In today’s digital age, real estate transactions have become prime targets for cybercriminals employing sophisticated wire fraud schemes. These scams can result in significant financial losses for unsuspecting buyers and professionals involved in property transactions. Understanding how these frauds occur and recognizing their warning signs are crucial steps in safeguarding your investments.

How Real Estate Wire Fraud Occurs

Real estate transactions typically involve multiple parties, including realtors, mortgage brokers, inspectors, appraisers, title companies, and attorneys. Communication among these parties often occurs via email, a medium that fraudsters exploit. According to a 2023 fraud summary from the Federal Trade Commission (FTC), email was the top reported tactic used by scammers to seek fraudulent payments.

Cybercriminals engage in “business email compromise” (BEC) by sending messages that appear to come from known real estate contacts, making seemingly legitimate requests. A common tactic involves sending instructions on how to wire a down payment, leading victims to transfer substantial funds to fraudulent accounts.

Signs of Real Estate Wire Fraud Emails

Fraudulent emails are often convincing and sophisticated, making them challenging to detect. Be vigilant for these red flags:

• Sender Email Domains: Check for slight misspellings or variations in email addresses. Fraudsters may create accounts that closely resemble legitimate ones, with minor differences that are easy to overlook.
• Urgency and Pressure: Be cautious of emails that create a sense of urgency or pressure you to act quickly without proper verification.
• Unusual Requests: Be wary of unexpected changes in payment procedures or requests for sensitive information.

Tips to Protect Yourself

To safeguard against real estate wire fraud:

• Verify Instructions: Always verify wiring instructions through a trusted and direct communication channel, such as a known phone number, before transferring funds.
• Be Skeptical of Changes: Be cautious of any sudden changes in payment instructions or procedures, especially if communicated solely via email.
• Secure Communication: Use secure methods for sharing sensitive information and avoid conducting such matters over unsecured or public networks.
• Educate and Train: Ensure that all parties involved in the transaction are aware of wire fraud risks and know how to recognize and prevent potential scams.

By staying informed and vigilant, you can protect your real estate investments from the growing threat of wire fraud.

For more details, read the full article here: Real Estate Wire Fraud – What You Need to Know.

In the evolving landscape of cyber threats, a new and concerning practice has emerged: Infrastructure Laundering. This term, introduced by cybersecurity firm Silent Push, describes a method where threat actors, masquerading as legitimate hosting companies, rent IP addresses from major cloud providers to conceal malicious activities. This tactic not only complicates detection efforts but also poses significant challenges to traditional security measures.

Understanding Infrastructure Laundering

Infrastructure Laundering involves cybercriminals leveraging the credibility of established cloud services to mask their illicit operations. By renting IP addresses from reputable providers such as Amazon Web Services (AWS) and Microsoft Azure, these actors integrate their malicious infrastructure within legitimate networks. This integration makes it difficult for defenders to distinguish between genuine and harmful traffic, as blocking IPs associated with well-known providers can inadvertently disrupt legitimate services.

The FUNNULL CDN Case

Silent Push’s research highlights the activities of the FUNNULL content delivery network (CDN) as a prominent example of Infrastructure Laundering. FUNNULL has reportedly rented over 1,200 IP addresses from AWS and nearly 200 from Microsoft Azure. While many of these IPs have been deactivated, FUNNULL continues to acquire new ones, often using fraudulent or stolen accounts. This persistent cycle enables them to maintain their operations despite takedown efforts.

The malicious activities facilitated by FUNNULL’s infrastructure are diverse and alarming:

• Money Laundering Services: Hosting platforms that assist in concealing the origins of illicit funds.
• Retail Phishing Schemes: Deceptive websites designed to steal personal and financial information from unsuspecting consumers.
• Pig-Butchering Scams: Sophisticated frauds where victims are enticed into long-term schemes, often involving fake investments, leading to substantial financial losses.

Challenges and Questions

The ongoing success of Infrastructure Laundering raises critical questions about the current capabilities of cloud service providers:

• Detection and Response: Why do cloud providers struggle to identify and halt the illicit rental of IP addresses in real-time?
• Post-Takedown Analysis: When a hosting account is terminated for fraudulent activities, are providers thoroughly investigating the associated content and monitoring for similar patterns within their networks?
• Continuous Acquisition: How can entities like FUNNULL repeatedly obtain new IP addresses from mainstream providers, even after previous accounts have been banned?

These concerns suggest potential gaps in the monitoring and enforcement mechanisms of cloud services, which threat actors are adeptly exploiting.

Mitigation Strategies

Addressing Infrastructure Laundering requires a collaborative and multi-faceted approach:

• Enhanced Monitoring: Cloud providers must implement robust systems to detect suspicious activities related to IP rentals and swiftly act upon them.
• Information Sharing: Establishing channels for real-time communication between cloud services and cybersecurity firms can aid in the rapid identification of emerging threats.
• Regulatory Oversight: Governments and regulatory bodies should consider frameworks that hold service providers accountable for the misuse of their platforms, ensuring they take proactive measures against such exploitation.

