Financial Services Anti-Fraud Risk and Control Workbook

Myth-busting guidance for fraud preventionin a practical workbook format An excellent primer for developing and implementing an anti-fraud program that works, Financial Services Anti-Fraud Risk and Control Workbook engages readers in an absorbing self-paced learning experience to develop familiarity with the practical aspects of fraud detection and prevention at banks, investment firms, credit unions, insurance companies, and other financial services providers. Whether you are a bank executive, auditor, accountant, senior financial executive, financial services operations manager, loan officer, regulator, or examiner, this invaluable resource provides you with essential coverage of: How fraudsters exploit weaknesses in financial services organizations How fraudsters think and operate The tell-tale signs of different types of internal and external fraud against financial services companies Detecting corruption schemes such as bribery, kickbacks, and conflicts of interest, and the many innovative forms of financial records manipulation Conducting a successful fraud risk assessment Basic fraud detection tools and techniques for financial services companies, auditors, and investigators Fraud prevention lessons from the financial meltdown of 2007-2008 Written by a recognized expert in the field of fraud detection and prevention, this effective workbook is filled with interactive exercises, case studies, and chapter quizzes, and shares industry-tested methods for detecting, preventing, and reporting fraud. Discover how to mitigate fraud risks in your organization with the myth-busting techniques and tools in Financial Services Anti-Fraud Risk and Control Workbook.

Preface ix Acknowledgments xiii Introduction: Brief History of Fraud in the Financial Services Industry xv Chapter 1 Why No Financial Services Institution Is Immune to Fraud 1 Statistical Perspective 1 What Is Fraud? 4 Myths and Realities about Financial Services Fraud 5 Review Points 9 Chapter Quiz 9 Chapter 2 The Human Element of Fraud 11 Who Are the Bad Guys? 11 Insider Threat 12 The Fraud Triangle 13 The Fraud Triangle in Financial Services 15 Pressure at Lehman: An Extreme Example 15 Opportunity and Rationalization 16 Rationalizing High-Level Fraud 19 A Fraud Diamond? 21 Review Points 21 Chapter Quiz 22 Chapter 3 Internal Fraud: Loan and Mortgage Fraud 25 Loan Fraud (Nonresidential Mortgage) 25 Mortgage Fraud 31 Types of Internal Mortgage Fraud to Beware Of 32 Red Flags of Employee-Level Loan and Mortgage Fraud 33 Preventing Employee-Level Loan and Mortgage Fraud 36 Review Points 47 Chapter Quiz 48 Chapter 4 Employee-Level Embezzlement 51 Looting Customer Accounts 51 Looting Noncustomer Funds 55 Theft of Confi dential Information 73 Insider Abuse of Computer Systems 75 Red Flags of Employee-Level Embezzlement 76 Preventing Employee-Level Embezzlement and Information Theft 81 Review Points 90 Chapter Quiz 90 Chapter 5 Internal Fraud: Management Level 93 Looting and Embezzlement 94 Illegal Financial Transactions/Corruption 97 Fraudulent Financial Reporting 102 Deceiving Borrowers, Investors, and Regulators 106 Red Flags of Management-Level Internal Fraud 109 Management-Level Fraud Prevention Checklists 113 Review Points 119 Chapter Quiz 120 Chapter 6 External Fraud against Financial Services Companies 123 Externally Perpetrated Loan Fraud (Nonmortgage) 123 Externally Perpetrated Mortgage Fraud Schemes 127 New Forms of Identity Theft and Fraud 139 Red Flags of External Fraud 152 External Fraud Prevention Checklists 160 Review Points 170 Chapter Quiz 171 Chapter 7 Conducting a Successful Fraud Risk Assessment 175 Getting It Done 175 Procedures for Conducting a Fraud Risk Assessment 177 Roles of the Board and Management in Fraud Risk Assessments 181 Review Points 183 Chapter Quiz 183 Chapter 8 Legal and Regulatory Compliance for Controlling Fraud Risk 185 Fraud Rules to Take Seriously 187 Hypothetical Case: Compliance and InfoSecurity 192 Develop and Implement a Response Program 193 Future Regulation: A Prediction 197 Review Points 197 Chapter Quiz 198 Chapter 9 Fraud Detection in Financial Services Companies 201 Basic Detection Methods 203 Advanced Fraud Detection Tools and Techniques 208 Essentials of Fraud Auditing in Financial Institutions 212 Essentials of Automated Auditing 215 Conclusion 215 Review Points 216 Chapter Quiz 218 Appendix A: Answers to Chapter Quizzes 221 Appendix B: Answer Key for Case Studies 225 Notes 237 Glossary 249 About the Author 255 Index 257