Fraud During the Coronavirus (COVID-19) Crisis

There are so many things to be worried about with the COVID-19 pandemic. First and foremost is the health of our family and friends. But let’s not kid ourselves: The health of our economy is important too. People are already out of work, and many more may be out of work in the weeks to come. There are so many uncertainties.

Since I do fraud investigations for a living, fraud is something I’m thinking about a lot. And the fraud risks during this time of uncertainty and economic distress are great!

There are a few reasons for this:

  1. Many companies have reduced the size of their workforce. The fewer people working, the more difficult things become. There may be increased workloads, which is stressful. There is also often reduced supervision. This creates greater opportunities for fraud to happen, and likely impacts whether or not it will be detected timely.
  2. Working remotely is a great option if it is possible in your company, but it also creates opportunities for fraud. This is again related to reduced supervision of employees.
  3. Employees are facing greater financial pressures. This could lead otherwise honest employees to turn to fraud. They may tell themselves they’re just “borrowing” the money. They may justify a theft because of a dire need.

Read moreFraud During the Coronavirus (COVID-19) Crisis

Using Facebook in Financial Investigations

I did a divorce investigation a few years ago that I like to call the Instagram Investigation. The husband was accused of marital waste (dissipation), as he was spending lots of money on his new girlfriend while his divorce was pending. The wife needed to quantify how much he was spending on the girlfriend, but it wasn’t clear who was spending money just by looking at the credit card statements. Until you looked at the girlfriend’s Instagram account and saw all the pictures from her shopping trips. It was a matter of comparing 150+ dated photos (also tagged with locations) to credit card charges to determine what was spent on the girlfriend.

Can we use Facebook to assist with financial investigations? Sometimes. I find that Facebook is most useful when researching relationships between people and tracking the activities of a party. It hasn’t proven to be particularly useful in terms of financial analysis, except when an occasional vacation or automobile purchase is documented on Facebook.

Even if the information I find may be limited, I still often check Facebook to see if there is anything I can use. I have found that Instagram accounts are very often public, so they don’t require permission from the user to see what he or she is posting. On the other hand, most people seem to have privacy safeguards in place on their Facebook accounts. That means you’re not going to see much of their activity unless you are FB friends with them.

Read moreUsing Facebook in Financial Investigations

Fraud Prevention on the Cheap

One common misconception among small business owners is that fraud prevention is expensive. And like anything else in this world, it can be expensive. A company that strives to eliminate virtually all opportunities for fraud by employees can spend a chunk of money doing so.

But it’s not always necessary to spend lots of money on fraud prevention. And it’s not always possible for a small business owner to spend a lot on fraud prevention. Let’s face it… budgets are tight and big new projects aren’t often possible.

Read moreFraud Prevention on the Cheap

Disappearing Income and Asset Values in Divorce

We’ve all seen it before: A spouse owns and operates one or more businesses. Divorce is filed, and the “out” spouse is told that the businesses have little or no value. Further, there is no income available to pay support, thanks to the poor financial condition of the businesses.

How can this be when the married couple has lived a good life for years, always having more than enough money to pay for homes, living expenses, and vacations? It’s the case of the disappearing income and asset values, brought on by the divorce.

Fortunately, there are ways to ferret out truth behind the financial picture that is being presented. It likely will not be easy. The “in” spouse controls the money, the information, and the documents. Getting him to turn over financial documents that will prove there is income and value will be difficult.

Read moreDisappearing Income and Asset Values in Divorce

Corporate Accountability Reporting and Roddy Boyd’s Hobby

I got a little chuckle this week when Roddy Boyd and his paid hobby, Southern Investigative Reporting Foundation, put out a plea for donations and referred to their “work” as corporate accountability reporting.

You see, a couple of weeks ago, I wrote about Roddy Boyd’s lack of ethics as it relates to a large donation from investor Marc Cohodes that influenced Roddy’s reporting.

Read moreCorporate Accountability Reporting and Roddy Boyd’s Hobby

How to Investigate a Cash Business

Closely-held businesses often create problems in divorces, as they need to be valued for the property division and the income needs to be evaluated for support purposes. It can be difficult to examine the income of a business that transacts with its customers primarily in cash. However, there are ways to verify whether the income being reported is reasonable.

Some of the ways that the income of cash businesses can be examined and verified include:

1. Find out the normal mark-up or profitability of the product or service being sold, and see how recently reported figures of the company compare.

Read moreHow to Investigate a Cash Business

Ways to Hide Income and Assets in Divorce

While it is common for one spouse to have control over the money in a marriage—be the major breadwinner, manage spending, and maintain control of financial documentation—family lawyers and their clients can increase the chances of finding hidden assets during a divorce by being aware of some of the schemes used to hide money.

Understanding the common schemes that may be used to hide assets and income can help the spouse in the lesser financial position protect himself or herself in the divorce; and, by knowing about these schemes, you can look for signs and hopefully limit the success your client’s soon-to-be-ex-spouse will have with them. Some of the more common schemes used to hide money in divorces include:

Read moreWays to Hide Income and Assets in Divorce

A Practical Fraud Investigation Course

My biggest criticism of the courses on fraud investigation at the college level or in the continuing education space are that they are not practical. They all focus on theory and teaching about different types of fraud schemes. But who is teaching about how to actually do the investigation? I am! Next month I am … Read more A Practical Fraud Investigation Course

Financial Investigation Software

At the heart of every financial investigation is a trail of money. And in many cases those trails are complex. They involve multiple bank accounts and thousands of transactions that are intertwined.  This voluminous financial data must be culled, analyzed, and presented in a way that proves the case, and therein lies the difficulty.

For the last forty years, investigators have relied primarily on manual processes to evaluate financial evidence. They compared accounting data to source documents, ultimately trying to prove the source and use of funds.

But this gets complicated in large cases because of the number of involved people and bank accounts. The process of understanding and organizing the flow of funds is complex, and it can take months before the parties to a case know exactly what happened to the money.

Over the last decade, advances have been made with technology to help fraud investigators analyze large volumes of financial data much faster, more efficiently, and more accurately than they can using only traditional investigative techniques.

Read moreFinancial Investigation Software