Conclusion

Infrastructure Laundering represents a significant evolution in cybercriminal tactics, effectively blending malicious activities within the fabric of legitimate cloud services. For professionals in the anti-fraud and cybersecurity sectors, understanding and combating this practice is imperative. By enhancing detection capabilities, fostering collaboration, and advocating for stringent oversight, the cybersecurity community can work towards dismantling these covert operations and safeguarding the integrity of our digital infrastructure.

Experiencing job loss can be challenging, but numerous resources are available in Washington State to support you during this transition. The ACFE Pacific Northwest (PNW) Chapter offers valuable programs and services, including career development, training, and networking opportunities within the fraud examination and investigation community.

1. ACFE Pacific Northwest Chapter Resources, Training, and Networking

As part of our commitment to supporting members and the broader community, the ACFE PNW Chapter provides several resources to assist you:

• Monthly Chapter Meetings & Networking Events: Connect with industry professionals, hiring managers, and fellow Certified Fraud Examiners (CFEs). These events offer excellent opportunities to network, share experiences, and learn about job openings. Check our Events Calendar for upcoming meetings.

• Fraud Training and Continuing Professional Education (CPE) Courses: Maintain and enhance your skills by participating in our webinars, workshops, and seminars. Explore upcoming sessions on our Training Page.

• ACFE PNW Chapter Mentorship Program: Receive guidance from experienced CFEs to navigate career transitions and explore new career paths. For more information, contact us through our Contact Page.

• Volunteer Opportunities: Enhance your resume and build new skills by volunteering with the ACFE PNW Chapter. Opportunities range from event coordination to blog writing and outreach. Visit our Volunteer Opportunities Page to learn more.

2. Employment Assistance and Job Search Support

• Washington State Employment Security Department (ESD): Offers unemployment benefits, job search support, and career retraining programs. Visit the ESD Website for more information.

• WorkSource Washington: Provides workshops, job search tools, resume assistance, and networking events. Explore services at WorkSource Washington.

• CareerOneStop: A U.S. Department of Labor resource for job listings and career exploration. Visit CareerOneStop to begin your search.

3. Financial Assistance Programs

• Unemployment Insurance (UI): Apply through the Washington State Employment Security Department. Visit the UI Application Page to start your application.

• COBRA Health Insurance: Continue your employer-provided health coverage temporarily. Learn more at the U.S. Department of Labor COBRA Information Page.

• Temporary Assistance for Needy Families (TANF): Provides cash assistance for families with children. Visit the Washington State Department of Social and Health Services TANF Page for eligibility information.

• Supplemental Nutrition Assistance Program (SNAP): Offers help with grocery costs. Apply via the Washington Connection Portal.

⚖️ 4. Legal Rights and Support for Terminated Employees

• Washington State Human Rights Commission: Assists with wrongful termination and discrimination claims. Visit the Human Rights Commission Website for guidance.

• National Employment Lawyers Association (NELA): Find an attorney specializing in employment law. Visit the NELA Find-A-Lawyer Directory to locate legal assistance.

• Legal Aid Services: Free or low-cost legal assistance for employment disputes. Visit Northwest Justice Project for resources and support.

️ 5. Resources for Whistleblowers

If your termination resulted from reporting misconduct or unethical behavior, you may be eligible for legal protections and support:

• Washington State Auditor’s Office – Whistleblower Program: Provides an avenue for state employees to report suspected improper governmental actions. Learn more at the Whistleblower Program Page.

• Washington State Human Rights Commission: Investigates claims of retaliation against whistleblowers. Visit the Human Rights Commission Website for more information.

• King County Ombuds Office: Offers guidance and support to whistleblowers within King County. Visit the Whistleblower Complaints Page for details.

• U.S. Department of Labor – Whistleblower Protection Program: Protects employees who report workplace violations. Learn more at the Whistleblower Protection Program Page.

❤️ 6. Emotional and Mental Health Support

Losing a job can be emotionally challenging, but support is available:

• Washington 211: Connects you with local counseling services, financial assistance, and support groups. Dial 211 or visit Washington 211 for assistance.

• National Alliance on Mental Illness (NAMI) Washington: Provides peer support groups and mental health resources. Visit NAMI Washington to find support.

• Employee Assistance Programs (EAP): If available, utilize your former employer’s EAP for short-term counseling and support.

7. Career Development and Training Resources

• Workforce Innovation and Opportunity Act (WIOA): Offers job retraining and skill development programs. Contact your local WorkSource office or visit WorkSource WIOA Information for details.

• edX, Coursera, and LinkedIn Learning: Explore online courses to build new skills and certifications.

• ACFE Membership Resources: Access industry publications, training discounts, and career tools. Visit the ACFE Membership Page to learn more.

Moving Forward with Support from ACFE PNW

Losing a job can be difficult, but it can also be a time for growth and new opportunities. Whether you need financial support, legal protection, career guidance, or networking opportunities, these resources can help you transition to your next chapter with confidence.

