FRAUD EXAMINERS MANUAL

1 FRAUD EXAMINERS MANUAL 2015 FRAUD EXAMINERS MANUAL i TABLE OF CONTENTS VOLUME I SECTION 1 FINANCIAL TRANSACTIONS AND FRAUD SCHEMES ACCOUNTING CONCEPTS Accounting Basics .. Financial Statements .. Generally Accepted Accounting Principles (GAAP) .. FINANCIAL STATEMENT FRAUD What Is Financial Statement FRAUD ?.. The Cost of Financial Statement FRAUD .. Why Financial Statement FRAUD Is Committed .. Trends in Financial Statement FRAUD .. Financial Statement FRAUD Schemes .. What Red Flags Are Associated with Financial Statement FRAUD in General? .. Detection of Fraudulent Financial Statement Schemes .. Financial Statement Analysis .. Interviews in Fraudulent Financial Statement Cases .. Prevention of Financial Statement FRAUD .. ASSET MISAPPROPRIATION: CASH RECEIPTS Skimming .. Cash Larceny .. ASSET MISAPPROPRIATION: FRAUDULENT DISBURSEMENTS Register Disbursement Schemes.

2 Check Tampering .. Electronic Payment Tampering .. Billing Schemes .. Payroll FRAUD .. Expense Reimbursement Schemes .. ASSET MISAPPROPRIATION: INVENTORY AND OTHER ASSETS Misuse of Inventory and Other Assets .. Theft of Inventory and Other Misappropriation of Intangible Assets .. FRAUD EXAMINERS MANUAL ii 2015 FRAUD EXAMINERS MANUAL FINANCIAL TRANSACTIONS AND FRAUD SCHEMES BRIBERY AND CORRUPTION Corruption .. Detection of Bribery Schemes .. Conflicts of Interest .. THEFT OF INTELLECTUAL PROPERTY Competitive Intelligence Versus Espionage .. Where Intelligence Professionals Get Information .. Favorite Employee Targets of Intelligence Professionals .. How Information Is Lost or Stolen .. Electronic Countersurveillance .. Insider Threats to Proprietary Information.

3 Investigating Corporate Espionage .. Program for Safeguarding Proprietary Information .. Minimizing the Risks of Misappropriation Legal Issues Related to Theft of Intellectual Property .. FINANCIAL INSTITUTION FRAUD Embezzlement Schemes .. Loan FRAUD .. Real Estate FRAUD .. Mortgage FRAUD .. New Account FRAUD Schemes .. Money Transfer (Wire) FRAUD Schemes .. Automated Teller Machine (ATM) FRAUD .. Account Takeover .. Advance-Fee FRAUD .. Letter-of-Credit FRAUD .. Inside/Outside Frauds .. Prevention .. Suspicious Activity Reports .. Applicable Federal Statutes .. CHECK AND CREDIT CARD FRAUD Check FRAUD .. Credit Card FRAUD .. Prevention and Detection of Credit Card FRAUD .. Electronic Bill Payment and Person-to Person Payments .. FRAUD EXAMINERS MANUAL 2015 FRAUD EXAMINERS MANUAL iii FINANCIAL TRANSACTIONS AND FRAUD SCHEMES INSURANCE FRAUD Types of Insurance Policies.

4 Agent/Broker FRAUD .. Underwriting Irregularities .. Vehicle Insurance Schemes .. Property Schemes .. Life Insurance Liability Schemes .. Red Flags of Insurance FRAUD .. Computer-Generated Detection Reports .. Workers Compensation FRAUD .. HEALTH CARE FRAUD Laws Relating to Health Care FRAUD .. FRAUD by the Insurance Company .. Employee Claims FRAUD .. Agent FRAUD .. Provider FRAUD .. FRAUD by the Medical Staff .. Kickbacks in the Health Care Industry .. Inflated Billings .. Insured and Beneficiary FRAUD .. Criminal Rings .. FRAUD by Medical Institutions .. Other Frauds in the Institutional Setting .. FRAUD in Special Care Facilities .. Managed Care .. Medicaid and Medicare FRAUD .. Electronic Claims Health Care Compliance Programs .. CONSUMER FRAUD Con Schemes .. Telemarketing FRAUD .

5 Ponzi and Pyramid Schemes .. Franchise FRAUD .. Identity Theft .. FRAUD EXAMINERS MANUAL iv 2015 FRAUD EXAMINERS MANUAL FINANCIAL TRANSACTIONS AND FRAUD SCHEMES COMPUTER AND INTERNET FRAUD Computer FRAUD Versus Computer Crime .. Computer Hacking .. Malware .. Email .. Internet FRAUD .. Electronic Commerce and Information Security .. Insider Threats .. Computer Security .. CONTRACT AND PROCUREMENT FRAUD Basics of Contract Law .. Methods of Procurement .. Phases in the Procurement Process .. Categories of Procurement FRAUD Schemes .. Preventing Contract and Procurement FRAUD .. FRAUD EXAMINERS MANUAL 2015 FRAUD EXAMINERS MANUAL v SECTION 2 LAW OVERVIEW OF THE UNITED STATES LEGAL SYSTEM Basic Concepts of the Law .. The Court System .. Civil and Criminal Actions for FRAUD .

