar grew up in Beverly Hills, California. As a young man he sold a "solar powered clothes dryer" in national magazines for $39.95. Unsuspecting customers received a length of clothesline. Comisar has been arrested and convicted of numerous crimes.

The Certified Fraud Examiner (CFE) is a credential awarded by the Association of Certified Fraud Examiners (ACFE). The ACFE association is a provider of anti-fraud training and education.   The ACFE seeks to reduce business fraud world-wide and to inspire public confidence in the integrity and objectivity within the profession. 

CFE training involves imparting knowledge of complex financial transactions and understanding of forensic methods, law, and of how to resolve allegations of fraud. Fraud examiners are trained to understand how and why fraud occurs.

To become a Certified Fraud Examiner (CFE), one must meet the following requirements:----

Be an Associate Member of the ACFE in good standing
Meet minimum academic and professional requirements (Undergraduate Degree + Master's degree or Professional Designation(s) and Professional Experience)
Be of high moral character
Agree to abide by the Bylaws and Code of Professional Ethics of the Association of Certified Fraud Examiners

The ACFE recognizes the following areas as qualified professional experience:----

Accounting and auditing
Criminology and sociology (sociology is acceptable only if it relates to fraud.)
Fraud investigation
Loss prevention (experience as a security guard or equivalent is not acceptable)
Law relating to fraud

Per the ACFE website, the code of ethics states that a Certified Fraud Examiner shall:----

Demonstrate a commitment to professionalism and diligence in his or her duties.

Not engage in any illegal or unethical conduct, or any activity which constitutes a conflict of interest.

Exhibit the highest level of integrity in the performance of all professional assignments and will accept only assignments for which there is reasonable expectation that the assignment will be completed with professional competence.

Comply with lawful orders of the courts and testify to matters truthfully and without bias or prejudice.

Obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party.

Not reveal any confidential information without proper authorization.

Reveal all pertinent material matters discovered during the course of an examination.

Continually strive to increase the competence and effectiveness of professional services performed under his or her direction.


The CFE Exam consists of 500 questions divided into four sections: --

Fraud Examination and Investigation, Criminology and Ethics, Financial Transactions, and Legal Elements of Fraud. 

Each question has a time limit of 75 seconds, and each section contains 125 questions.

The CFE Exam covers the following four areas:----

Fraud Prevention and Deterrence - Tests your knowledge of why people commit fraud and what can be done to prevent it. Topics covered in this section include crime causation, white-collar crime, occupational fraud, fraud prevention, fraud risk assessment, and the ACFE Code of Professional Ethics.

Financial Transactions - This section tests your knowledge of the types of fraudulent financial transactions incurred in accounting records. To pass this section, you will be required to demonstrate knowledge of these concepts: basic accounting and auditing theory, fraud schemes, internal controls to deter fraud and other auditing and accounting matters.

Fraud Investigation - This section includes questions in the following areas: interviewing, taking statements, obtaining information from public records, tracing illicit transactions, evaluating deception and report writing.

Legal Elements of Fraud - This section ensures that you are familiar with the many legal ramifications of conducting fraud examinations, including criminal and civil law, rules of evidence, rights of the accused and accuser and expert witness matters.

There is a very thin line between the fraud detection and the fraud investigation in India.

To explain it in a simpler manner the detection process is carried out by the auditor (or the employees performing the similar supervision functions).   

Fraud Investigation is the work of the law enforcement officials like police department ( RAGADKE KHAINI MOONH MEIN DHAAL )  in India and the prevention is the work of the management.

The Internet makes it much easier today for fraudulent companies to register for state and local business licenses, establish virtual offices in prominent office buildings, create shell companies, and obtain other proofs of right as legitimate businesses. 

Disreputable credit coaches and so-called business enhancement services provide guidance to fraudsters on how to set up a fake business and obtain credit without arousing suspicion. 

At the same time, competitive pressures make many companies reluctant to turn away new customers; and sales personnel, eager for a sale, may even coach new customers on how to skirt their own company’s anti-fraud controls.

Bustout fraudsters usually disappear with the stolen money or goods long before the victimized companies realize they’ve been cheated and payment is never coming.

Business fraud does not receive the high-level of attention given to consumer fraud. In many instances, companies do not even know they have been the victims of fraud, which they often mischaracterize as bad debt and then take it off their books.

In addition, many companies are reluctant to even acknowledge losses due to fraud, preferring to quietly absorb their losses as a cost of doing business.

