Every year, organizations and professionals around the globe unite to shine a spotlight on fraud and its far-reaching impacts during International Fraud Awareness Week (commonly called Fraud Week). This annual campaign, spearheaded by the Association of Certified Fraud Examiners (ACFE), aims to educate businesses, governments, and individuals about the importance of fraud prevention and detection.

As members of the ACFE Pacific Northwest Chapter, we’re proud to participate in this global effort to raise awareness and empower organizations to combat fraud effectively. Here’s what you need to know about Fraud Week and how you can get involved.

What Is International Fraud Awareness Week?

Fraud Week, established by the ACFE, occurs every November and brings attention to the pervasiveness of fraud worldwide. It’s a dedicated time for organizations to:

•Highlight the detrimental effects of fraud on businesses, governments, and individuals.

•Promote anti-fraud education and awareness.

•Empower individuals and teams with tools to detect and prevent fraud.

With over $5 trillion lost to occupational fraud annually, according to the ACFE’s Report to the Nations, initiatives like Fraud Week play a crucial role in fostering transparency and trust within organizations.

Why Is Fraud Awareness Important?

1.Financial Impact: Fraud significantly impacts organizations’ bottom lines, with small businesses and nonprofits being especially vulnerable.

2.Reputational Risk: Beyond financial losses, fraud can damage an organization’s reputation, leading to lost clients and tarnished credibility.

3.Preventative Culture: By promoting awareness, organizations can create a proactive, ethical culture that reduces opportunities for fraudulent behavior.

How Can You Participate in Fraud Week?

There are many ways to join the Fraud Week movement, whether you’re an individual professional, a CFE, or part of an organization.

1. Host trainings and Educational Sessions

•Organize fraud prevention workshops for employees or colleagues.

•Use resources like the ACFE’s Fraud Prevention Check-Up to assess your organization’s fraud risk.

2. Share Anti-Fraud Content

•Post fraud awareness tips, statistics, and resources on your organization’s website or social media channels using the hashtag #FraudWeek.

•Highlight key findings from the ACFE’s Report to the Nations to educate others about fraud trends.

3. Partner with your Community

•Collaborate with local businesses or community organizations to host fraud awareness events.

•Offer pro-bono consultations to nonprofits or small businesses to help them identify and mitigate fraud risks.

4. Conduct a Fraud Risk Assessment

•Use Fraud Week as an opportunity to review internal controls and address any gaps.

•Involve your fraud prevention team or hire a CFE to evaluate your organization’s fraud vulnerabilities.

5. Share Success Stories

•Highlight case studies or success stories of how fraud prevention or detection efforts saved your organization from losses.

•Encourage employees to share their ideas for improving anti-fraud measures.

6. Engage Employees

•Host a fraud trivia contest or lunch-and-learn session to make anti-fraud education engaging.

•Recognize employees who demonstrate integrity and ethical behavior as part of your Fraud Week activities.

How the ACFE PNW Chapter Supports Fraud Week

At the ACFE Pacific Northwest Chapter, we’re committed to providing resources and support to our members during Fraud Week and beyond. This year, we’re proud to:

•Share downloadable resources and tools for Fraud Week participation.

•Host webinars on emerging fraud trends and prevention techniques.

•Highlight stories from local CFEs making a difference in fraud prevention.

Join the Movement

Whether you’re a seasoned CFE or just starting your journey in the fraud prevention field, International Fraud Awareness Week is your chance to make an impact. Let’s work together to build a world where fraud is harder to commit and easier to detect.

What will you do for Fraud Week? Share your plans with us in the comments or on LinkedIn!

For more information on Fraud Week and access to official resources, visit the ACFE Fraud Week page.

As Certified Fraud Examiners (CFEs), we are constantly on the lookout for evolving threats that challenge ethical standards and societal trust. One of the latest frontiers is the misuse of generative artificial intelligence (AI) to create sophisticated propaganda and manipulate public perception, as highlighted in a recent Atlantic article, “AI’s Fingerprints Were All Over the Election”.

This issue underscores the growing need for CFEs to broaden their expertise to address emerging fraud risks that extend beyond traditional financial schemes.

The Role of Generative AI in Election Propaganda

Generative AI technologies, such as large language models (LLMs) and advanced image generators, have become powerful tools for crafting fake narratives. During the 2024 elections, these tools were used to create AI-generated images, videos, and even entire articles that blurred the lines between reality and fabrication. While some content was clearly satirical, other pieces were more insidious, aiming to manipulate opinions and spread disinformation.

The article from The Atlantic highlights that the pervasiveness of AI-driven content has contributed to a general erosion of trust in information sources. This “trust gap” poses a significant risk to democratic processes and organizational integrity alike.