The ACFE PNW Chapter is here to support you through mentorship, training, and professional connections.

For additional resources, industry insights, and upcoming events, visit the ACFE Pacific Northwest Chapter website.

Fraud can happen in any organization, large or small, public or private. According to the Association of Certified Fraud Examiners’ (ACFE) Report to the Nations, organizations lose an average of 5% of annual revenue to fraud. Strengthening internal controls is one of the most effective ways to mitigate this risk, ensuring your organization is protected from fraud and operational inefficiencies.

Here are key strategies to strengthen internal controls in your organization:

1. Segregation of Duties

One of the simplest yet most effective internal control mechanisms is the segregation of duties (SoD). No single employee should have control over all aspects of a financial transaction, such as authorization, recording, and custody of assets.

•Why it matters: SoD prevents one individual from committing and concealing fraud.

•Example: Ensure that the person approving invoices is not the same person processing payments.

2. Regular and Surprise Audits

Audits are essential to assess whether policies and procedures are being followed, but the element of surprise adds an extra layer of deterrence.

•Why it matters: Employees are less likely to commit fraud if they know their work could be reviewed unexpectedly.

•How to implement: Schedule periodic audits while incorporating surprise checks into the routine.

3. Clear Policies and Procedures

Establish clear, documented policies for critical processes such as procurement, expense reimbursement, and cash handling.

•Why it matters: Policies provide a framework for employees to understand what is acceptable and expected.

•Tip: Regularly review and update these policies to reflect changes in your organization or industry.

4. Leverage Technology

Modern technology can play a pivotal role in fraud prevention. Implement tools like data analytics software and automated controls to monitor transactions and flag anomalies.

•Why it matters: Technology can identify unusual patterns or behaviors that might indicate fraud.

•Example: Use automated systems to require multiple approvals for high-value transactions.

5. Strong Whistleblower Programs

Encourage employees to report suspicious activities without fear of retaliation. A strong whistleblower program can uncover fraud early, before it escalates.

•Why it matters: The ACFE reports that 42% of fraud cases are detected by tips, making whistleblower programs the most effective detection tool.

•How to implement: Set up anonymous reporting channels and train employees on how to use them.

6. Ongoing Employee Training

Regular training on fraud awareness ensures all employees are vigilant and informed about the latest fraud schemes.

•Why it matters: Educated employees are more likely to recognize and report red flags.

•Tip: Include fraud prevention training as part of your onboarding process and conduct refresher sessions annually.

7. Perform Fraud Risk Assessments

Conducting regular fraud risk assessments helps identify and address vulnerabilities in your internal controls.

•Why it matters: Proactively identifying risks can prevent fraud from occurring.

•How to implement: Engage Certified Fraud Examiners (CFEs) to evaluate your organization’s processes and recommend improvements.

8. Monitor and Review Controls

Strong internal controls require continuous monitoring to remain effective. Establish a system for regularly reviewing and testing these controls.

•Why it matters: Fraud schemes evolve, and your controls should adapt to meet emerging risks.

•Example: Review access permissions periodically to ensure they align with employees’ current responsibilities.

Final Thoughts

Internal controls are your organization’s first line of defense against fraud. By implementing robust controls and fostering a culture of transparency and accountability, you can significantly reduce fraud risk. Certified Fraud Examiners (CFEs) are well-equipped to help organizations design, implement, and monitor these controls effectively.

If you’d like to learn more about strengthening internal controls or need guidance on assessing your organization’s fraud risks, connect with the ACFE Pacific Northwest Chapter. Let’s work together to build stronger, fraud-resistant organizations!

Stay informed on fraud prevention strategies and trends by visiting our blog regularly. Follow us on LinkedIn for updates and resources.

#FraudPrevention #InternalControls #ACFEPNW #FraudAwarenessWeek

The U.S. Department of Justice’s Fraud Section has released its 2024 Year in Review, highlighting its major fraud enforcement actions and evolving strategies to combat financial crime. This past year marked record-breaking corporate settlements, aggressive enforcement against high-level offenders, and enhanced investigative techniques, all of which have significant implications for fraud examiners and compliance professionals.

A Year of High-Impact Prosecutions

In 2024, the Fraud Section:

✔️ Charged 234 individuals for financial crimes, including corporate executives and professionals.

✔️ Secured convictions against 252 individuals, reflecting a high success rate in prosecutions.

✔️ Resolved cases with over $2.3 billion in corporate settlements, tripling the amount from 2023.

Notably, 35% of those charged were high-ranking executives, attorneys, accountants, and other gatekeepers, signaling a shift toward targeting those enabling fraud schemes rather than just individual perpetrators.

The Most Prolific Fraud Schemes in 2024

The DOJ’s Fraud Section targeted a wide range of financial crimes, but three key fraud schemes dominated enforcement actions in 2024:

1️⃣ Healthcare Fraud & COVID-19 Relief Fraud

The Healthcare Fraud Unit aggressively pursued individuals and entities exploiting federal programs:

•$1.2 billion in fraudulent claims uncovered, including Medicare/Medicaid fraud, kickback schemes, and unnecessary medical services.