They don’t like further investigation into their won hidden crimes still to be unearthed.  Consequently, the exact cost of business-to-business fraud is not known.

From the criminal’s point of view, “bust-out” business fraud is an ideal scam. You can target multiple companies—both large and small—in a single operation; your fraudulent activities fly under the radar of most traditional antifraud controls; and you can abscond with the stolen cash or goods before your victims even realize they’ve been scammed. 

In a case a phony California business acquired a state business license, leased warehouse space, built an e-commerce website, created a false corporate history, and established other Proofs of Right that persuaded at least 50 companies to extend credit to this seemingly legitimate business operation. 

The companies included medium andlarge businesses, including Fortune 500 companies, that leased equipment and sold office suppliers, computers and electronics, and other consumable goods that are easily re-sold. 

Once the credit agreements were in place, the fraudulent business quickly borrowed against its limits and then disappeared without paying for the goods it obtained from its unsuspecting creditors. 

All together, the victimized businesses were exposed to over $2.8 million in losses.

In today’s digital age, fraudsters have little trouble creating the trappings of what appears to be a legitimate business. 

They often operate from a virtual office address, use the Internet and online services to establish a virtual phone number, answering service, government business registration i.e., LLC and licenses, favorable, yet fake financial statements, made-up trade or payment references, and even steal the identity of another business with favorable credit history. 

They carefully research each targeted company to understand, for example, how the company verifies creditworthiness and how much credit they can request without triggering a more rigorous background check. 

This new generation of criminals has essentially blown up the traditional model for verifying a new business customer’s Proof of Right and legitimacy.



During FRAUD BRAINSTORMING , setting a “zero tolerance” for criticism is essential. Business leaders must encourage team members to share all ideas no matter how unusual they seem. 

Participants must feel free to speak openly without fearing a loss of standing or credibility

AN AUDIT TEAM MUST HAVE A PRE-AUDIT BRAIN STORMING SESSION AND ALSO A POST AUDIT BRAIN STRORMING SESSION  . 

THIS MUST BE MADE MANDATORY.


Brainstorming is a group creativity technique by which efforts are made to find a conclusion for a specific problem by gathering a list of ideas spontaneously contributed by its TEAM members.

The assumption is that the greater the number of ideas generate the bigger the chance of producing a radical and effective solution.

I DID BRAINSTORMING ALMOST EVERY WEEK AT SEA—CLOAKED AS MANAGEMENT COMMITTEE AND SAFETY COMMITTEE MEETING. 

In brainstorming, criticism of ideas generated should be put 'on hold'. Instead, participants should focus on extending or adding to ideas, reserving criticism for a later 'critical stage' of the process. By suspending judgment, participants will feel free to generate unusual ideas.

IF ANY OF MY OFFICERS FELT INSULTED , THEY WOULD NOT DARE TO SPEAK UP AND FILIBUSTER


Computer supported brainstorming may overcome some of the challenges faced by traditional brainstorming methods





When carefully planned and managed, brainstorming can lead to many high-quality ideas about possible fraud risks audit team members wouldn’t likely generate individually. 

A brainstorming session that ignores best practices, however, might quickly give way to inefficiencies and distractions that ultimately could muddy the audit team’s ability to focus on relevant fraud risks. 

That kind of deterioration can hinder key audit decisions, leading the team down dangerous paths—for example, to incorrect conclusions concerning which fraud risks are present, confusion on how to respond to a disjointed list of identified risk issues or lack of “buy-in” to the brainstorming process.


EVERY COMPANY IN INDIA MUST HAVE  NEW  MANUAL ABOUT FRAUD RISK ASSESSMENT AND DETECTION .   

THIS CHAPTER MUST BE APPROVED AND REVISED REGULARLY BY THE GOVT .   

FRAUD BRAIN STORMING SESSIONS MUST BE MINUTED AND SIGNED .  

THE INTERVAL MUST BE LAID DOWN.  

FAILURE TO DO THIS MUST CAUSE THE CEO TO BE DISMISSED WITHOUT NOTICE.

Auditors are much more likely to correctly identify fraud risk conditions if the audit team engages in open-ended, nontraditional considerations of them. 

Responses from numerous stakeholders, such as forensic accountants, internal auditors, external auditors and other fraud experts, have reaffirmed the benefits of auditors engaging in such discussions.

A barrier to disseminating critical information can be the engagement partner’s or manager’s failure to share information about a client’s honesty and integrity with the engagement team. 

So, in part, brainstorming sessions prompt the more experienced auditors to share their insights with less experienced team members and, in turn, encourage those who are less experienced but have recent first-hand knowledge of client processes to provide their insights to the senior members.


