Fraud

Fraud can be one of many things. There is Internet fraud, credit card fraud, telephone fraud, and
many other kinds as well. Basically, fraud is when an individual or a company takes advantage of
a consumer. The problem of fraud is getting worse and worse every day. One of the causes of
the recent rise in fraud is the advent of the Internet. The Internet allows almost anyone to pose as
a legal-looking company and steal the money of customers who misplace their trust in them.
Other forms of Internet fraud include e-mail scams and ads that mislead unknowing consumers.

Some types of fraud affect almost everyone involved in business of any sort. Health care fraud
causes the cost of medical care to rise and credit card fraud causes companies to be more weary
of who they take credit cards from. One type of fraud that affects only the person taken
advantage of are scams. Some examples of different scams are “Free Prize” scams, when a
customer is promised a free gift if they purchase a product, “Investment” scams, when a customer
is asked to invest at a discount and told they will get a high return on their money, or “Charity”
scam, when someone is asked to contribute to a charity that doesn’t exist.

Scams and other types of fraud hurt everyone, from senior citizens to teenagers ordering things
off of the Internet. I believe there is only one solution to the problem of fraud, consumers must
know who they’re giving money to. The problem is not the Internet, telephones, or credit cards
themselves, it’s the stupidity and trustworthiness of consumers. If everyone who gives their
money to someone else for any reason investigated that person first, there would be no fraud, or
at least a much lower occurrence of it.
REFERENCES

http://www.emich.edu/public/coe/nice/hangup.html

http://www.fraudbureau.com/

http://www.fdn.net/

Abstract
This paper explains that the American International Group--AIG, the world's largest insurer--
was reported to have arranged deals to manipulate financial figure in its own records and
those of General Re, a reinsurance company, resulting in financial fraud during the autumn of
2000. The author points out that AIG also was involved in another accounting fraud with
Brightpoint Inc., which was reported by the Securities and Exchange Commission in 2003; AIG
worked closely with the Brightpoint people to tailor an alleged insurance policy that let
Brightpoint overstate its earnings by an amazing 61% in a cash circulation deal from
Brightpoint to AIG and again back to Brightpoint. The paper defines receivables are monies
due from the customers, which are tallied by invoices and happen due to operating cycle's
process of selling inventory or services on terms that permit delivery before cash is collected.

Table of Contents
The General Re Fraud
The Brightpoint Fraud
Cash & Accrual Basis of Accounting
Receivables and Inventory
Fixed and Intangible Assets
Liability & Stockholders Equity

From the Paper

"Under the cash method of accounting, the books are maintained on the actual cash flow.
Income is recorded on its receipt and expenses enter the books on their actual payment.
Whereas majority of the businesses use the accrual basis, the most correct method for the
company depends on the sales volume, credit policy of the company and business structure.
In case of the accrual method, income & expenses are recorded while they occur,
notwithstanding whether there has been exchange of cash and an example of this is sale on
credit. Accrual method is appropriate when the annual sales are more than $5 million and the
business is a corporate organization. Besides, it is suggested that while selling on credit,
matching of income and expenses during a given period must be done."

What is a Fraud? A fraud is when one party deceives or takes unfair advantage
of

another. A fraud includes any act, omission, or concealment, involving a breach

of legal or

equitable duty or trust, which results in disadvantage or injury to another. In a

court of law

it is necessary to prove that a false representation was made as a statement of

fact, that was

made with the intent to deceive and to induce the other party to act upon it. It
must be

proven that the person who has been defrauded suffered a injury or damage
from the act.

