“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others and confused the heck out of the rest of us — including me.” – Senator Tom Carper, chair of the Senate Homeland Security and Governmental Affairs Committee, November 2013
Today is day 2 of our Fraud Awareness Week series, Fraud Stories and Lessons Learned, and we want to highlight the rapidly emerging problem of cryptocurrency fraud. Brad Moody, EVP of Operations for Lowers & Associates, points out the rapid increase in crypto-related fraud noting that in 2016 there were only 340 active fraud cases of such fraud and by 2020, there were more than 80,000 cases in the U.S. alone.
In this fraud story, Brad explains how current schemes to capture victim organizations’ cryptocurrency are amplifying the need for effective internal controls, anti-fraud training, and third-party penetration testing.
Listen to the story here:
Interestingly, one of the best ways organizations can protect themselves from cryptocurrency fraud is through the same tried and true practices used to prevent social engineering, phishing, and other related attacks. Employees are increasingly subject to scams through email and link-sharing, so it’s important to look at how to detect and block such activity but also to train employees on how to recognize and avoid becoming victims to such scams.
David Gardiner, Senior Vice President of Lowers Forensics International, offers further advice: “Crypto based currencies are now becoming a professionally acceptable form of tender. Now more than ever, corporations need to proactively mitigate their risk and exposure. This can be done through a myriad of operating procedures including the process of facilitating not only their outbound, but even incoming payments. Strict rules of engagement, much like the protocols already used in wire transfers (verbal confirmation, dual signature authentication, etc.) should be followed here as well.”
Stay tuned tomorrow for another fraud story from the front lines of Lowers & Associates.
Authors: Joe Labrozzi and Michael Gaul
Imagine waking up to news reporting the credit card data of 37 million people has been hacked. And then learning that among the hacked are employees of your company who used their corporate email accounts to sign up for a service that connected people for the purpose of having an illicit affair.
What goes through your mind?
Do you ask, how can people be so stupid? Or do you ask other more salient questions such as: … Continue reading
Organizational fraud is a hidden crime. But when it is detected, it is often by a colleague or employee of the perpetrator who happens to discover the fraud – over 40% of the initial detection of a fraud is through a tip, most often from an employee. That’s why the ACFE Fraud Prevention Checkup highlights the necessity of a fraud reporting mechanism, in other words, a whistle-blower program.
An effective whistle-blower program has to both encourage the person who discovers the crime to report it and give him the means to do so. A potential whistle-blower may be someone who works closely with the perpetrator, with bonds of friendship or fears of retribution. The program needs to overcome these barriers to be effective.
In fact, research by the law firm Labaton Sucharow reported in Security Magazine in an article by Jim Ratley found that 34% of employees have learned about “workplace misconduct” and that most of them would report it if they could. The factors that could encourage them to report the issues included remaining anonymous, avoiding retaliation, and getting a reward. … Continue reading
Yet more evidence of the prevalence of financial fraud against organizations has emerged from a recent poll by Kyriba. The poll found that almost 80% of organizations had been victims of fraud. The very high proportion of victims is startling in itself, but it is consistent with information we have presented in previous posts that organizational fraud is a global problem, costing 5% of top line revenue annually.
Almost 30% of the respondents to the Kyriba poll reported suffering financial losses, but we think this is a conservative number in this context. Organizational fraud is a hidden crime that sometimes is difficult to detect, even long after the fact. When organizations do detect fraud, they may have incentives to minimize publicity about the crime, so underreporting is probable.
The poll includes some indications that the fraud was even more costly than reported. 5.6% of respondents reported that they had been targets of fraud but did not know if they had suffered losses, while almost 14% did not even know if they had been targets or not. In fact, a little less than 8% reported that they knew they had not been victims, and it’s a good bet that a few of these simply hadn’t found out yet. … Continue reading
Occupational fraud is a huge drain on organizations’ resources, costing an estimated global loss of $3.7 trillion dollars annually. And according to the Association of Certified Fraud Examiner’s (ACFE) 2014 study, just 14% of defrauded organizations are able to fully recover their losses.
Fraud is a very real threat to the bottom line of almost every organization in our economy. But it can be prevented, or at least mitigated.
There are 3 steps in setting up a fraud prevention program in your organization:
- Understand what fraud is and how it is likely to emerge.
- Identify potential sources of fraud in your organizations.
- Take steps to prevent fraud through processes or controls.
Ultimately, a healthy anti-fraud corporate culture that permeates from the top down will make your organization more crime resistant. This will take time to nurture, and it will take continuous effort to sustain, but in the end you can make occupational fraud an extinct disease in your workplace.
… Continue reading