Even though brand-new team members may not have information specific to the client to contribute, these sessions provide an excellent opportunity for them to become familiar with pertinent information that could affect their professional skepticism during their first year on the engagement. 

And, new team members bring a fresh perspective to the process by sharing insights from other client experiences. In any case, the brainstorming requirement mandates that all key audit team members must engage in dialogue.


AFTER BRAINSTORMING ON THE SHIP, I TOOK DECISIONS ONLY AFTER ONE SESSION OF REM SLEEP

PEOPLE WHO NOW ME OR HEARD OF ME –KNOW WHY !




HOW MANY OF OUR IIM PROFESSORS HAVE EVER BEEN A LEADER ?

TAKE ALL OF INDIAs IIM PROFESSORS---  

THEIR COMBINED LEADERSHIP SKILLS / INTELLECT CAN BE FITTED  UNDER THE UNCIRCUMCISED FORESKIN OF CAPT AJIT VADAKAYILs  PRICK-- MY SAILORS WILL CRY !


Four common pitfalls can hinder an audit team’s brainstorming effectiveness: group domination, “social loafing,” “groupthink” and “groupshift.”

Group domination is one of the most corrosive problems. Because the goal of a brainstorming session is to have audit team members share thoughts and ideas, one or two participants dominating the process can quickly squelch the creative energies of the group as a whole, reducing the likelihood the team will identify any actual fraud risks.

Audit teams are especially susceptible to this pitfall because of their traditional hierarchical structure. Senior team members may intimidate less experienced staff who look to them to lead the discussion. Other team members may defer to those assigned to lead the audit planning, believing they have had an opportunity to think in more detail about potential fraud risks. 

Furthermore, as in any group setting, there may be one or two vocal individuals with great confidence in their own ability and a determination to present their views. If any of these conditions are present, the intended benefits of fraud risk brainstorming—an exchange of ideas among the entire team—may never materialize.

Social loafing, also called free-riding, is another potential pitfall of brainstorming activities. It occurs when participants disengage from the process, expecting that other team members will pick up the slack. 

Given their size and geographic dispersion, large audit teams may be particularly susceptible. Other reasons for such “loafing” may include the “why bother” feelings that stem from group domination, the absence of compelling incentives to actively participate in the discussion and an individual’s failure to make a sufficient personal investment in the group’s task. 

It may be that members of the engagement team are juggling numerous client engagements or some team members may be working on a specific aspect of the engagement, such as IT or tax specialty work and thus may “check out” when the discussion does not directly address their specific aspect of the engagement.

WHEN YOU KEEP QUIET NOBODY CAN FIND OUT IF YOU ARE A SAGE OR A DUFFER

Fear of losing credibility also may prevent individuals from participating. If individuals feel they need to protect their standing, they will be less likely to voice an unpopular idea or opinion. This may be a problem for less experienced audit staff members or others recently assigned to the client engagement. 

They may feel unqualified to speak openly about engagement-specific risks or be reluctant to do so in front of more experienced engagement team members, who eventually will play a role in their performance evaluations. Such self-censuring behavior can hinder a group’s ability to handle the complex nature of the fraud-risk-assessment process—the very type of problem for which “outside the box” thinking is critical.

Groupthink is another pitfall to avoid. This phenomenon occurs when team members become so concerned with reaching consensus that they fail to realistically evaluate all ideas or suggestions. Audit teams can be particularly susceptible to this as auditors generally are very sensitive to time/budget pressures. 

Thus, they quickly may align with the group’s view of fraud risks in an effort to complete the task efficiently. Also, because the brainstorming requirement is new, there may be a lack of “buy in” that prompts team members to embrace the group’s views quickly in order to move to other tasks perceived as being more critical.

Groupshift is the fourth pitfall. While a purpose of brainstorming sessions is to help the audit team collectively arrive at conclusions about fraud risks, team leaders must exercise caution to avoid allowing the team to take an extreme position on fraud risk. 

For example, a group whose members generally are conservative might shift toward a more conservative position while a group of risk-takers might lean toward even riskier positions. With the recent emphasis on fraud detection, there is some cause for concern audit teams will assume the risks are high in all engagements.

The leader should establish a strong foundation for brainstorming sessions by communicating fundamental ground rules before a session begins: Do not criticize others’ ideas, let each person speak, and try to build on others’ ideas. Audit team members should know what to expect of themselves and others. 

