FRAUD EXAMINERS MANUAL

1 FRAUD EXAMINERS MANUAL FRAUD EXAMINERS MANUAL : 2021 Edition i TABLE OF CONTENTS VOLUME I SECTION 1 FINANCIAL TRANSACTIONS AND FRAUD SCHEMES ACCOUNTING CONCEPTS Accounting Basics .. Financial Statements .. Generally Accepted Accounting Principles .. 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 .. Theft of Cash on Hand .. ASSET MISAPPROPRIATION: FRAUDULENT DISBURSEMENTS Register Disbursement Schemes.

2 Check Tampering Schemes .. Electronic Payment Tampering .. Billing Schemes .. Payroll FRAUD Schemes .. Expense Reimbursement Schemes .. FRAUD EXAMINERS MANUAL ii FRAUD EXAMINERS MANUAL : 2021 Edition FINANCIAL TRANSACTIONS AND FRAUD SCHEMES ASSET MISAPPROPRIATION: INVENTORY AND OTHER ASSETS Misuse of Inventory and Other Assets .. Theft of Inventory and Other Misappropriation of Intangible Assets .. CORRUPTION What Is Corruption? .. Forms of Corruption .. Methods of Making Corrupt Payments .. Detection of Corruption Schemes .. Conflicts of Interest .. Anti-Corruption Programs .. THEFT OF DATA AND INTELLECTUAL PROPERTY Competitive Intelligence Versus Espionage .. Where Intelligence Professionals Get Information .. Favorite Employee Targets of Intelligence Professionals .. How Information Is Lost or Stolen.

3 Electronic Countersurveillance .. Insider Threats to Proprietary Information .. Investigating Corporate Espionage .. Program for Safeguarding Proprietary Information .. Minimizing the Risks of Misappropriation IDENTITY THEFT Perpetrators of Identity Theft .. Victims of Identity Theft .. Methods of Committing Identity Theft .. Types of Identity Theft Schemes .. How Identity Thieves Steal Information .. Methods of Preventing Identity Theft .. How to Respond to Identity Theft .. FINANCIAL INSTITUTION FRAUD Embezzlement Schemes .. Loan FRAUD .. Real Estate FRAUD .. New Account FRAUD Schemes .. FRAUD EXAMINERS MANUAL FRAUD EXAMINERS MANUAL : 2021 Edition iii FINANCIAL TRANSACTIONS AND FRAUD SCHEMES FINANCIAL INSTITUTION FRAUD (CONT.) Money Transfer (Wire) FRAUD Schemes .. Automated Teller Machine Account Takeover.

4 Advance-Fee FRAUD .. Letter-of-Credit FRAUD .. Inside/Outside Frauds .. Prevention .. Suspicious Transaction Reports .. The Basel Committee on Banking Supervision .. PAYMENT FRAUD Check FRAUD .. Credit and Debit Card FRAUD .. Prevention and Detection of Credit and Debit Card FRAUD .. Electronic Bill Payment and Person-to-Person Payments .. Online and Mobile Account FRAUD .. Alternative Currencies .. INSURANCE FRAUD Types of Insurance Policies .. Agent/Broker FRAUD .. Underwriting Irregularities .. Vehicle Insurance Schemes .. Property Schemes .. Life Insurance Liability Schemes .. Workers Compensation FRAUD .. Detecting and Preventing Insurance HEALTH CARE FRAUD Types of Health Care Systems .. Provider FRAUD .. FRAUD by the Medical Staff .. Inflated Billings .. Kickbacks in the Health Care Industry.

5 FRAUD by Medical Institutions .. Other Frauds in the Institutional Setting .. FRAUD in Special Care Facilities .. FRAUD EXAMINERS MANUAL iv FRAUD EXAMINERS MANUAL : 2021 Edition FINANCIAL TRANSACTIONS AND FRAUD SCHEMES HEALTH CARE FRAUD (CONT.) FRAUD by the FRAUD by Insurance Companies .. Employee Claims FRAUD .. Agent FRAUD .. Electronic Claims Health Care Compliance Programs .. CONSUMER FRAUD Consumer FRAUD Schemes .. Elder FRAUD .. Telemarketing FRAUD .. Ponzi and Pyramid Schemes .. CYBERFRAUD What Is Cyberfraud? .. Recognizing Computer Intrusion .. Insider Threats .. Computer Hacking .. Malware .. Email .. Internet FRAUD .. Electronic Commerce and Information Security .. Cybersecurity .. CONTRACT AND PROCUREMENT FRAUD Basics of Contract Law .. Methods of Procurement.