•Convictions of doctors, medical professionals, and corporate executives involved in overbilling, false diagnoses, and illegal referrals.

•COVID-19 relief fraud remained a focus, with fraudsters exploiting PPP loans, unemployment assistance, and healthcare relief funds.

2️⃣ Corporate & Securities Fraud

Financial crimes affecting investors and markets resulted in high-profile corporate settlements and prosecutions:

•Market manipulation and insider trading schemes targeted major financial institutions and hedge funds.

•Convictions for executives engaging in fraudulent financial reporting, Ponzi schemes, and investment fraud.

•Increased use of data analytics to detect suspicious trading patterns, pump-and-dump schemes, and accounting fraud.

3️⃣ Foreign Corrupt Practices Act (FCPA) & Bribery

The DOJ’s anti-bribery enforcement surged, targeting international corporate misconduct:

•Resolutions with major multinational corporations spanning China, Germany, Brazil, Spain, Australia, Switzerland, and South Africa.

•The largest-ever corporate settlement for FCPA violations involving a major energy company.

•Introduction of the International Corporate Anti-Bribery (ICAB) Initiative to increase cross-border enforcement.

Cutting-Edge Enforcement Strategies

The Fraud Section introduced several key initiatives in 2024 to improve fraud detection and prosecution:

Corporate Whistleblower Awards Pilot Program – Encourages individuals to report misconduct, similar to SEC whistleblower incentives.

AI & Data Analytics in Fraud Investigations – DOJ analysts used AI-driven detection tools to uncover fraud patterns in market trading, healthcare billing, and financial transactions.

Enhanced Corporate Voluntary Disclosure Policy – Encouraging self-reporting and cooperation to mitigate corporate penalties.

Key Takeaways for Fraud Examiners

Increased Scrutiny of High-Level Executives – Expect more prosecutions of corporate gatekeepers such as accountants, attorneys, and compliance officers.

Data-Driven Investigations – The DOJ’s use of AI and analytics reinforces the importance of forensic accounting and fraud detection technology.

Global Expansion of Fraud Enforcement – The DOJ’s international cases highlight the growing need for compliance programs that address cross-border fraud risks.

As the DOJ Fraud Section enters its 70th year, its enforcement actions continue to shape the landscape of corporate compliance, financial fraud investigations, and anti-corruption efforts. Fraud examiners, compliance officers, and investigators should take note of emerging fraud trends and enforcement priorities to enhance their fraud prevention strategies.

For a full overview of the DOJ Fraud Section’s 2024 Year in Review, visit the Department of Justice website here.

Stay informed on the latest fraud trends and enforcement updates by following the ACFE Pacific Northwest Chapter.

The FBI has issued a public service announcement highlighting the increasing use of generative artificial intelligence (AI) by criminals to enhance the effectiveness and scale of financial fraud schemes. Generative AI enables the creation of highly convincing synthetic content, making it more challenging for individuals and organizations to detect fraudulent activities.

AI-Generated Text

Criminals leverage AI to produce realistic text, facilitating various fraudulent activities:

•Social Engineering and Phishing: Crafting persuasive messages to deceive individuals into revealing sensitive information or transferring funds.

•Fake Profiles: Generating numerous fictitious social media profiles to lure victims into financial scams.

•Enhanced Language Proficiency: Utilizing AI for language translation to minimize errors, thereby increasing the credibility of scams targeting individuals across different regions.

AI-Generated Images

The use of AI extends to creating realistic images that support fraudulent schemes:

•Deceptive Profiles: Producing authentic-looking photos for fake social media accounts involved in romance and investment scams.

•Fake Identification: Creating counterfeit identification documents to facilitate identity theft and impersonation.

•False Endorsements: Generating images of celebrities or influencers promoting counterfeit products or fraudulent services.

AI-Generated Audio and Video

Advancements in AI have made it possible to clone voices and create realistic videos:

•Vocal Cloning: Impersonating voices of relatives or authority figures to request urgent financial assistance or conduct ransom demands.

•Deepfake Videos: Creating videos of public figures to lend credibility to fraudulent schemes or misinformation campaigns.

Protective Measures

To safeguard against these sophisticated AI-driven frauds, consider the following steps:

•Verification Protocols: Establish secret codes or phrases with family members to confirm identities during emergencies.

•Scrutinize Content: Be vigilant for subtle inconsistencies in images, videos, or audio that may indicate manipulation, such as unnatural movements or mismatched lip-syncing.

•Limit Personal Exposure: Restrict the amount of personal information, images, and audio shared publicly online to reduce the risk of them being exploited for fraudulent purposes.

•Independent Verification: Always verify unsolicited requests for financial assistance or sensitive information by contacting the individual or organization directly through known and trusted channels.

As generative AI technology continues to evolve, it is crucial for individuals and organizations to remain vigilant and adopt proactive measures to detect and prevent AI-facilitated fraud. Staying informed about these emerging threats and implementing robust verification processes can significantly reduce the risk of falling victim to such schemes.