Implications for CFEs

As CFEs, understanding how generative AI is leveraged in fraudulent schemes is critical. Here are a few implications:

1.Increased Complexity in Fraud Schemes:

•Fraudsters can create hyper-realistic fake documents, videos, and identities, making it harder to discern truth from fabrication.

•Propaganda techniques could extend to corporate fraud, where AI-generated content is used to manipulate public opinion about companies or products.

2.Challenges in Fraud Detection:

•The detection of AI-generated content requires advanced tools and techniques, such as forensic analysis of metadata and machine learning models trained to identify deepfakes.

3.Ethical and Reputational Risks:

•Organizations caught up in AI-generated disinformation campaigns risk reputational harm, even if they are not directly involved in fraud.

How CFEs Can Respond

CFEs are uniquely positioned to combat these new challenges by leveraging their investigative expertise and adapting to technological advances. Here are some actionable steps:

1.Stay Informed About AI Tools:

•Develop an understanding of how generative AI works, including its capabilities and limitations.

•Participate in training programs focused on identifying and mitigating AI-driven fraud.

2.Integrate AI Detection Tools:

•Collaborate with IT and cybersecurity teams to implement AI detection software.

•Utilize forensic tools to analyze digital content for signs of manipulation.

3.Educate Stakeholders:

•Raise awareness within organizations about the risks of generative AI.

•Develop policies and protocols for verifying the authenticity of digital content.

4.Advocate for Regulatory Standards:

•Support the development of regulations and industry standards to address the misuse of AI technologies.

•Engage in conversations about the ethical implications of generative AI in fraud.

Call to Action for CFEs

Generative AI is a double-edged sword. While it offers incredible potential for innovation, it also creates opportunities for fraudsters to exploit its capabilities. CFEs must rise to the challenge by integrating technology-driven fraud detection methods into their toolkit and collaborating with experts across disciplines to safeguard trust.

Let’s leverage our skills to ensure that the rise of AI enhances, rather than undermines, integrity in our organizations and society.

For more insights on combating fraud in the era of AI, stay tuned to the ACFE PNW Chapter blog. Together, we can navigate the challenges of this rapidly changing landscape.

As we approach Veterans Day, honoring those who have served our country goes hand-in-hand with raising awareness about protecting veterans from various types of scams. Veterans are often targeted by fraudsters who exploit their sense of duty, financial needs, or government benefits. These schemes can lead to significant financial loss, and worse, a breach of trust that can impact veterans’ wellbeing. Understanding these scams and knowing how to avoid them is essential, both for veterans and their families.

1. VA Benefits Scams

Some fraudsters falsely claim to be affiliated with the Department of Veterans Affairs (VA) or offer to “help” veterans access or boost their VA benefits. They might charge a fee for these supposed services, even though applying for VA benefits is free. Scammers may also ask veterans to provide personal information, like Social Security numbers, which can be used for identity theft.

How to Avoid It: Veterans should be cautious of anyone requesting payment to help with VA benefits applications. Working directly with the VA or using a VA-accredited representative ensures that their information is safe and the services are legitimate.

2. Phony Charities

Many fraudulent charities use patriotic or veteran-related language to tug at heartstrings, especially around Veterans Day. They may claim that donations go to support veterans or military families, but in reality, very little—if any—of the money is directed to legitimate causes.

How to Avoid It: Before donating, check the legitimacy of the organization through resources like Charity Navigator or the Better Business Bureau’s Wise Giving Alliance. Veterans and their families can also verify if the charity is registered as a 501(c)(3) nonprofit with publicly available financial information.

3. Fake Job Offers for Veterans

Job scams often target veterans by offering work-from-home positions or claiming to have special opportunities tailored to former military personnel. Scammers may ask for personal information or upfront payment for “training” or “certification,” only to disappear once they have what they need.

How to Avoid It: Be wary of job offers that require payment upfront or ask for personal information early in the application process. Veterans seeking employment should work with verified veteran employment services, such as those offered through the VA or reputable employment agencies specializing in military-to-civilian transitions.

4. Imposter Scams Targeting Veterans’ Families

Fraudsters may impersonate veterans or VA representatives and contact family members, claiming that there are issues with benefits or that money is needed urgently. These scams rely on the emotional urgency of the situation and the natural response to want to help.

How to Avoid It: Families should verify any requests through official channels before providing any information or payments. The VA will never call or email asking for immediate payment, especially in cases involving supposed “emergencies.”