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Comp fraud
As much as $40 billion are lost every year due to flourishing computer crimes. In 1993 alone,
Internet, the world wide system of computer networks, was swindled out of approximately $2
billion, and about $50 million were stolen from various companies such as GTE Corp., AT&T,
Bell Atlantic and MCI ( Meyer and Underwood 45). Ironically these same organizations have
been collaborating with software manufacturers for an expanded software production ( Cook
53 ). Multinational corporations and international authorities are threatened by these
innumerable white collar crimes since such crimes are most difficult to prevent, and/or detect
and highly profitable to the offenders ( Stern and Stern 525 ). This ever growing menace to
society is assisted by the sophisticated computer technology which has also provided
invaluable benefits to mankind. For instance, the advanced computer networks have recently
helped to save lives in a faraway Chinese province. From information received through the
Internet, a Chinese doctor was able to treat a desperate 13 year old girl, Yang Xiaoxia, of a
mysterious flesh eating disease which had also killed eleven people in Great Britain in 1994
( Turner 54 ). On the other hand, Internet has caused serious and unpreventable legal
problems, as passwords can be very easily broken, ideas stolen and wrong doings very
difficult, if not impossible to trace ( Meyer and Underwood 44 ). For example hackers in Florida
can pass comfortably through another computer in Finland, where they can strip any name
and address, and move on to still another computer in Asia, where such piracy is not
considered a serious crime ( Meyer and Underwood 45 ). For instance, 25% of computer
software is considered pirated in the U.S., (Internet of course making things easy since you
could send even large length programs to another user through E-mail) while in China, the
rate goes up to 98%. In 1994 only, companies estimated to have lost $8 billion due to piracy (
Hall and Vancura 108 ). Figure 1 How to prosecute offenders? Furthermore, Internet Frauds
are very difficult to prevent because a long time is required for most of them to be discovered.
For instance, law enforcers need not only at least equal scientific and technical ability as the
offenders, but also precious time and energy to examine company books and accounts to
unravel such crimes ( Croal 14 ). It is also felt that prosecution is often incorrect and counter
productive (Southerland 85). When the crimes are uncovered, the laws are too vague and too
limited for proper prosecution ( Stern & Stern 528 ). The complexity of Internet fraud makes it
very difficult for legislators to estimate the extent to such offenses, thus leaving many
loopholes to be exploited by alert offenders. Moreover, Internet “offenses and offenders do
appear to enjoy structural advantages, and the outcome of the policies pursued by law
enforcers is that many avoid public prosecution and punishment” ( Croal 91). Furthermore, it
is widely believed that so little has been done to prevent such computer crimes although
adequate defensive technology is available for such prevention because computer owners and
governments are arrogant and apathetic ( Schwartau 313-314 ). Nevertheless, at some point
in the very near future, they will not afford any longer to be so. Even now, there are many
debates going on in almost every country on whether of not this information highway should
be censored or not. By censorship, I do not only mean material that is pornographic or such,
but also certain information that is not really supposed to be exposed. Certainly though on the
other hand, since we are supposed to be free citizens, information is not supposed to be kept
from us since it is our right to know. As you can see, this debate is endless. In addition to the
enormous difficulty in its prevention, Internet fraud is even more difficult to detect. One
reason is that the police do not use the detection programs efficiently eventhough such
programs are regularly updated. Another reason for failure is that officers are not trained to
work with non-print methods. According to senior FLETC Legal Division instructor, these
detection programs are alien to law enforcement because “ cops have always followed a paper
trail, and now there might not be one “ ( Sussman 56 ). When certain frauds are able to be
done, it is the hackers pathos to find a way to do it. Not all frauds are done to obtain a
tangible benefit. Most hackers or computer freaks do so just to say that they did it. It is a
matter of self fulfillment. Needless to say, victims must also report crimes promptly. At
present, organizations, such as financial institutions, are reluctant to report such crimes
( Stern & How are they to be caught if the crime is not reported promptly? By the time it is,
the criminal has probably “ disappeared “. Finally, there seems to be no end for Internet fraud
in sight because it is highly profitable. Ironically, this same package assists teachers in
teaching various subjects in school curriculums ( Gill 200 ). One could say that Internet fraud
is a part of or is at least related with many other types of crimes, primarily white collar crimes,
piracy, illegal program sharing, illegal copies of programs and games…. the list goes on and
on. Everyone knows that when any child purchases a game from his neighborhood computer
shop and instead of paying 5000 Drs. for the original game made by the manufacturer, he/she
could buy the same game, with almost identically the same quality for 2000 Drs. from the
copy that the computer shop owner has made. This is not actually an Internet fraud in the
sense that you could achieve this even without having access to the Internet. This is true but
Internet can be used as a mean here. For instance, games and programs, as mentioned
previously can be copied or sent to others with the use of Internet. In any case it is illegal, yet
everyone knows about it. the actual problem is what we could do about it? Moreover many of
these Internet frauds are simply users sharing programs and games. It is estimated that ten
illegal copies of a software program are made for every one copy legally sold ( Stern and
Stern 527 ). Studies also show that white collar criminals average $100000 per crime in
comparison to the ordinary bank robber who only steals $1600 on a hold up ( Stern and Stern
525 ). These studies though are most likely to be incorrect since companies as mentioned
previously are reluctant to report all such white collar crimes involving their organizations.
Reasons notes an example: … whereas as employee who embezzles from the employer is
guilty of a white collar offense, the same employee may also be involved in price fixing or
misleading advertising as part of the policies, practices, and/or procedures of the organization.
In the latter offenses, the white collar offender is carrying our organizational goals. ( Wick and
Dailey 59 ). The costly problems of Internet fraud will become worse and worse if they are not
quickly dealt with. Some possible actions may be: 1. Laws can be made clearer and stricter 2.
Companies greater security• How are they to be caught if they are not reported? •Stern 525 ).
This is due to the fact that they are afraid of either admitting that they have been robbed or to
protect their public image. Consequently though, it is far too difficult for law enforcers to go
after the criminals since : to protect products 3. Companies willingness to report illegal
matters 4. Creation of defensive programs 5. Retrain police force 6. We ourselves should not
use illegally obtained data 7. We should not deal with countries that either ignore or
encourage such crimes and frauds 8. People should be better educated on the dangers of the
Internet from a young age. What is being implied here is not that we should get rid of the
Internet as to not to have such frauds. Doubtless, the Internet is a huge benefit towards
progress, unification, and to mankind in general. Nevertheless, just like most of the things in
our world, it is also dangerous in the sense that these same benefits that it provides to us, can
be provided to individuals that do not have the best intention in mind. Thus what we as simple
users could do is just to be careful. Bibliography Works Cited Cook, J. William. “Shifting into
the Fast Lane”. U.S. News & World Report Jan. 23, 1995. Croal, Hazel. White Collar - Criminal
Justice and Criminology. Buckingham-Philadelphia: Open University Press, 1992. Gill, K. S.
Artificial Intelligence for Society. New York: John Wiley and Sons, 1986. Hall, Cindy and
Vancoura, Cliff. “Booting up Bootleg Software.” USA Today April 12, 1995. Meyer, Michael with
Underwood, Anne. “Crimes of the Net.” NEWSWEEK Nov. 14, 1994. Schwartau, Winn.
Information Warfare: Chaos on the Electronic Superhighway. New York: Thunder’s Mouth
Press, 1994. Stern, Nancy and Stern, Robert. Computing in the Information Age. U.S.: John
Wiley and Sons, 1993. Sussman, Vic. “Policing Cyberspace.” U.S. News & World Report Jan.
23, 1995. Sutherland, Edwin H. White Collar Crime. New Haven, London: Yale University
Press, 1983. Turner, Mia. “ A Web for Masses.” TIME April 10, 1995. Wick, Peter and Dailey,
Timothy. White Collar and Economic Crime. Mass.-Toronto: Lexington Books, 1982. Word
Count: 1425

