Using the Internet to Investigate Fraud

1. Using the Internet to Investigate Fraud William N. Dilla, CPA, Ph.D. wdilla@iastate.eduDecember 17, 2010

2. Person of the Year 2010

3. Presentation Objectives • We will learn about: • Using the Internet to develop a predication of fraud • How a fraud investigators might use the Internet • Using the Internet for background checks • Protecting one’s self on the Internet

4. Two Fraud Triangles • The “motivation triangle” • Pressure / Incentives • Opportunity • Attitude / Rationalization • The “element triangle” • Theft Act • Concealment • Conversion

5. The Motivation Triangle • Pressure / Incentives • Living beyond means • Vice (gambling, drugs, etc.) • Financial Emergencies • Bonuses or stock options (financial reporting fraud) • Opportunity • Poor internal controls • Override of internal controls • Collusion • Attitude / Rationalization • Dishonest individual • “Everyone else is doing it” • “They owe it to me” • “I’ll just borrow the money”

6. The Element Triangle • Theft Act • Rarely observed directly • Concealment • Often causes anomalies, investigate with: • Analytical procedures • Data mining • Examination of documents • Conversion • Sales of stolen assets • Living beyond means • Investigate with wealth analysis • Perpetrator brags to others

7. Where can the Internet assist with fraud investigation? • Motivation triangle • Pressure / Incentives • Opportunity • Attitude / Rationalization • Element triangle • Theft Act • Concealment • Conversion

8. Aviva, USA Case Exercise: Pretend you are an investigator who has just discovered a predication of fraud involving Phyllis and Marla Stevens. Perform an Internet search to gather information supporting your case.

9. Additional Information for Stevens’ Case • Current residence • Des Moines, IA • Previous residence • Indianapolis, IN

10. Aviva, USA Case • Alleged $5.9 million fraud over four years • Used terminated employee identity to generate fraudulent commission payments • Another Aviva employee noticed a discrepancy (“accidental” discovery) • Alleged perpetrator (Phyllis Stevens) and spouse (Marla Stevens) owned considerable property and had made substantial political contributions • Substantial cash withdrawals made before alleged perpetrator’s arrest

11. Categories of Available Information • Free websites • Proprietary websites • Databases only accessible to law enforcement

12. Starting Point—General Purpose Sites • google.com • bing.com • yauba.com • Privacy safe • Allows search by source type (e.g., news, images, document type) • Easy to navigate • Learn how to use advanced features

13. People Search Sites • spokeo.com • Notoriously inaccurate! • zabasearch.com / intelus.com • These two are linked • Better quality sites, costs to get information • pipl.com • “Deep web search” engine • Shows links to other sites • peekyou.com • Provides links to multiple sites • others?? • search term “people search sites” • Exercise: find yourself on one of these sites

14. News Sites • Free resources • Proprietary resources • factiva.com • nexis.com • Public and college libraries

15. Auction Sites • ebay.com • craigslist.com • searchtempest.com

16. Photo / Video Sites • flickr.com • picasa.com • images.google.com / images.bing.com • youtube.com • video.google.com

17. Blogs • technorati.com • icerocket.com • Icrerocket also for searching social networks, images

18. Social Networks • linkedin.com • twitter.com • facebook.com • weddingchannel.com • lococitato.com • Shows maps of relationships between facebook users

19. What if the information you’re looking for is “private”? • “Friend” person • Attempt to e-mail • What if you don’t want to use your real identity? • See next slide

20. Pretexting • Private investigators will set up “fake” accounts • For fun, look up: • Jorge Beale • JingerRytand • NOT a strategy for non-professionals!

21. Background checks on the Internet • New hires • New clients • Free sources • Many of the sources we’ve discussed already, plus: • http://www.bbb.org/us/ • http://www.linkedin.com/ • Is the job candidate’s online information the same as what they gave you? • See “LinkedIn’s top 10 overused resume phrases” at CNN.com

22. Other Background Check Resources • Partly free • Individual information • BRB Publications http://www.publicrecordsources.com/ • http://www.intelius.com/ • Business information (Dun and Bradstreet) http://www.dnb.com • Charity information http://www2.guidestar.org/ • Entirely fee-based • Personal information summary http://www.spokeo.com • Online background check http://www.ussearch.com

23. Protecting Yourself • “Opt-out” of background check information possible, but not easy • Proprietary privacy services available • Social networks, blogs, etc. • Set privacy settings • Careful who you friend • Careful what you share!!! • See “The internet and the end of privacy” at CNN.com

24. Summary • Internet searches useful for: • Preliminary fraud investigation • Basic background checks • Hire a professional for more involved investigations • Be careful what you post and who you friend! • For more on this topic: • Cynthia Hetherington • http://www.hetheringtongroup.com/ • Look under “Training” • Electronic version of this presentation: • http://www.bus.iastate.edu/wdilla/Acct591/default.asp