5. Investment Scams Aimed at Veterans

Veterans are sometimes targeted with offers for “special” investments or guaranteed high returns. Scammers exploit the trust veterans have in fellow service members or their desire for financial stability. These investments can include Ponzi schemes, where early returns are paid out using new investors’ money rather than legitimate profits, leading to substantial losses.

How to Avoid It: Veterans should approach any investment opportunity with caution. Consulting with a trusted financial advisor, especially one who specializes in working with veterans, can provide an additional layer of protection against these scams.

6. Housing and Pension Scams

In pension poaching schemes, scammers pose as financial advisors or attorneys and offer to help veterans qualify for VA pension benefits, sometimes by transferring assets. They may also charge fees for “repositioning” assets to make veterans eligible for benefits or charge for access to public information about benefit eligibility.

How to Avoid It: Veterans should work with accredited VA representatives and avoid any advisors who charge fees for accessing information or transferring assets.

How CFEs Can Help Veterans and Their Families

Certified Fraud Examiners (CFEs) can play an essential role in supporting veterans by offering fraud prevention education, hosting informational sessions on common scams, and working with veteran service organizations to provide fraud awareness resources. CFEs can also collaborate with community groups, offering expertise in fraud detection and prevention and helping veterans to protect their finances from these threats.

Final Thoughts

Scams targeting veterans are not only financially damaging but also undermine trust and take advantage of individuals who have served our country. Educating veterans and their families on these common scams and providing guidance on identifying red flags can make a meaningful difference in safeguarding their finances and well-being. This Veterans Day, let’s share these insights to honor and protect those who have selflessly served.

In the modern workplace, many factors contribute to the financial and operational well-being of an organization. Among these is an often overlooked but significant challenge: time theft and falsifying timesheets. As the Association of Certified Fraud Examiners (ACFE) PNW Chapter, our mission is to raise awareness and promote best practices that uphold ethical standards. Addressing time theft is crucial because it not only affects a company's bottom line but also erodes workplace integrity and morale.

What is Time Theft?

Time theft occurs when employees get paid for work they didn’t actually perform. In its simplest form, it might involve stretching a lunch break or taking extended personal time. However, more serious forms include falsifying timesheets, manipulating time clock systems, or having a colleague "buddy punch" their time in or out.

According to the American Payroll Association (APA), time theft can account for up to 4.5 hours per week per employee. Over the course of a year, this can add up to thousands of dollars per individual—costs that affect both the organization's profitability and its ability to allocate resources effectively.

The Impact of Time Theft and Falsifying Timesheets

The consequences of time theft and falsifying timesheets extend beyond financial loss. Here are some of the key areas impacted:

1. Financial Loss: Even minor instances of time theft add up quickly. For large organizations, the cumulative effect across departments can result in millions of dollars in lost productivity.

2. Employee Morale: When employees see others getting away with time theft, it can lead to a culture of mistrust and frustration. Honest employees may feel undervalued, leading to resentment and reduced engagement.

3. Operational Efficiency: Time theft disrupts scheduling and can impact the entire workflow. Projects might be delayed or compromised in quality, affecting the company’s reputation and client satisfaction.

4. Legal and Compliance Risks: Falsifying timesheets can bring legal consequences for both employees and employers. Employers may face accusations of non-compliance with labor laws, while employees caught falsifying timesheets could face disciplinary actions, including termination.

Common Methods of Time Theft

Understanding how time theft typically occurs can help organizations take preemptive steps. Here are some common methods employees use:

- Buddy Punching: One employee clocks in or out on behalf of another, often to cover up for lateness or early departures.

- Padding Hours: Employees may log additional hours on timesheets, claiming they worked longer than they did.

- Extended Breaks: Lengthening lunch hours or taking unscheduled breaks outside of allotted times.

- Personal Activities on Company Time: Spending work hours on personal tasks like social media browsing, online shopping, or handling personal matters.

How Employers Can Mitigate Time Theft and Falsifying Timesheets

1. Invest in Technology: Using biometric time tracking, such as fingerprint or facial recognition, can make it harder for employees to engage in buddy punching. Automated systems that integrate with payroll can also streamline attendance records and reduce the risk of human error or manipulation.

2. Set Clear Expectations and Enforce Policies: Having a well-defined attendance and time-tracking policy is essential. Employees should understand the rules and consequences of falsifying timesheets or engaging in time theft. Regular training on the importance of accurate reporting can reinforce ethical behavior.

3. Implement Random Audits: Periodic audits can discourage employees from engaging in time theft. Managers should review timesheets regularly and compare them with productivity metrics to identify discrepancies.

4. Foster a Transparent Culture: Building a work environment where transparency is valued can help mitigate time theft. Encouraging employees to take accountability for their work time and fostering open communication can reduce dishonest practices.

