Financial Services Anti-Fraud Risk and Control Workbook

290 Pages·2010·3.98 MB·English

by  Peter Goldmann

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Financial Services Anti-Fraud
Risk and Control Workbook
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Financial Services Anti-Fraud
Risk and Control Workbook
PETER D. GOLDMANN
JOHN WILEY & SONS, INC.
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Copyright © 2010 by Peter Goldmann. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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ISBN: 978-0-470-49899-6
Printed in the United States of America
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Preface ix
Acknowledgments xiii
Introduction: Brief History of Fraud in the Financial Services Industry xv
Chapter 1 Why No Financial Services Institution
Is Immune to Fraud 1
Statistical Perspective 1
What Is Fraud? 4
Myths and Realities about Financial Services Fraud 5
Review Points 9
Chapter Quiz 9
Chapter 2 The Human Element of Fraud 11
Who Are the Bad Guys? 11
Insider Threat 12
The Fraud Triangle 13
The Fraud Triangle in Financial Services 15
Pressure at Lehman: An Extreme Example 15
Opportunity and Rationalization 16
Rationalizing High-Level Fraud 19
A Fraud Diamond? 21
Review Points 21
Chapter Quiz 22
Chapter 3 Internal Fraud: Loan and Mortgage Fraud 25
Loan Fraud (Nonresidential Mortgage) 25
Mortgage Fraud 31
Types of Internal Mortgage Fraud to Beware Of 32
Red Flags of Employee-Level Loan and Mortgage Fraud 33
Preventing Employee-Level Loan and Mortgage Fraud 36
Review Points 47
Chapter Quiz 48
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S Chapter 4 Employee-Level Embezzlement 51
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Theft of Confi dential Information 73
Insider Abuse of Computer Systems 75
Red Flags of Employee-Level Embezzlement 76
Preventing Employee-Level Embezzlement and Information Theft 81
Review Points 90
Chapter Quiz 90
Chapter 5 Internal Fraud: Management Level 93
Looting and Embezzlement 94
Illegal Financial Transactions/Corruption 97
Fraudulent Financial Reporting 102
Deceiving Borrowers, Investors, and Regulators 106
Red Flags of Management-Level Internal Fraud 109
Management-Level Fraud Prevention Checklists 113
Review Points 119
Chapter Quiz 120
Chapter 6 External Fraud against Financial Services
Companies 123
Externally Perpetrated Loan Fraud (Nonmortgage) 123
Externally Perpetrated Mortgage Fraud Schemes 127
New Forms of Identity Theft and Fraud 139
Red Flags of External Fraud 152
External Fraud Prevention Checklists 160
Review Points 170
Chapter Quiz 171
Chapter 7 Conducting a Successful Fraud Risk Assessment 175
Getting It Done 175
Procedures for Conducting a Fraud Risk Assessment 177
Roles of the Board and Management in Fraud Risk Assessments 181
Review Points 183
Chapter Quiz 183
Chapter 8 Legal and Regulatory Compliance for
Controlling Fraud Risk 185
Fraud Rules to Take Seriously 187
Hypothetical Case: Compliance and InfoSecurity 192
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Develop and Implement a Response Program 193 S
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Future Regulation: A Prediction 197 N
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Review Points 197 N
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Chapter Quiz 198 C
Chapter 9 Fraud Detection in Financial Services
Companies 201
Basic Detection Methods 203
Advanced Fraud Detection Tools and Techniques 208
Essentials of Fraud Auditing in Financial Institutions 212
Essentials of Automated Auditing 215
Conclusion 215
Review Points 216
Chapter Quiz 218
Appendix A: Answers to Chapter Quizzes 221
Appendix B: Answer Key for Case Studies 225
Notes 237
Glossary 249
About the Author 255
Index 257
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