6 Phases in the Procurement Process .. Categories of Procurement FRAUD Schemes .. Preventing Contract and Procurement FRAUD .. FRAUD EXAMINERS MANUAL FRAUD EXAMINERS MANUAL : 2021 Edition v SECTION 2 LAW OVERVIEW OF THE LEGAL SYSTEM Basic Concepts of the Law .. Types of Legal Systems .. International Issues in FRAUD Cases .. Court Systems .. Civil and Criminal Actions for FRAUD .. Parallel Proceedings .. Administrative Proceedings .. THE LAW RELATED TO FRAUD Definition of FRAUD .. Principal Types of FRAUD .. International Initiatives Against FRAUD and Corruption .. BANKRUPTCY (INSOLVENCY) FRAUD Key Parties in the Bankruptcy System .. Types of Bankruptcy Filings .. Bankruptcy Schemes .. Cross-Border Insolvency Regimes .. The World Bank Principles .. SECURITIES FRAUD What Constitutes a Security? .. Securities Laws and Regulations.

7 Self-Regulatory Organizations .. Securities FRAUD Schemes .. Investigative Tips .. MONEY LAUNDERING The Money Laundering Process .. Money Laundering Methods .. International Anti-Money Laundering Efforts .. Enforcement and Prevention Strategies .. Special Problems for Insurance Companies .. FRAUD EXAMINERS MANUAL vi FRAUD EXAMINERS MANUAL : 2021 Edition LAW TAX FRAUD Introduction .. Evidence of Tax FRAUD .. Types of Tax Evasion Schemes .. Common Defenses to Allegations of Tax Evasion .. FRAUD Schemes Targeting Taxpayers .. INDIVIDUAL RIGHTS DURING EXAMINATIONS Employees Duties and Rights During Investigations .. Rights and Obligations Under Criminal Law .. The Law Relating to Government Search and Investigations in Private Actions .. THE CRIMINAL JUSTICE SYSTEM International Covenant on Civil and Political Rights.

8 The Charging Process .. Defenses .. The Trial Process .. Sentencing .. Punishment .. Appeal .. Corporate Criminal Liability .. THE CIVIL JUSTICE SYSTEM Procedure in Civil Cases .. Decisions and Remedies in Civil Alternative Dispute Resolution .. BASIC PRINCIPLES OF EVIDENCE Three Basic Forms of Evidence .. Direct Versus Circumstantial Evidence .. Admissibility of Evidence .. Special Rules Concerning the Admission of Evidence in Adversarial Chain of Custody .. Impeachment .. Privileges and Protections .. FRAUD EXAMINERS MANUAL FRAUD EXAMINERS MANUAL : 2021 Edition vii LAW TESTIFYING Considerations for Testifying as a Lay Witness .. Considerations for Testifying as an Expert .. Qualifying to Testify as an Expert Witness .. Preparing to Testify .. Direct Examination .. Cross-Examination.

9 Expressing an Opinion on Witness Immunity for Experts .. Summary .. FRAUD EXAMINERS MANUAL viii FRAUD EXAMINERS MANUAL : 2021 Edition 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 FRAUD Response Plan .. Initial Response to Suspicions or Allegations of FRAUD .. Planning and Conducting a Formal Investigation .. Structure the Investigation to Preserve Confidentiality .. COLLECTING EVIDENCE Types of Evidence .. General Rules for Collecting Documents .. Obtaining Documentary Evidence .. Examining Fraudulent Documents .. Handling Documents as Physical Evidence .. Identifying Writings .. The Document Expert s Findings.

10 How to Obtain Handwriting Samples .. Typewriters and Computer Printers .. Photocopies .. Dating a Document .. Indented Writings .. Counterfeit Printed Documents .. Fingerprints .. Disposal of Evidence .. 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 .. FRAUD EXAMINERS MANUAL FRAUD EXAMINERS MANUAL : 2021 Edition ix INVESTIGATION INTERVIEW THEORY AND APPLICATION (CONT.) Facilitators of Communication .. Kinesic Interview and Interrogation .. The Cognitive Interview Technique .. PEACE Interviewing Method .. Interview Mechanics .. Question Typology .. Introductory Questions .. Informational Questions.