Credit card fraud

Now a days everyone has a credit card. Most people have multiple credits cards. With the rise of people
paying with plastic everywhere they go, there will be a rise in credit card fraud. Through the years thieves
have come up with many ways to steal credit cards and charge hundreds of dollars before anyone even knows
what happened. They use many techniques such as mail and Internet order fraud, account takeover,
skimming and carding. In total, credit card fraud cost card holders and issuers over 500 million a year. In
the long run everyone pays for this through increased prices to pay off the credit and charge fraud.(1)
Mail and Internet fraud is where the highest number of fraud cases happen. Everyone pays with credit cards
online and if someone steals your card they can easily order hundreds of dollars of products online. The
Internet also makes it much easier to use stolen cards because you don't have to prove the card is yours. It is
nearly impossible for a merchant to verify you own the card without actually being there to check the card
and your ID. Also carriers such as ups and FedEx don't check your ID to see if it matched the credit card. A
preventions made by merchants have been single card use numbers, but it didn't work as well as thought and
if merchants impose anymore preventions they could be losing business because of it.
There are two types of fraud that are categorized with identity theft. One being account takeover and the
other being application fraud. Account takeover fraud involves a thief calling the bank and trying to get the
account address changed so all the mail goes to a new address. Application fraud involves someone
impersonating you to open an account under your name. Some merchants have added some prevention to
this buy having the buyer send a copy of the physical card and a statement to be allowed to use the card.
Fraud