6 THE LAW RELATED TO FRAUD (PART 1) Definition of FRAUD .. Principal Types of FRAUD .. Federal Legislation Related to FRAUD .. THE LAW RELATED TO FRAUD (PART 2) Federal Legislation Related to FRAUD (Cont.) .. Fines Under Title 18 .. Qui Tam Suits and the Civil False Claims Act .. Federal Whistleblower Statutes .. BANKRUPTCY FRAUD Introduction .. The Bankruptcy Code (Title 11, United States Code) .. Creditors Rights and Remedies .. Bankruptcy Crime Statutes .. Bankruptcy Schemes .. SECURITIES FRAUD Federal Regulation of Securities .. Self-Regulatory Organizations .. State Regulation .. What Constitutes a Security? .. Commodity Futures, Exchange-Traded Options, and OTC Options .. Securities FRAUD Schemes .. Investigative Tips .. MONEY LAUNDERING Introduction .. The Money Laundering Process.

7 Methods of Money Laundering .. FRAUD EXAMINERS MANUAL vi 2015 FRAUD EXAMINERS MANUAL LAW MONEY LAUNDERING (CONT.) Alternative Remittance Systems .. Federal and State International Anti-Money Laundering Efforts .. Enforcement and Prevention Strategies .. Special Problems for Insurance Companies .. TAX FRAUD Introduction .. Hallmarks of Tax FRAUD .. Taxpayer Tax Preparer Penalties .. Whistleblower Programs .. Defenses for Tax FRAUD .. Evidence of Tax FRAUD .. Other Legal Elements of Tax FRAUD .. INDIVIDUAL RIGHTS DURING EXAMINATIONS Employees Duty to Cooperate .. Employee s Rights During the Investigation .. Interviews .. Searches and Polygraph Examinations .. Avoiding Liability for Obstruction of Justice and Witness Tampering .. Discharging a Suspected Wrongdoer.

8 CRIMINAL PROSECUTIONS FOR FRAUD Basic Principles of Criminal Law .. Constitutional Rights .. Arrests .. Interrogation of Suspects .. The Charging Process .. The Trial Process .. Sentencing .. Appeal .. FRAUD EXAMINERS MANUAL 2015 FRAUD EXAMINERS MANUAL vii LAW THE CIVIL JUSTICE SYSTEM Civil Litigation .. Proposed Amendments to the Federal Rules of Civil Procedure .. Alternative Dispute Resolution .. Trial of a Civil Case .. Fidelity Bond Claims .. BASIC PRINCIPLES OF EVIDENCE Definition of Evidence .. Three Basic Forms of Evidence .. Direct Versus Circumstantial Evidence .. Admissability of Evidence .. Special Rules Concerning Some Types of Circumstantial Evidence .. Exhibits .. Hearsay .. Excluding Illegally Seized Evidence .. Impeachment .. Privileges .. TESTIFYING Introduction.

9 Considerations for Testifying as a Lay Witness .. Considerations for Testifying as an Expert .. Preparing to Testify .. Direct Examination .. Cross-Examination .. Expressing an Opinion on Witness Immunity for Experts .. Summary .. FRAUD EXAMINERS MANUAL viii 2015 FRAUD EXAMINERS MANUAL VOLUME II SECTION 3 INVESTIGATION PLANNING AND CONDUCTING A FRAUD EXAMINATION Why Conduct a FRAUD Examination? .. What FRAUD Examination Entails .. FRAUD Examination and Forensic Accounting .. FRAUD Examination Methodology .. Develop a Response Plan .. Initial Response to Suspicions or Allegations of FRAUD .. Planning and Conducting a Formal Investigation .. Structure the Investigation to Preserve Confidentiality .. ANALYZING DOCUMENTS Obtaining Documentary Evidence.

10 Examining Fraudulent Documents .. Handling Documents as Physical Evidence .. Identifying Writings .. The Document Expert s Findings .. How to Obtain Handwriting Samples .. Typewriters and Computer Printers .. Photocopies .. Dating a Document .. Indented Writings .. Counterfeit Printed Documents .. Fingerprints .. Sources for Expert Document INTERVIEW THEORY AND APPLICATION Preparation .. Characteristics of a Successful Interview .. Characteristics of an Effective Interviewer .. Legal Considerations When Conducting an Interview .. Elements of Inhibitors of Communication .. Facilitators of Communication .. Kinesic Interview and Interrogation .. The Cognitive Interview Technique .. Interview Mechanics .. Question Typology .. FRAUD EXAMINERS MANUAL 2015 FRAUD EXAMINERS MANUAL ix INVESTIGATION INTERVIEW THEORY AND APPLICATION (CONT.)