For more detailed information, please refer to the FBI’s official announcement.

In today’s digital age, the lines between fraud examination and cybersecurity are increasingly blurred. As organizations embrace digital transformation, fraudsters are exploiting technology to perpetrate complex schemes that challenge traditional investigative approaches. For Certified Fraud Examiners (CFEs), understanding the intersection of cybersecurity and fraud examination is crucial for effectively identifying, investigating, and preventing fraud in a digital landscape.

The Cybersecurity-Fraud Nexus

Cybersecurity focuses on protecting systems, networks, and data from unauthorized access, breaches, and attacks. Fraud examination, on the other hand, aims to detect, investigate, and prevent deceptive activities that cause financial harm. Despite their distinct objectives, these fields overlap significantly when it comes to detecting and mitigating fraud perpetrated through cyber means.

Key Areas of Overlap:

1.Data Breaches: Cybercriminals use stolen data to commit identity theft, financial fraud, and more. CFEs can help trace the misuse of stolen information and quantify its financial impact.

2.Social Engineering: Techniques like phishing are used to deceive employees into revealing sensitive information. Fraud examiners can identify patterns and educate organizations to reduce susceptibility.

3.Internal Threats: Disgruntled employees with access to sensitive data can exploit vulnerabilities. CFEs work alongside cybersecurity professionals to monitor, detect, and investigate these threats.

Why CFEs Should Understand Cybersecurity

With the rise of cyber-enabled fraud, CFEs must develop a foundational understanding of cybersecurity principles. This knowledge equips them to:

•Recognize cyber-related fraud schemes, such as ransomware attacks or e-commerce fraud.

•Collaborate effectively with cybersecurity teams to gather digital evidence.

•Stay ahead of emerging threats in the ever-evolving digital landscape.

Essential Cybersecurity Skills for CFEs:

•Understanding digital forensics to collect and analyze electronic evidence.

•Familiarity with encryption, authentication, and access control mechanisms.

•Knowledge of cybersecurity frameworks like NIST or ISO 27001.

Common Cyber-Enabled Fraud Schemes

1.Business Email Compromise (BEC):

•Fraudsters impersonate executives or vendors to trick employees into wiring money.

•Prevention Tip: Educate employees to verify unusual requests through secondary channels.

2.Synthetic Identity Fraud:

•Criminals combine real and fabricated information to create new identities, often to secure loans or credit.

•Prevention Tip: Use advanced analytics and AI to detect anomalies in application data.

3.Ransomware Attacks:

•Attackers encrypt an organization’s data and demand payment for its release.

•Prevention Tip: Maintain regular backups and implement multi-factor authentication (MFA).

Collaboration Between CFEs and Cybersecurity Professionals

Fraud prevention and cybersecurity teams often operate in silos, but collaboration is critical for effective defense. Here’s how these teams can work together:

•Joint Investigations: CFEs can provide expertise in tracing fraudulent transactions, while cybersecurity professionals focus on securing systems and identifying breaches.

•Training and Awareness: Together, these teams can educate employees on recognizing fraud and maintaining cybersecurity best practices.

•Incident Response: When a cyberattack occurs, CFEs and cybersecurity experts can coordinate efforts to mitigate financial and reputational damage.

Best Practices for Organizations

1.Implement an Integrated Fraud and Cybersecurity Framework:

•Develop policies that address both fraud prevention and cybersecurity risks.

•Use technology to monitor transactions and detect suspicious activity in real time.

2.Invest in Training:

•Ensure employees understand the basics of cybersecurity and fraud schemes.

•Provide specialized training for CFEs to enhance their cybersecurity skills.

3.Leverage Technology:

•Utilize AI and machine learning to analyze data patterns for signs of fraud.

•Employ forensic tools to uncover and preserve digital evidence.

Looking Ahead

The intersection of cybersecurity and fraud examination is not just a trend but a necessity in modern fraud prevention. As CFEs, staying informed about cybersecurity developments and fostering collaboration with IT and cybersecurity teams will empower you to stay one step ahead of fraudsters.

By embracing the synergy between these disciplines, CFEs can play a pivotal role in helping organizations protect their assets, reputations, and stakeholders in the face of evolving cyber threats.

For more insights on fraud prevention and cybersecurity, visit the ACFE Pacific Northwest Chapter website. Together, let’s bridge the gap between fraud examination and cybersecurity to create safer, fraud-resistant organizations.

A recent article published by Forbes highlights an alarming new frontier in identity fraud: hackers on the dark web have built “Face ID farms,” amassing databases of AI-generated facial identities and real-world biometric data. These tools are used to bypass identity verification processes, such as Face ID, creating a new challenge for fraud examiners and organizations worldwide. As technology advances, so too does the sophistication of fraud schemes, making it essential for Certified Fraud Examiners (CFEs) to stay informed and vigilant.

What Is a Face ID Farm?

