Youngblood - Business theft and fraud: detection and prevention

Business Theft and Fraud

Detection and Prevention

Business Theft and Fraud

Detection and Prevention

James R. Youngblood

CRC Press

Taylor & Francis Group

6000 Broken Sound Parkway NW, Suite 300

Boca Raton, FL 33487-2742

2017 by Taylor & Francis Group, LLC

CRC Press is an imprint of Taylor & Francis Group, an Informa business

No claim to original U.S. Government works

Printed on acid-free paper

Version Date: 20160226

International Standard Book Number-13: 978-1-4987-4243-6 (Paperback)

This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. The authors and publishers have attempted to trace the copyright holders of all material reproduced in this publication and apologize to copyright holders if permission to publish in this form has not been obtained. If any copyright material has not been acknowledged please write and let us know so we may rectify in any future reprint.

Except as permitted under U.S. Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers.

For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged.

Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

Library of Congress Cataloging-in-Publication Data

Names: Youngblood, James, 1960- author.

Title: Business theft and fraud : detection and prevention / James R. Youngblood.

Description: Boca Raton : Taylor & Francis, 2016. | Includes bibliographical references and index.

Identifiers: LCCN 2016005420 | ISBN 9781498742436 (alk. paper)

Subjects: LCSH: Employee theft. | Employee crimes--Prevention. | Fraud. | Fraud--Prevention. | Identity theft. | Computer crimes.

Classification: LCC HF5549.5.E43 Y68 2016 | DDC 658.4/73--dc23

LC record available at http://lccn.loc.gov/2016005420

Visit the Taylor & Francis Web site at

http://www.taylorandfrancis.com

and the CRC Press Web site at

http://www.crcpress.com

This book is dedicated to my mother,
Joan Kathryn Youngblood,
July 22, 1940September 2, 2009

I owe everything I have ever achieved to this wonderful woman.

Contents

Fraud occurs in every business. It does not discriminate by size, industry, geography, or any other factor. Since recorded time, people and money have always been a combustible mixture. Some people have a true need of some kind and believe that money will solve their problems, so they turn to fraud as a means of relief. Others are just greedywhatever they have is not enough, and they will do anything to obtain wealth. If they cannot earn it honestly, they will steal it from those who did.

Ive been in the fraud business for over 30 years. My first job out of law school was with a small firm that handled consumer fraud and deceptive trade practices claims. I absolutely loved it. I did not love the hassles of navigating the legal system and fighting with the opposing attorneys, but I loved the fact that we were fighting against businesses and individuals who sought to enrich themselves at the expense of others. That desire led me to take a position with the Association of Certified Fraud Examiners (ACFE) in 1995. It was at that point that my fraud horizon expanded, and the view was not pretty.

As I began writing, researching, and talking to our members about fraud, it became abundantly clear just how big the problem is. In fact, the ACFEs research suggests that organizations lose 5% of revenues each year to fraud. If applied to the estimated gross world product, this means that in excess of $3.5 trillion is lost to fraud each year. The bottom line is that if organizations are not fighting fraud, they are definitely losing money.

The problem with fighting fraud is that there are so many different types: internal frauds, external frauds, cyber attacks and the list goes on. Indeed, you will see the list in the table of contents.

Although it seems grim, it is not. Every business has to make a choice: either accept the losses and plan for them in the budget or fight back.

The ACFE and members like Rick Youngblood are fighting back. I have known Rick for more than 15 years. He was an early member of the ACFE, and he understood immediately that you have to fight fraud with both barrels. First, you have to design controls to prevent fraud as much as possible on the front end. And, second, you have to be constantly on the alert. Potential fraudsters have to know that if they try to steal, they will be caught and brought to justice. Controls are necessary, but they alone cannot do the job. Fraudsters look at controls as something to get around. Someone has to be on patrol looking for signs of fraud.

John D. Gill, CFE
Vice PresidentEducation
Association of Certified Fraud Examiners
Austin, Texas

James Rick Youngblood, CPP, CFE, has extensive experience in the fields of loss prevention, security investigations, law enforcement, and fraud investigation. Rick has authored numerous articles on the topics of fraud/security/loss prevention for many national publications. He has also provided fraud/security/loss prevention presentations for many national and international organizations, including ASIS International (formerly the American Society for Industrial Security), the Association of Certified Fraud Examiners, the Institute for International Research, etc. Rick is a current and long-time member of the ASIS Crime and Loss Prevention Council and is also a member of the ASIS Investigations Council.

Rick is the author of the book, A Comprehensive Look at Fraud Identification and Prevention, published by CRC Press in April 2015 (ISBN 978-1-4987-0032-0). He is coauthor of the book, Security for Colleges and Universities, published in 2014 by ASIS International (ISBN 978-1-934904-57-2), to which he contributed the chapter, Risk Management for Campus Administrators. Rick also coauthored a book to be published by ASIS International in 2016: Security in 2025.

Rick currently holds a masters degree in financial management and a bachelors degree in criminal justice/business management. He is a retired chief warrant officer from the US Army and spent over 21 years on active duty and in the National Guard as a CID special agent. Rick currently resides in Phoenix, Arizona, with his wife, Rosanne.

Fraud and theft can strike an unsuspecting organization through all avenues. The perpetrator can