What is a Fraud? A fraud is when one party deceives or takes unfair advantage of
another. A fraud includes any act, omission, or concealment, involving a breach of legal or
equitable duty or trust, which results in disadvantage or injury to another. In a court of law
it is necessary to prove that a false representation was made as a statement of fact, that was
made with the intent to deceive and to induce the other party to act upon it. It must be
proven that the person who has been defrauded suffered a injury or damage from the act.
Who commits a fraud and why? It is generally accepted that 20 percent of
employees are honest. Another 20 percent are dishonest and don't mind doing wrong. That
means the remaining 60 percent are potentially dishonest, that's a total of 80 percent of
employees which may be dishonest. To understand fraud you first have to determine the
contributing factors to why people commit fraud. Some people commit fraud for the sport
and thrill of it. There are other recognizable reasons why honest people may commit a
breach of trust. Need is the most common reason. A desperate financial need is usually the
cause of most frauds. Still some people commit fraud to pay for an elevated life style
which other wise they could not afford. Needs arise from a number of locations these
include: Drug or alcohol addiction, Marriage break-ups and/of extravagant love affairs,
Gambling Debts, Business losses, Unexpected family crises, Mounting debts, and the
desire to live a lifestyle far beyond ones means.
Fraud is costing society several hundred billion a year. Organizations loose close
to 6 percent of annual revenue to fraud and abuse of social systems. Fraud costs Canadian
organizations $100 billion annually. On the average, organizations loose $9 dollars a day
per employee to fraud. On an average of fraudulent cases males received $185,000 and
females received $48,000. A study done by the insurance industry indicates the groups
most likely to commit fraud. The most typical person who may commit fraud is a
college/university educated white male. Men were responsible for almost four times the
fraud as were females. Losses caused by people with post-graduate degrees were five
times greater than those caused by high school graduates. Fifty eight percent of fraud is
committed by employees, which averages $60,000 per case. Twelve percent of fraud is
cause by owners, which on the average costs the insurance companies $1 million per case.
Fraud increases the cost of Canadians everyday living. It affects bank rates, insurance
rates, credit card rates, and product costs. All companies that suffer losses factor in the
loss to the premium and price the consumer pays.
Fraud is a white collar crime because no one physically gets hurt. The victims of
Fraud are usually: Small companies which have large clientele, such as Real estate,
financial industry, and education industries. Fifty percent of fraud involves corporations
with cash accounts. About ten percent of fraud arises from conflicts of interest, about five
percent of fraud cases come from fraudulent statements. Presently the funds obtained by
frauds are not recovered. Money obtained from crime is carefully hidden or spent avoiding
recovery by the victims and authorities. It is extremely difficult to locate hidden money's in
today's electronic age. Computers have increased the speed of transactions and thus often
not leaving sufficient documentation to track a potential fraud. There are numerous ways of
hiding fraudulent funds. Criminals often conceal illicit payments, launder their money, Hide
it in complex computer programs, on/off in book transactions, off shore transactions, and
net worth computations.
Fraud is on the rise and the resources to combat it are on the decline, thus making
fraud investigators jobs that much more important. Many crimes, particularly those which
are non violent crimes are going unattended by the police because they just don't have the
man power to combat it. They are willing to look into fraudulent claims but as of recent
they lack the time and resources to give these crimes all the attention they require. The
police are now working in co-operation with insurance companies, corporations, and
investigators to try to combat this ever increasing crime. Fraud investigators are required
to have a police back ground and a real understanding as to what fraud is, how it relates to
the criminal code, and how to identify it. A fraud investigator must investigate allegations
of fraud. The investigation may require that the investigator collect evidence, take
statements, maintain continuity of evidence, analyze the scam, prepare court briefs, work
with the authorities, testify to findings in court, assist in the detection and prevention of
fraud and white-collar crime. Fraud investigators must have a extensive educational back
ground. A bachelor's degree in criminology is recommended, a minimum of eight year
experience in a related field and actual experience in uncovering, documenting or
investigating fraud matters is needed. There is not nearly enough personnel to combat the
ever increasing problem of fraud.
In the insurance industry fraud increases every Canadians insurance premium, it is
estimated that almost $300 of everyone's premium is spent towards fraud. At a time in
society where conservation of money is extremely important and every cent counts, that
$300 dollar cost could be utilized for more important items and not for someone's