Face ID farms are hubs where hackers leverage AI and deepfake technology to create or manipulate facial images capable of bypassing biometric verification systems. These databases contain both synthetic and stolen biometric data, making it increasingly difficult to differentiate between legitimate and fraudulent users. By combining AI-generated faces with stolen personal information, criminals can create convincing digital identities, enabling them to commit crimes such as:

•Account takeovers

•Synthetic identity fraud

•Financial fraud and unauthorized transactions

•Government benefits fraud

Why This Matters to CFEs and Organizations

Biometric authentication systems, such as facial recognition, are often viewed as secure safeguards against fraud. However, the emergence of AI-generated identities demonstrates that these systems are not foolproof. Fraudsters can exploit vulnerabilities in biometric verification to pass as legitimate users, undermining the integrity of security protocols.

CFEs and anti-fraud professionals must understand how AI-powered fraud schemes operate in order to detect and prevent them effectively. Without proper safeguards, organizations may become unwitting victims of identity-related fraud, risking financial losses, reputational damage, and compromised customer trust.

Red Flags: How CFEs Can Detect Fraudulent Use of AI

Detecting fraudulent use of AI requires a multi-faceted approach. Here are some key indicators that CFEs can monitor:

1.Behavioral Inconsistencies

– Fraudulent users may pass biometric verification but exhibit unusual behavior patterns, such as accessing accounts from multiple IP addresses or using outdated device signatures.

– Transaction anomalies, such as conducting large transfers during off-hours or repeatedly updating personal details, may indicate compromised accounts.

2.Pixel and Image Analysis

– Conduct forensic analysis of profile pictures and facial images. AI-generated images often have subtle flaws, such as inconsistent lighting, mismatched earrings, or blurred backgrounds. Tools that detect deepfakes can help identify synthetic images.

3.Verification Failures in Real-Time Interactions

– Require live verification processes, such as blinking, speaking, or turning the head. Synthetic faces and images often fail when subjected to real-time, dynamic prompts.

4.Rapid Account Creations and Fraud Clusters

– Fraudulent actors often create multiple accounts at once. Monitor for clusters of new account creations linked by shared data points, such as device fingerprints or geolocation patterns.

5.Unusual Changes in Biometric Verification Attempts

– Investigate multiple failed attempts followed by sudden success in biometric verification. This may indicate fraudsters testing AI-generated images until they pass.

Best Practices for Organizations to Strengthen Fraud Prevention

To counter AI-driven identity fraud, organizations should implement robust fraud detection frameworks that include:

1.Layered Authentication

– Avoid relying solely on facial recognition or biometrics. Implement multi-factor authentication (MFA), such as time-based one-time passwords (TOTP) or physical security keys, to add an additional layer of defense.

2.AI-Powered Fraud Detection Solutions

– Deploy advanced fraud detection systems capable of identifying deepfakes and synthetic identities through machine learning and behavioral analytics.

3.Collaboration with Cybersecurity Teams

– Fraud investigators should work closely with IT and cybersecurity teams to ensure that fraud detection tools are regularly updated and capable of identifying the latest threats.

4.Employee Training and Awareness

– Train employees on emerging fraud trends, including AI-generated identities, so they can recognize red flags and escalate concerns promptly.

5.Digital Identity Verification Vendors

– Partner with reputable digital identity verification vendors that use advanced liveness detection technologies to verify the authenticity of biometric data.

The Role of CFEs in Combating AI Fraud

Certified Fraud Examiners play a critical role in mitigating the impact of AI-driven fraud. By incorporating forensic analysis techniques and collaborating with cross-functional teams, CFEs can help identify synthetic identities, expose fraudulent schemes, and strengthen organizational defenses. Staying informed on the latest fraud schemes—such as those highlighted in the Forbes article—is crucial for maintaining an edge against cybercriminals.

As the use of AI in fraud schemes continues to grow, so must the strategies used to combat them. By adopting proactive fraud detection measures and implementing AI-resistant safeguards, organizations can protect themselves and their stakeholders from this evolving threat.

Conclusion

The rise of Face ID farms and AI-generated identities is a stark reminder that fraudsters are constantly adapting. However, CFEs equipped with the right tools and knowledge can detect these schemes and protect organizations from their impact. It is vital for anti-fraud professionals to stay ahead of technological advancements and foster a culture of collaboration and vigilance within their organizations.

As a community of fraud professionals, the ACFE PNW Chapter encourages continued education and awareness to strengthen our collective efforts in the fight against fraud.

For more information on this topic and other fraud trends, visit our blog for regular updates. Together, we can outpace even the most sophisticated fraudsters.

As we approach the end of 2024, fraud examiners across the Pacific Northwest—and around the globe—have witnessed an unprecedented range of schemes targeting businesses, governments, and individuals alike. From sophisticated deepfake attacks to large-scale cryptocurrency heists, this year has shown that fraudsters continue to adapt and evolve, using emerging technologies and global events to their advantage. Below, we highlight some of the most prevalent fraud schemes of 2024, along with insights for preventing and detecting these threats in the future.