It is particularly important that all participants feel their input is valued and their voice will be heard. The leader also should make certain that participants understand how the session will proceed and how ideas generated during the meeting will impact the audit.

 At the beginning of a meeting, the leader should genuinely encourage all audit team members, including less experienced staff, to express any idea no matter how unusual it may seem. 

Because not everyone enters the brainstorming activity with a similar level of knowledge or experience with the client or willingness to share ideas about fraud risk in an open-ended fashion, it is important to establish a comfortable environment. 

There is no substitute for having the engagement leader stress to the audit team the importance of the brainstorming session, emphasizing that every idea is valued and everyone has something to contribute to the discussion. Demonstrated genuine involvement by the engagement leader will go a long way towards setting the stage for all team members to engage in the activity.

Take a “zero tolerance” stance on criticism. The leader must make it clear that no criticism about any issue presented will be allowed while the group is generating ideas about fraud risks. Imagine the reaction of a new staff person whose manager laughs or rolls her eyes at that individual’s suggestion. Any perception of criticism can quickly shut down a team member’s willingness to participate. 

Criticism also may negatively affect the efficiency of the brainstorming activity by diverting attention from the risk assessment process to other subjects. With a “zero tolerance for criticism” expectation, the team is less likely to fall prey to the pitfalls noted. Open-mindedness, not conformity, should be the meeting’s goal.

Participants should make every effort to generate as many ideas as possible about how and where the entity may be susceptible to fraud and how management might conceal its actions. The greater the number of ideas about potential fraud risks, the more likely the group will accurately identify and assess relevant fraud risks and develop appropriate audit responses to them. 

If idea generation about fraud risks within a particular business process (for example, inventory management) or account (investments) begins to wane, the leader should shift the discussion to another business process (purchasing) or account (receivables) or rephrase the current question to get the group thinking differently. 

So, if the group is discussing how receiving personnel might steal inventory and the brainstorming process begins to slow, the session leader might ask participants to think about how purchasing personnel could misappropriate inventory (for example, redirecting inventory orders to unauthorized locations). Reframing issues from different perspectives can be a valuable technique for increasing the number of ideas generated about a particular fraud risk.

It is important for the leader to assign credit for ideas generated to the group as a whole rather than to a contributing member. Recognizing group ownership of ideas is more likely to increase the team’s interest and its commitment to its goals than when individuals are rewarded personally.


IN SHIPBOARD BRAINSTORMING SESSIONS I DO NOT ALLOW NAMES TO BE TAKEN.  

ANY VICTIMIZATION AFTER A BRAINSTORMING SESSION , IS DEALT WITH SEVERELY


Ultimately, the information gathered during the brainstorming session should be combined with that obtained through other planning activities to identify the risks of material misstatements due to fraud. Thus, before leaving the brainstorming session, team members need to clarify, refine and achieve consensus on conclusions about initial fraud risk ideas.

Some firms have the team classify fraud risks in one of two categories: risks affecting the overall engagement and risks affecting a specific account or class of transactions. Other methods of summarizing fraud risks involve classifying them along the three conditions of the fraud triangle of incentive/pressure , opportunity , and rationalization/attitude . 

By grouping ideas related to these three concepts, the team will be focusing on conditions that ultimately may indicate high fraud risk. That is, the team may be more likely to identify areas in which incentives are excessive and opportunities exist for individuals whose attitudes enable them to rationalize fraud.

The engagement leader should assign someone responsibility for documenting the results of this discussion and any necessary follow-up procedures. 

For example, if the audit team believes there is an increased risk of fraud related to the client’s revenue recognition, it will document that additional targeted procedures will be performed, which might include specific analytical procedures for revenue accounts by product line, inquiries of sales and operations personnel about side agreements, or specific revenue cut-off procedures at year-end.

The risks identified and the related responses must be documented in the audit files along with information about how and when the brainstorming discussion occurred, the audit team members who participated and the subject matter discussed.

Participants are more likely to generate high-quality ideas if they know what is expected of them and understand the rules of the activity.

While certain aspects of the team’s planned audit responses will be evident to management, the session leader should emphasize to team members that there is a need to avoid disclosing information about such responses to preserve the confidentiality of the auditor’s procedures. For example, a surprise inventory count would lose much of its value if management were to know in advance of its timing and location.


A brainstorming session is held during planning to identify fraud risks and develop procedures to address them. Then, during the wrap-up phase of the audit, a fraud checklist is completed to ensure no risks were overlooked and that appropriate procedures were performed. 