5. Reward Integrity: Recognize and reward employees who demonstrate honesty and integrity. Positive reinforcement can shift workplace culture towards greater accountability.

What Employers Should Avoid

- Over-Monitoring: Excessive monitoring can backfire, making employees feel micromanaged or distrusted, which can hurt morale and productivity.

- Punitive-Only Measures: Relying solely on punishment without offering training or support can create an adversarial relationship between employees and management. Instead, a balance between enforcement and positive reinforcement is more effective.

Recognizing Red Flags

Managers should be vigilant for signs of time theft or timesheet fraud. Some common red flags include:

- Regular Overtime with Little Output: Employees who consistently work "overtime" without showing a commensurate increase in productivity might be inflating their hours.

- Frequent Buddy Punching: When the same employee frequently clocks in or out for others, it could indicate buddy punching.

- Timesheet Discrepancies: Repeated errors or changes on an employee’s timesheets may signal intentional falsification.

- Patterns in Absenteeism or Tardiness: Employees who frequently report hours just short of overtime thresholds may be attempting to maximize earnings without putting in extra work.

Moving Forward: Building a Culture of Accountability

Addressing time theft and falsified timesheets is not just about minimizing financial losses; it’s about creating a culture of honesty, accountability, and fairness. Employees are more likely to engage in ethical behavior when they see that it’s valued and rewarded. Employers can achieve this by leading by example, being transparent in policies, and promoting open communication across all levels of the organization.

By taking these steps, companies can minimize the risk of time theft, improve employee morale, and foster a more productive work environment. At ACFE PNW, we encourage businesses to remain proactive in identifying and addressing time theft. Together, we can build workplaces where honesty and integrity are the cornerstones of success.

In a recent development, the notorious Black Basta ransomware group has expanded its attack tactics by exploiting Microsoft Teams, marking a new and concerning trend in ransomware campaigns targeting corporate environments. According to a report from Cybersecurity News, this shift in strategy signals a critical need for organizations and Certified Fraud Examiners (CFEs) to bolster their defenses against ever-evolving cyber threats.

The Black Basta Threat

Black Basta, a ransomware-as-a-service (RaaS) group known for targeting organizations with sophisticated malware, has previously used traditional email phishing attacks to gain access to systems. However, their recent approach involves infiltrating corporate networks through Microsoft Teams, a platform widely used for internal communication and collaboration. This is particularly alarming because Teams is often trusted implicitly by employees as a safe communication tool, making phishing links or malicious attachments sent through it more likely to evade suspicion and detection.

Once inside the network, Black Basta deploys ransomware to encrypt sensitive files, demanding payment in exchange for decryption. In addition, they often use the “double extortion” tactic—exfiltrating data and threatening to leak it publicly if the ransom is not paid.

Understanding the Microsoft Teams Exploit

The Black Basta group’s use of Microsoft Teams demonstrates a pivot from more commonly exploited applications to trusted communication platforms. Through compromised user accounts or by leveraging vulnerabilities in external applications, the group infiltrates Teams chats. They then send malicious links or attachments to employees, using psychological tactics to make the links appear legitimate. Given the familiarity and trust employees have in Teams, they are more likely to click on these links without hesitation, leading to ransomware infiltration.

This approach bypasses many traditional cybersecurity defenses, such as spam filters and email gateways, and highlights a significant vulnerability within the corporate communication structure. For CFEs, understanding how threat actors exploit these trusted communication tools is critical in preventing and investigating cyber fraud.

Implications for CFEs and Fraud Prevention

The shift to using internal communication platforms for ransomware campaigns underscores the importance of comprehensive cybersecurity measures in fraud prevention. CFEs can play a proactive role by:

1. Enhancing Employee Awareness: Training staff to recognize potential phishing attempts, even within trusted communication platforms like Teams, is essential. CFEs can work with cybersecurity teams to develop training programs that raise awareness about this new attack vector.

2. Monitoring Anomalous Behavior: Identifying unusual activities, such as unexpected file shares or links in Teams, can be a red flag. CFEs should encourage organizations to implement user behavior analytics (UBA) to detect anomalies that may indicate a security breach.

3. Implementing Access Controls: Ransomware groups often leverage compromised accounts with elevated privileges. Ensuring that access to sensitive information and systems is restricted based on necessity can help limit the damage in case of a breach. CFEs can recommend that organizations regularly review and audit user access rights.

4. Regular Backups and Incident Response Planning: In the event of a ransomware attack, quick recovery is crucial. Regular data backups and rehearsed incident response plans can mitigate the impact of ransomware, reducing downtime and financial losses.