1. AI-Driven Social Engineering

What Happened:

The rapid advancement of generative AI tools in 2024 has made social engineering attacks more convincing and harder to detect. Fraudsters are using deepfake audio and video to impersonate executives or loved ones, tricking victims into disclosing sensitive information or authorizing fraudulent payments.

Key Tactics:

•Voice Phishing (Vishing): High-fidelity fake “CEO” calls to employees demanding urgent payments

•Synthetic Videos: Pretend Zoom calls with cloned C-suite executives “confirming” high-dollar wire transfers

•AI Chatbot Scams: Fraudsters employing AI-driven chat interfaces to build trust and solicit personal data

Prevention Tips:

•Implement multi-factor authentication (MFA) and strict internal controls for wire transfers

•Educate teams on red flags of urgent payment requests—especially if they come from unfamiliar channels

•Keep abreast of new AI detection tools and partner with IT teams to test them

2. Business Email Compromise (BEC) 2.0

What Happened:

While Business Email Compromise is not new, 2024 saw a more refined approach. Attackers spoof vendor emails with uncanny accuracy, factoring in details like typical invoice amounts, payment terms, and branding elements. This “BEC 2.0” tactic often bypasses older email security filters.

Key Tactics:

•Vendor Impersonation: Fraudsters send convincing invoices closely mirroring legitimate vendor details

•Account Takeovers: Compromised corporate email accounts used to place false purchase orders

•Phishing for Credentials: Employees tricked into disclosing login details via malicious links

Prevention Tips:

•Conduct routine vendor verification, especially for changes in banking details

•Establish a dual-approval process for large payments or new vendor setups

•Deploy real-time monitoring for suspicious logins or IP addresses

3. Cryptocurrency and NFT Scams

What Happened:

The crypto sphere remained a playground for scammers in 2024. Non-Fungible Tokens (NFTs) continued to pique consumer interest, but unscrupulous players launched “rug pull” schemes—attracting investors and then disappearing with funds. Meanwhile, crypto romance scams on social platforms soared, where con artists lured victims into fraudulent investments.

Key Tactics:

•Fake ICOs and Airdrops: Promises of free coins to drive traffic to malicious sites

•Discord Community Exploits: Hackers hijacking official NFT or crypto project channels to distribute malicious links

•Pump-and-Dump Schemes: Artificially inflating token values before selling en masse

Prevention Tips:

•Verify the legitimacy of any new crypto project or NFT collection before investing

•Look for established smart contract audits and transparent development teams

•Educate clients and employees on the warning signs of unrealistic investment returns

4. Pandemic Relief Fraud (Ongoing)

What Happened:

Despite a gradual phase-out of many COVID-19–era relief programs, criminals have still found ways to exploit government stimulus packages and small business loans well into 2024. Falsified applications, shell companies, and identity theft remain popular channels for siphoning funds.

Key Tactics:

•Synthetic Identities: Mixing real and fabricated personal data to pass identity checks

•Exaggerated Financial Statements: Overstating business operations to qualify for large relief grants

•Impersonating Government Agencies: Fraudsters contacting businesses to “collect payback” on supposed overdue loans

Prevention Tips:

•Strengthen KYC (Know Your Customer) procedures and verify all supporting documents

•Implement robust cross-matching systems to identify multiple loan applications under the same identity

•Train staff to recognize and report any suspicious loan inquiries

5. Health Care and Telemedicine Fraud

What Happened:

As telehealth expanded in 2024, so did health care fraud. Fake telemedicine providers offered bogus consultations, upcoded billing for non-existent treatments, or prescribed high-priced medications without medical necessity. Criminal rings also targeted older adults for personal data to bill insurers.

Key Tactics:

•Phantom Billing: Charging insurance providers for services never rendered

•Telehealth Scams: Fraudulent “online clinics” luring patients with cheap or free exams, then billing insurers for premium services

•Patient Brokering: Paying third parties to recruit Medicare or Medicaid beneficiaries into fraudulent schemes

Prevention Tips:

•Validate telemedicine providers’ credentials and watch for unusual spikes in patient volume

•Regularly review claims data for outliers, such as exceedingly high billing for certain procedures

•Encourage whistleblowers with clear, confidential reporting mechanisms

Conclusion

The fraud landscape in 2024 has been marked by sophisticated technology, evolving social engineering tactics, and continued exploitation of government programs. For anti-fraud professionals in the Pacific Northwest and beyond, staying vigilant means continuous education, robust internal controls, and a proactive approach to new threats.

As we gear up for 2025, remember the importance of sharing intelligence, collaborating with industry peers, and leveraging resources available through the ACFE. Our collective effort is crucial in the ongoing fight against fraud.

References

1.Association of Certified Fraud Examiners (ACFE). (2024). 2024 Report to the Nations: Global Study on Occupational Fraud and Abuse. Retrieved from

https://www.acfe.com/report-to-the-nations/2024

2.FBI Internet Crime Complaint Center (IC3). (2024). 2024 Internet Crime Report. Retrieved from

https://www.ic3.gov

3.Federal Trade Commission (FTC). (2024). Consumer Sentinel Network Data Book 2024. Retrieved from

https://www.ftc.gov

(Note: Data for 2024 may be preliminary; the FTC typically releases final data annually.)