Of course, the loop is not complete unless everyone on the audit team is aware of the brainstorming session and its outcome. So, be sure to provide the results of the session to any team members who do not attend the session. Written memos can be circulated among team members or links to electronic audit files can provide easy sharing of key fraud risk information among engagement team personnel.

In 2013, US federal authorities shut down a massive synthetic ID fraud scheme that created 7,000 false identities to obtain more than 25,000 credit cards that resulted in more than $200 million in confirmed losses.

The scheme involved a three-step process that included:---
--Fabricating synthetic identities by creating fraudulent identification documents and credit profiles
--Boosting the credit of the synthetic identities by providing false creditworthiness information
--Running up large loans using the false identity

To remain undetected, the fraudsters maintained more than 1,800 “drop addresses,” including houses, apartments and Post Office boxes, which were used as the mailing addresses of the false identities.

They also created dozens of sham SHELL companies that did little or no legitimate business, obtained credit card terminals for the companies, and then ran up charges on the fraudulent credit cards.

To support the scheme, the fraudsters reportedly spent millions of dollars sustaining the elaborate network of drop addresses and running credit reports on the thousands of false identities.

The goal was “to get credit cards, get the credit limits as high as possible, then use those credit limits to max them out, and then walk away.   A lot of what they did was very painstaking and very sophisticated and took a long time.

Fortunately, robust and reliable countermeasures to synthetic ID fraud are available to organizations.





The prevalence of synthetic identity theft has increased by more than 150 percent since 2010.   3 % of the U.S. population, or about 7 million identities, are "synthetic."

Synthetic identity theft has been made easier thanks to changes by the US Social Security Administration.

In the past, the first three digits of a Social Security number denoted the geographic area of USA where you lived when the card was issued.   Since 2011, the numbers have been randomly generated, making it harder to tell if they are valid.

Watch for mail that comes to you, but has someone else's name on it.

You also should keep an eye on your bank and credit card statements and verify all the transactions.

Synthetic identity theft is the crime of committing identity fraud while using fictitious information. This means that some or all of the information behind the identity is false. Identity thieves often take real Social Security Numbers and pair them with fake information.

The ways to go about obtaining personal identifying information are obvious. Some examples include stealing mail, trash, phishing or hacking online accounts, and taking advantage of workplace authority. Regardless, the point is that the thief gets their hands on sensitive pieces of information. 

They then look for weaknesses within the data, such as by checking their credit report.

The smartest identity thieves up their profits further by paying off the debts with fraudulent checks. Doing this allows the cards to get used up a second time, therefore doubling the amount the criminal pockets from the crime. And, it’s unfortunate but, a lot of the time it’s “credit repair experts” trying to help people build their credit without realizing scammers are taking advantage of them.

Creating fictitious reports on synthetic credit files--- This is the most advanced method of synthetic identity theft that exists. To pull it off, the criminal needs access to a company that can report to the credit bureaus. 

Organized identity crime groups have the ability to pull strings and partner up with small business owners to make this possible. Also, some owners and employees learn how it’s done and take advantage of their reporting privileges on their own.

So, the company will set up a credit account in the fictitious identity and then send positive reports to the credit bureaus. The person running the scheme has the choice to use the business credit accounts as a way to open the credit file, or to build up one that’s already open.

 The latter works best as it allows the company to get away with a higher credit limit overall. It also gives the fraudster the power to increase the account’s limit at a faster rate than normal.

Now, the thief can run this scheme with one of two end games. First, they can defraud the company supporting the scam and await compensation from insurance payouts. Second, they can use the strong credit history they created to get a bunch of credit lines elsewhere to max out. 

The only problem is that they cannot run this fraud under a bunch of names, or for amounts much greater than the business’s product values.

Regardless, the scam often ends within the same year it starts and there’s a good chance the two end games will cross paths. This is because, in the case of a real business supporting the crime, the suspect will have to show criminal activity on the business’s account. Failing to do so would raise a lot of suspicion and point the police right to the culprit.

In the digital age, obtaining verifiable data to create a synthetic ID and nurture it is becoming increasingly easy in USA.

INDIA IS NOT YET FULLY DIGITALISED.    WE NEED TO KNOW THE PITFALLS

 Since real people won’t see activity on an account created with their SSN that doesn’t include their exact name or address, they’re not going to raise any red flags. And when unusual activity does occur on the fake account, the synthetic-identity fraudster will promptly confirm that the suspicious activity is “legitimate” if contacted.

Fraudsters have relatively easy access to personally identifiable information to create synthetic ID facilities. Data breaches, often massive, are a primary source.