5. Utilizing Advanced Threat Detection Tools: Leveraging tools like Endpoint Detection and Response (EDR) and extended detection and response (XDR) solutions enables continuous monitoring and faster responses to suspicious activities within networks. CFEs can advocate for the deployment of these technologies to better prepare organizations against sophisticated cyber threats.

Lessons from Black Basta for the Future

As ransomware groups like Black Basta innovate, organizations must continually adapt their defenses. CFEs, with their expertise in fraud examination and risk assessment, play a crucial role in understanding these evolving threats and advocating for necessary safeguards. Through awareness training, rigorous access controls, and robust detection measures, CFEs can help organizations remain resilient against the next generation of cyber threats.

This case underscores the need for vigilance in the use of trusted platforms and the importance of proactive cybersecurity measures. As ransomware tactics continue to evolve, CFEs are essential in helping organizations build robust defenses against this growing threat.

Fictitious businesses, often used for laundering money, inflating invoices, or diverting funds, represent a growing challenge for fraud examiners. Fraudsters use fake companies, often masked behind shell corporations and false identities, to manipulate financial systems. In recent years, cases like that of Registered Agents Inc., revealed by a Wired investigation, show how easily criminals can create entire personas to deceive regulatory systems.

Key Indicators and Techniques for Detecting Fictitious Businesses

1. Public Records & Corporate Registry Searches

Fraud examiners begin by scrutinizing corporate filings, seeking anomalies in registration data. Fictitious companies often lack historical records, or provide inconsistent details, such as listing residential addresses for corporate headquarters or using P.O. boxes. One recent example involved fake "registered agents" used in schemes to hide the true beneficial owners of businesses. By comparing data from state corporate registries and regulatory filings, investigators can spot patterns of suspicious behavior.

2. Beneficial Ownership Investigations

Fraudsters often layer ownership structures to obscure who controls a business. Investigators can identify shell companies by examining financial documents and cross-referencing ownership structures across jurisdictions. The infamous Panama Papers leak in 2016 exposed how international shell companies were used to facilitate tax evasion and money laundering, highlighting the importance of tracing beneficial ownership in fraud cases.

3. Online Presence and Verification

A fictitious business typically has a limited or non-existent online footprint. Fraud examiners can use open-source intelligence (OSINT) techniques to search for the company’s digital footprint, examining websites, social media profiles, and customer reviews. Investigators should also verify physical locations, phone numbers, and email domains to ensure the company is legitimate. The Theranos case, for instance, illustrated how fraudulent companies can appear legitimate through elaborate marketing while failing to deliver on their actual business claims.

4. Cross-Referencing with Vendor and Financial Records

In procurement fraud, fake companies are often used to generate false invoices and inflate costs. Fraud examiners should review vendor lists and financial records, comparing the frequency and amount of payments made to suppliers. The CityTime fraud scandal in New York City saw contractors creating shell companies to siphon millions from government contracts through false billing.

5. Use of Data Analytics

Data analytics tools can help fraud examiners sift through vast amounts of financial data to detect irregularities that might indicate fictitious businesses. Investigators can flag unusual patterns, such as high-volume transactions between seemingly unrelated entities or sudden increases in payments to new vendors. In a well-known case, the WorldCom accounting fraud was partially uncovered by identifying large, unexplained financial transfers between subsidiaries.

Conclusion

Fictitious businesses are at the heart of many large-scale fraud schemes. Fraud examiners must be vigilant and use a combination of public records, beneficial ownership tracing, and digital intelligence to uncover these entities. By leveraging these techniques, fraud investigators can detect and disrupt fraudulent activities, protecting organizations from significant financial loss. The recent surge in cases involving fake companies emphasizes the need for diligence in unmasking such fraud schemes and bringing perpetrators to justice.

In a bold move to combat the growing threat of cryptocurrency-related crime, the FBI recently launched an undercover operation using a fake cryptocurrency to infiltrate and take down cybercriminals. According to a report from The Hacker News, the FBI created this fake digital currency as part of a sting operation, catching criminals in the act as they conducted illicit transactions. This operation underscores the significant role law enforcement agencies, along with fraud examiners, can play in countering fraud in the evolving world of cryptocurrencies.

Cryptocurrency Fraud: A Growing Concern for CFEs

Cryptocurrency fraud continues to be a major concern for organizations and law enforcement alike, with criminals finding new ways to exploit the decentralized and largely anonymous nature of digital currencies. From Ponzi schemes to ransomware payments and money laundering, the crypto ecosystem has become fertile ground for fraudsters. As CFEs, it is critical to remain vigilant, learn from such high-profile cases, and adapt our techniques to effectively detect and prevent fraud in this space.

What Can CFEs Learn from the FBI's Operation?