fraudulent schemes. Fraud is entrenched in Canada's social programs: Worker's
compensation, unemployment compensation, welfare, insurance, and ohip. Many other
crimes are fueled by the money generated by fraud, these include drug trafficking, gun
smuggling, as well as illegal immigrant smuggling. All of these factors force the Canadian
cost of living upwards. If we don't put a stop to fraud, it will ruin Canada's entire economic
structure.
One of the largest contributing factors to fraud is poor economic times, perhaps
when the economy and job markets pick up there will be a decline in fraudulent claims. But
until that time maybe our best defense against fraud is understanding how it works and
creating protection nets to shield us from it. Some very useful ways of protecting ourselves
from fraud are: Consulting a fraud investigator for protection tips, be an honest and fair
employer who can be respected, Have a written code of ethics which a organization
expects from its employees, check employees references for past behavior, examine
business/bank statements very closely, have a anonymous hot line or drop box where
people are encouraged turn in dishonest co-workers. Educating the public and showing
them what fraud is doing to business in Canada is very important. If the public realized
how large the fraud problem in Canada is they would try to do something to correct the
situation. Punishment for fraud is very minimal. There is almost no deterrence for this
crime. If we want to see any improvement in the combat of fraud we must increase the
penalty. Presently the rewards of fraud out weigh the risk of being caught. If a person is
convicted with fraud they usually receive probation, suspended sentences, or a conditional
discharge. This is not right, fraud is a crime against society. The penalty for fraud should
be much stiffer than it is. They should pay back every cent to the people they stole from as
well as pay back society.
Certified fraud investigators consider occupation fraud to be a serious problem and
on the increase, this is a direct result from a number of factors. There is a direct connection
between the potential dishonesty of employees between a certain age, sex, level of
education, and position in the company. Lack of internal protection against fraud in small
companies. Ignorance to the nature and cost of fraud to there company. A false belief that
fraud is not occurring in there company. Until society realizes what fraud is doing and
decides to protect itself from fraud, the problem will only increase. Fraud is a growth
industry because businesses unwittingly created opportunities for fraud to exist. The price
for this ignorance is enormous on society as a whole. To eliminate fraud industries must
eliminate all opportunities for fraud to thrive. With penalties the way they presently are, it
is easy to see why criminals are committing more fraud. If a bank was robbed and the
robber received $14,000 from the robbery, as a penalty they might receive fourteen years.
A person who commits a fraud and realized $14,000, they might receive a penalty of six
months. Elimination of fraud will not be a instantaneous event, it will take years to do or
perhaps we will never truly get rid of it. If we as society want to survive we must work
together as a whole to eliminate fraud to the best of our abilities. Fraud should be
considered a very serious offense and the penalties should be more severe. White collar
crimes hurt everyone, as well as our economic future.
Fraud
Case Study: Enron
Background
Once the seventh largest company in America, Enron was formed in 1985 when InterNorth acquired
Houston Natural Gas. The company branched into many non-energy-related fields over the next several
years, including such areas as Internet bandwidth, risk management, and weather derivatives (a type of
weather insurance for seasonal businesses). Although their core business remained in the transmission and
distribution of power, their phenomenal growth was occurring through their other interests. Fortune
Magazine selected Enron as "America's most innovative company" for six straight years from 1996 to 2001.
Then came the investigations into their complex network of off-shore partnerships and accounting
practices.
How the Fraud Happened
The Enron fraud case is extremely complex. Some say Enron's demise is rooted in the fact that in 1992, Jeff
Skilling, then president of Enron's trading operations, convinced federal regulators to permit Enron to use
an accounting method known as "mark to market." This was a technique that was previously only used by
brokerage and trading companies. With mark to market accounting, the price or value of a security is
recorded on a daily basis to calculate profits and losses. Using this method allowed Enron to count projected
earnings from long-term energy contracts as current income. This was money that might not be collected for
many years. It is thought that this technique was used to inflate revenue numbers by manipulating
projections for future revenue.
Use of this technique (as well as some of Enron's other questionable practices) made it difficult to see how
Enron was really making money. The numbers were on the books so the stock prices remained high, but
Enron wasn't paying high taxes. Robert Hermann, the company's general tax counsel at the time, was told by
Skilling that their accounting method allowed Enron to make money and grow without bringing in a lot of
taxable cash.