The building blocks of a synthetic ID can include personally identifiable information (PII), but the opportunities for fraud that Social Security numbers (SSNs) provide make them highly valuable for fraudsters.   More than 70% of top financial institutions allow the use of SSNs as identifiers.

For example, breaches at two major health insurance companies exposed SSNs, birth dates and other account data of more than a combined 93 million subscribers.

To avoid possible detection, fraudsters often seek out SSN of people who don’t make use of credit. The elderly are targeted, especially those living with relatives who are less likely to use credit cards or pay utility bills. Children are targets, too, primarily because parents are extremely unlikely to check their credit reports, which limits fraud detection.

Proprietary algorithms in robust solutions are especially useful in identifying synthetic IDs. By comparing an SSN to a consumer’s unique identification information, the algorithm determines how well a consumer’s SSNs matches its identity.

The most useful tools return both positive confirmations of an SSN match and several negative alerts that can signal the creation of a synthetic identity or other SSN-related fraud at account opening — before any damage is done.

Warnings to look for:---
--SSN can’t be matched to the specific consumer based on comparison algorithms
-- SSN matches to a different consumer, while no credit file is available for the requested applicant
-- SSN matches to different consumer, and a credit file is available for the name and address provided; however, the SSN on that file is different from the SSN provided on the inquiry.


BEFORE INDIA GOES INTO DIGITIZATION WE MUST KNOW THE WORKINGS



Today, synthetic ID fraud accounts for 80% of all credit card fraud losses, and nearly ¼ th of credit card charge-offs in USA.

The rise in synthetic ID fraud can be attributed to a variety of conditions.

First, it’s not especially difficult to create a synthetic ID. The steps include:----
--Obtain an SSN of another person
--Fabricate a name to be used with the SSN
--Create false birth dates that tend to match the appearance of the fraudster in case any in-person appearances are required
--Create an address to receive mail fraudulently
-- Provide telephone numbers that will probably be untraceable or stale by the time the fraud is realized

Once the identities are created, fraudsters typically nurture them until they mature. They open accounts at different organizations, check their credit scores regularly, and choose the perfect time to exploit the accounts to the maximum degree possible.

In the aftermath, financial-services organizations are generally left with a significant loss and nobody to chase in their collection and recovery process.

Historically, synthetic ID fraud was generally committed by consumers whose poor credit ratings made it difficult to open credit card accounts or receive loans. With a few adjustments to their personally identifiable information, cash-strapped consumers were able to create new accounts.

Synthetic ID fraud is built on the foundation of a fictitious identity, often created with a combination of real data and fabricated information. For example, the fraudster may “borrow” one person’s Social Security number (SSN), combine it with another person’s name, and use someone else’s address to create a brand new identity.

The perpetrator can then use this fraudulent identity to apply for credit, make major purchases, or a variety of other activities that give the identity a financial history.

Synthetic ID fraud has since transitioned into a widely used criminal activity designed to steal many millions of dollars.

For example, in 2013 the U.S.Attorney’s Office for the District of New Jersey charged 18 defendants with plotting a $200 million credit card fraud conspiracy that involved fabricating more than 7,000 identities to obtain tens of thousands of credit cards

In typical identity theft, a fraudster pretends to be a victim by using that person's real name, Social Security number and other personal information. The criminal doesn't change any of that pilfered data.

But in synthetic identity theft, a criminal essentially creates a whole new identity.

This kind of identity thief starts with a real Social Security number, but then adds fake credentials, such as a fake name, address, birth date and so on. It's a Frankenstein's monster, stitched together from various parts into something that looks approximately like a real person.

Bad guys then use these manufactured identities to apply for jobs and build credit little by little, for example by obtaining cellphone service or credit cards — small accounts that, properly maintained, can establish enough credit to obtain larger loans that won't be paid back.

Since such a criminal only uses some of a consumer's personal information, the fraud often won't show up on the legitimate SSN holder's credit report. On the other hand, negative information attached to another file can be linked to the individual's file in the credit bureau, negatively affecting his or her credit report and credit score

Since this type of ID theft does not affect your main credit file, it often doesn't hit your credit report, nor will a fraud alert or credit freeze help.  It takes longer to find out you've been victimized, making it harder for you to clear your name. When the criminals run up thousands of dollars of debt and disappear, the creditors will eventually back track to you.

Synthetic identity theft has been around for a while, but it is having more of an impact than it used to.

About 4% of applications for credit cards and cellphone accounts are synthetic identity thefts.



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