Here are three key takeaways from this FBI operation that can enhance the skill set of Certified Fraud Examiners in their own fight against cryptocurrency fraud:

1. Understand the Technology Behind Crypto

The FBI's ability to create a fake cryptocurrency highlights their deep understanding of the technology behind digital assets. CFEs should aim to develop a solid foundation in blockchain technology, cryptocurrency markets, and how transactions are conducted. This knowledge will allow CFEs to identify red flags and anomalies that may indicate fraudulent activities.

2. Collaborating with Law Enforcement

This case illustrates the power of collaboration between private sector investigators and law enforcement. CFEs often work alongside agencies like the FBI to provide expertise on financial matters, document trails, and fraud prevention tactics. Engaging early and maintaining open communication with law enforcement agencies is crucial in cases involving large-scale cryptocurrency fraud.

3. Use of Undercover Operations and Deception in Investigations

Though undercover operations are more common in law enforcement, CFEs can learn from the strategy employed by the FBI. Building relationships with fraudsters or their intermediaries, while remaining within ethical boundaries, can sometimes provide insight into criminal networks. Additionally, using deception in a controlled, legal manner can be an effective tool to unearth fraud schemes.

The Role of CFEs in the Fight Against Crypto Fraud

Certified Fraud Examiners are uniquely positioned to assist organizations in navigating the challenges of cryptocurrency fraud. CFEs can help:

- Conduct thorough risk assessments to identify vulnerabilities within an organization's cryptocurrency systems.

- Establish comprehensive anti-fraud programs that include protocols for investigating suspicious transactions involving digital currencies.

- Educate and train employees on recognizing the signs of crypto fraud, thereby minimizing exposure to fraudulent schemes.

In the fast-evolving world of cryptocurrency, fraud examiners must stay ahead of trends by continuously upgrading their knowledge and skill set. With the right tools, CFEs can play a pivotal role in protecting organizations from falling victim to fraudsters who exploit the cryptocurrency ecosystem.

Final Thoughts

The FBI's recent success using a fake cryptocurrency in a sting operation is a reminder that fraud prevention is not just about reacting to schemes after they occur, but about taking proactive steps to infiltrate and dismantle fraud rings before they can do serious damage. CFEs can be a part of this process by staying informed, fostering collaboration with law enforcement, and continuing to refine their investigative techniques.

By learning from this case and others, CFEs can bolster their efforts in identifying, investigating, and preventing cryptocurrency fraud, ensuring their organizations are better protected against this rapidly growing threat.

Stay tuned to the ACFE PNW Chapter's blog for more updates on how CFEs can combat the latest fraud trends!

The Better Business Bureau (BBB) has published an insightful and alarming report on the growing prevalence of Money Mule Scams, a form of fraud where criminals recruit unwitting individuals—known as "mules"—to transfer stolen or illicit funds. These scams have gained traction in recent years due to the expansion of global criminal networks, evolving digital communication platforms, and the ability to reach victims from across the world. This growing threat is of particular importance to the fraud prevention community.

A "money mule" is an individual who, knowingly or unknowingly, helps criminals move money from one account to another, often across international borders. Money mules can be recruited through a variety of channels, including romance scams, work-from-home job offers, lottery winnings, and even social media interactions. Romance scams, in particular, are a prevalent gateway, with the BBB study revealing that between 20-30% of romance scam victims end up becoming money mules. Once victimized, many people do not realize they are breaking the law by moving money on behalf of fraudsters.

One reason these schemes are so effective is the use of emotional manipulation. Scammers often build long-term relationships with their victims, especially in romance scams, creating an emotional bond that makes it easier to exploit them. The victim is asked to transfer funds on behalf of the scammer, often under the guise of helping the scammer out of a fabricated emergency. In other cases, victims may believe they are simply assisting in a legitimate business transaction.

The Role of Global Crime Networks

One of the most concerning findings in the report is the involvement of large-scale international crime networks. Many of the scams orchestrated online are not isolated incidents but are part of a sophisticated web of criminals working together to launder money, evade law enforcement, and further their illicit activities. These networks make it more difficult for authorities to track the flow of money and identify the criminals responsible.

Law enforcement agencies, such as the FBI and Interpol, are involved in monitoring and shutting down these schemes, but as criminals use more advanced techniques—like cryptocurrency transfers and encrypted communications—the challenges increase. Money mules often serve as an intermediary layer, making it even harder to track funds back to their source. This leaves mules and victims in vulnerable positions, with their actions being scrutinized by authorities as well.