4.Centers for Medicare & Medicaid Services (CMS). (2024). Medicare Telemedicine Statistics and Fraud Alerts. Retrieved from

https://www.cms.gov

For more information about emerging fraud threats, relevant trainings, and certification resources, visit the PNW ACFE website. Stay informed, stay prepared, and together, let’s keep building a fraud-resistant Pacific Northwest.

Fraud detection often involves uncovering irregularities in datasets that may hint at manipulation or deceit. One powerful tool for such analyses is Benford’s Law, a statistical principle that reveals predictable patterns in naturally occurring numerical datasets. By leveraging modern AI tools like ChatGPT and Microsoft Co-Pilot, Certified Fraud Examiners (CFEs) can efficiently apply Benford’s Law to detect potential financial fraud.

What is Benford’s Law?

Benford’s Law states that in datasets drawn from natural processes (e.g., financial transactions, population numbers), the leading digits of numbers are not uniformly distributed. Instead, smaller digits like 1 occur more frequently than larger digits. For example:

•1 is the leading digit about 30% of the time.

•9 appears as the leading digit less than 5% of the time.

When a dataset deviates significantly from this expected distribution, it can indicate potential manipulation, such as fabricated or altered data. CFEs use Benford’s Law to identify anomalies in financial records, expense reports, and transaction logs, which may signify fraud.

Using AI Tools to Simplify Benford’s Law Analysis

Applying Benford’s Law manually can be time-consuming, especially with large datasets. This is where AI tools like ChatGPT and Microsoft Co-Pilot come into play, streamlining the process and enabling CFEs to focus on interpreting results and investigating irregularities.

How ChatGPT Supports Benford’s Law Analysis

ChatGPT can assist CFEs in several ways:

1.Explaining Concepts: ChatGPT can provide clear explanations of Benford’s Law and guide users through its application.

2.Code Generation: It generates scripts for programming languages like Python to automate Benford’s Law analysis.

3.Result Interpretation: ChatGPT helps CFEs understand deviations and assess whether they warrant further investigation.

Example Use Case with ChatGPT:

•Prompt: “Generate Python code to apply Benford’s Law to a financial dataset and visualize the results.”

•Output:

import numpy as np

import pandas as pd

import matplotlib.pyplot as plt

# Load dataset

data = pd.read_csv("financial_data.csv")

data['LeadingDigit'] = data['Amount'].astype(str).str[0].astype(int)

# Benford's Law expected frequencies

benford_freq = np.array([0.301, 0.176, 0.125, 0.097, 0.079, 0.067, 0.058, 0.051, 0.046])

# Calculate actual frequencies

actual_freq = data['LeadingDigit'].value_counts(normalize=True).sort_index().values

# Plot comparison

plt.bar(range(1, 10), benford_freq, alpha=0.7, label="Benford's Expected")

plt.bar(range(1, 10), actual_freq, alpha=0.7, label="Actual Data")

plt.xlabel('Leading Digit')

plt.ylabel('Frequency')

plt.legend()

plt.show()

This code quickly analyzes a dataset and visualizes deviations between expected and actual distributions.

Microsoft Co-Pilot: Automating and Enhancing Analysis

Microsoft Co-Pilot integrates with tools like Excel and Power BI to simplify Benford’s Law application, especially for professionals less comfortable with coding.

1.Data Preparation: Co-Pilot can clean and organize datasets, such as extracting leading digits from transaction amounts.

2.Automated Calculations: It generates formulas for calculating actual digit frequencies and comparing them to Benford’s expected distribution.

3.Visualization: Co-Pilot helps create charts and dashboards to visualize discrepancies at a glance.

Example Use Case with Co-Pilot:

•Request: “Set up a Benford’s Law analysis template in Excel, complete with a chart comparing actual and expected frequencies.”

•Result: Co-Pilot generates the necessary formulas and visualization, saving time and effort.

Real-World Application of AI and Benford’s Law

A CFE investigating procurement records used ChatGPT to generate a Python script for Benford’s Law analysis and Co-Pilot to visualize the data in Excel. The analysis revealed an unusually high occurrence of transactions with the leading digit 7, prompting further review. This led to the discovery of falsified invoices and kickback schemes.

Key Benefits of AI Tools for CFEs

1.Efficiency: Automates time-intensive tasks.

2.Accessibility: Simplifies complex analyses for non-technical users.

3.Enhanced Insight: Facilitates quick identification of anomalies.

Conclusion

Benford’s Law is a valuable tool in the CFE’s arsenal for uncovering financial fraud. By integrating modern AI tools like ChatGPT and Microsoft Co-Pilot, CFEs can conduct more efficient, accurate, and accessible analyses. As these tools continue to evolve, fraud examiners can expect even greater support in their investigations.

If you’ve used AI tools in fraud detection, share your insights in the comments or join the discussion at our next ACFE PNW Chapter conference in April!