The Impact on Victims

The consequences for individuals who become money mules can be severe. Not only can they face legal action, but they also often suffer financial losses, as their own personal funds can become entangled in fraudulent schemes. In many cases, mules have their bank accounts closed, making it difficult for them to open new ones. Worse, even if the individual was unaware they were participating in illegal activity, ignorance of the law does not absolve them from responsibility.

The emotional toll is equally devastating. Victims of romance scams, who often become mules after being emotionally manipulated, report feelings of betrayal, shame, and guilt once they realize they have been duped into criminal activity.

Red Flags and Prevention

The BBB study emphasizes the importance of education and awareness in combating this growing issue. Anti-fraud professionals, as well as financial institutions, need to take an active role in educating the public about the risks of money mule scams. Individuals can protect themselves by being aware of red flags, such as:

- Requests to transfer funds for someone they’ve only met online, especially if there’s urgency or secrecy involved.

- Invitations to open new bank accounts or accept funds with the promise of future payment.

- Job offers that involve processing or transferring money as part of the position.

- Claims of lottery winnings or unexpected inheritances, especially when the recipient must "help" move funds.

For fraud examiners, the takeaway is clear: both individuals and institutions need better awareness and stronger controls to prevent these schemes from proliferating. Banks and financial institutions should invest in better monitoring tools to flag suspicious transfers and stop them before they do harm. Companies should also create more robust anti-fraud training for employees, especially those in customer-facing roles, to detect early warning signs.

What Can Anti-Fraud Professionals Do?

As a member of the Association of Certified Fraud Examiners (ACFE), staying ahead of these evolving threats is crucial. The BBB study offers invaluable insights into how money mule schemes operate, who they target, and how to detect them early on. Here’s how you can take action:

- Educate Clients and the Public: Provide resources and workshops that inform the public about how to recognize and avoid becoming a mule. This is especially important for vulnerable groups, such as seniors and young adults, who are often targeted in these scams.

- Collaborate with Financial Institutions: Work closely with banks and payment processors to develop better tracking mechanisms for unusual account activity or large, frequent transfers between accounts that don’t have a legitimate business purpose.

- Enhance Reporting Channels: Encourage victims to come forward, even if they unknowingly participated. Provide them with the right resources to report scams to law enforcement, the Federal Trade Commission (FTC), or their country’s equivalent agencies.

- Monitor Emerging Fraud Trends: Stay up-to-date on the latest techniques fraudsters use, such as the exploitation of cryptocurrency and blockchain technologies to launder money. This requires ongoing professional development and training in digital fraud detection.

Conclusion

Money mule scams are a growing threat to both individuals and the global financial system. As anti-fraud professionals, it’s essential to remain vigilant and proactive in identifying, preventing, and combating these schemes. The BBB’s report on money mule scams serves as an important resource for understanding the complexity of these scams and the steps we can take to reduce their prevalence.

For the full report and more detailed analysis, you can visit the BBB Money Mule Scam Study here.

For fraud examiners and compliance professionals, investigating misconduct and financial fraud often exposes them to highly sensitive and traumatic situations. While this exposure is necessary for uncovering wrongdoing, it can lead to a phenomenon known as "secondhand trauma" or "vicarious trauma." This condition occurs when professionals, despite not being the direct victims of the distressing events, absorb the emotional weight of these cases over time.

Investigative work can involve witnessing stories of betrayal, financial loss, violence, and other life-altering consequences. For example, fraud examiners may uncover cases where families lose their life savings due to a scam or where organizations are ruined by corrupt practices. This continuous immersion into negative and sometimes shocking realities can silently take a toll on their mental and emotional health.

Signs and Symptoms of Secondhand Trauma

Secondhand trauma can manifest in several ways. Professionals experiencing this may notice emotional exhaustion, impaired judgment, difficulties in concentration, or even symptoms resembling post-traumatic stress disorder (PTSD). Many may also suffer from physical symptoms such as headaches or sleeplessness. Over time, these effects can lead to burnout, where professionals feel detached from their work, unmotivated, or incapable of handling their caseloads with the same efficiency.

For compliance professionals and fraud examiners, this is especially concerning because their ability to think clearly and make sound judgments is essential to conducting thorough and accurate investigations. When secondhand trauma goes unaddressed, it not only affects their mental health but also impacts the quality and integrity of their work.

Addressing the Issue: Organizational and Personal Solutions

Recognizing the signs of secondhand trauma is the first step in addressing it. Both individuals and organizations must be proactive in creating an environment that supports mental and emotional well-being.

On a personal level, professionals need to prioritize self-care. This could involve taking regular breaks, engaging in creative outlets or physical activities, and seeking therapy or counseling when needed. Spending time in nature or practicing mindfulness techniques can help clear the mind and reduce stress. It's also important for professionals to establish boundaries between work and personal life, ensuring that their work-related stress doesn't bleed into their home life.

From an organizational standpoint, companies should foster a supportive culture that acknowledges the emotional demands of investigative work. This can be done by offering regular training on mental health, providing access to employee assistance programs (EAPs), and encouraging open discussions about the emotional impact of investigations. Leadership teams should actively monitor the well-being of their staff and offer flexible working conditions, where possible, to alleviate stress.

Additionally, mentorship and peer support can be invaluable. Senior professionals can help guide newer investigators through difficult cases, offering coping strategies and emotional support. Having a network of peers who understand the nature of the work can be a powerful tool for resilience.

Long-Term Implications

Without addressing secondhand trauma, the long-term implications can be detrimental both to individuals and organizations. High turnover, frequent sick leaves, and decreased productivity are common in environments where burnout is prevalent. Worse, unresolved trauma can have lasting effects on a professional’s mental health, potentially leading to anxiety disorders, depression, or substance abuse.

In the realm of fraud examination and compliance investigations, where precision and attention to detail are paramount, secondhand trauma threatens not just the professionals but also the outcomes of their work. Organizations must invest in the well-being of their investigative teams to ensure that both the mental health of their employees and the integrity of their investigations remain intact.

Conclusion

Secondhand trauma is a silent yet significant risk for those working in sensitive investigations. By recognizing its signs, taking proactive steps for personal care, and fostering a supportive organizational culture, both individuals and companies can mitigate its effects. Addressing this issue is not just about preserving mental health but also about ensuring the continued success and accuracy of fraud examinations and compliance investigations.

For more in-depth insights, read the full article here.

Recent revelations about the alarming increase in insider attacks linked to North Korean hackers have highlighted the need for heightened vigilance in identifying and mitigating such threats. As detailed in a recent ITPro report, over 100 U.S. companies, particularly in the technology, financial, and professional services sectors, unknowingly hired North Korean hackers posing as legitimate remote IT workers. These hackers exploited recruitment processes to exfiltrate sensitive data and siphon off funds, often using stolen identities and sophisticated methods such as deepfake technology to bypass background checks.

The rise in insider threats of this nature, particularly from state-sponsored actors like the North Korean group FAMOUS CHOLLIMA, underscores the importance of implementing robust defenses and continuous monitoring within organizations. To help prevent these threats, here are key strategies businesses can adopt:

1. Strengthen Recruitment and Background Checks

The attackers often use stolen identities or AI-generated imagery to pass background checks, as was the case in a North Korean hacker’s attempt to infiltrate a cybersecurity firm. To mitigate this risk, companies should enhance their vetting processes by:

- Verifying candidates' physical presence via live video interviews at multiple stages of the hiring process.

- Cross-checking references through multiple channels beyond email, such as phone calls or in-person verifications.

- Monitoring for inconsistencies in resumes, such as employment gaps or frequent job changes that don’t align with industry norms.

2. Implement Rigorous Onboarding and Monitoring Processes

As seen in cases involving North Korean insiders, hackers often request that company equipment be sent to drop locations where they remotely log in via VPNs. To catch such tactics:

- Ensure that remote employees' equipment is sent to verified locations and cross-reference addresses during the hiring process.

- Utilize endpoint detection and response (EDR) tools to monitor unusual activities on company systems, such as the execution of unauthorized software or remote access attempts.

- Enforce strict access controls and limit the systems that new employees can access until a probationary period is completed.

3. Collaborate Between IT, Security, and HR Teams

Communication between departments is critical. HR teams are often the first line of defense during recruitment, but they need to work closely with IT and security teams to spot anomalies in behavior or access requests from new hires. Joint training sessions and clear incident response plans should be implemented to address potential insider threats swiftly.

4. Continual Security Awareness Training

Security awareness training helps all employees stay alert to the signs of insider threats. Employees should be educated about:

- The dangers of social engineering and how attackers may pose as co-workers or IT personnel.

- The signs of compromised systems, such as unusual login times or unexplained software installations.

- Reporting mechanisms for suspicious behavior within the organization.

5. Leverage AI and Machine Learning for Threat Detection

With advanced methods like deepfake technology being used to deceive background checks, leveraging AI for ongoing employee behavior monitoring is essential. Machine learning algorithms can detect deviations from normal employee patterns, flagging potential insider threats before significant damage occurs.

In an era where insider threats are becoming more sophisticated and state-sponsored attacks are on the rise, taking these proactive measures will help companies stay ahead of attackers and protect their sensitive assets.

Sources: ITPro article on insider threats, KnowBe4 blog on North Korean IT workers【5】【6】【7】.