02 Jan 2023
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How AI and Machine Learning Help Fight Fraud

Roger Rossmeisl, CPA
Fraud Briefs
How AI and Machine Learning Help Fight Fraud

The biannual Association of Certified Fraud Examiners “Report to the Nations” has repeatedly concluded that the longer fraud schemes remain undetected, the greater the losses for the victimized organizations. According to the 2022 report, the average fraud lasts 12 months and leads to a median loss of $117,000. But schemes that last 25 to 36 months result in a median loss of $300,000, and if fraudsters are able to conceal their theft for five years, the median loss rises to $800,000. Fortunately, advancements in artificial intelligence (AI) and machine learning (ML) have changed the landscape of fraud detection — and shortened the lifespan of fraud schemes. What do these terms mean, and how does the technology help organizations fight fraud? Explaining the technologies AI simulates human intelligence and...

10 Dec 2022
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What Are Your Job Applicants Hiding?

Roger Rossmeisl, CPA
Fraud Briefs
What Are Your Job Applicants Hiding?

Checkster, a reference checking company, has found that 78% of job candidates either misrepresent or consider misrepresenting themselves during the hiring process. And a survey by career advice company ResumeLab reveals that 56% of applicants either lied or “stretched the truth” in recent interviews. Findings of other studies vary, but the takeaway is generally consistent: Don’t assume résumé claims or interview answers are truthful. Verify applicant representations and consider performing formal background checks. Why it matters Some job candidate misrepresentations are relatively benign. A Monster “Future of Work” study finds that many applicants (60%) say they’ve mastered a skill when, in reality, their knowledge is basic. A beginner level Excel user may claim mastery in the software, but if the job calls for little or no Excel...

09 Dec 2022
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Don’t Fall for Invoice Fraud Schemes

Roger Rossmeisl, CPA
Fraud Briefs
Don't Fall for Invoice Fraud Schemes

Middle-market businesses lose an average of almost $300,000 annually to invoice fraud, according to a recent survey by software company Medius and researcher Censuswide. Invoice fraud can be challenging to spot — and even more difficult to recover from — but your company can take steps to prevent it from happening. Common types The most common type of invoice fraud is fraudulent billing. In billing schemes, a real or fake vendor sends an invoice for goods or services that the business never received (and may not have ordered in the first place). Overbilling schemes are similar. Your company may have received goods it ordered, but the vendor’s invoice is higher than agreed upon. Duplicate billing is where a fraud perpetrator sends you the same invoice more than...

13 Nov 2022
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Fraud’s New Frontier: NFTs

Roger Rossmeisl, CPA
Fraud Briefs
Frauds New Frontier: NFTs

When new technologies emerge, it can take time for the general public to learn how they work. Non-fungible tokens, or NFTs, first appeared in 2014, yet many people are still confused about what they are and how to buy and store them. This gives criminals who understand the technology an advantage. In addition to money laundering, tax evasion and terrorist funding, NFTs are being used to commit fraud and steal from unsuspecting asset buyers. For example, more than $100 million in NFTs was stolen between July 2021 and July 2022, according to analytics company Elliptic. Snapshot view In their simplest form, NFTs are immutable digital assets — often related to art, sports, music, digital culture and avatars — linked to the blockchain, the digital ledger used to...

13 Nov 2022
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Preventing “Privileged User” Fraud and Abuse

Roger Rossmeisl, CPA
Fraud Briefs
Preventing Privileged User Fraud and Abuse

In most companies, employees need a user identity to access work-related hardware and software. Privileges to use certain applications or open certain files usually are provided to workers based on their department, role and level of authority. Over their tenure, employees might accumulate various privileges they no longer need. For example, someone who once worked in accounting might retain the ability to make journal entries even after transferring to the legal department. Unfortunately, dishonest employees could use their privileges for nefarious purposes. Best practices Privileged users sometimes use their access to perpetrate fraud, intellectual property theft or sabotage. And they don’t always act alone. Third parties, such as competitors, could try to recruit privileged users to steal trade secrets. Or employees could collude with hackers to compromise...

23 Oct 2022
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Don’t Let Tax ID Thieves Steal Your Refund

Roger Rossmeisl, CPA
Fraud Briefs
Dont Let Tax ID Thieves Steal Your Refund

Any form of identity theft can be costly, unsettling, and take months — sometimes years — to fully recover from and repair. But tax-related identity theft can be particularly disturbing because it involves the IRS, about which many people already harbor suspicion and anxiety. Although the IRS has taken significant steps in recent years to help minimize the occurrence of tax-related identity theft, this type of fraud continues to occur. Here’s how to avoid becoming a victim. Individuals and businesses are vulnerable If criminals use your information to file an income tax return to claim your refund, the first notification of fraud you receive may be a denial of your return. Tax returns are identified via Social Security numbers (SSNs) and the IRS won’t accept two returns...

25 Sep 2022
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IRS Announces the “Dirty Dozen” Tax Scams for 2022

Roger Rossmeisl, CPA
Current Events, Fraud Briefs
IRS Announces Dirty Dozen Tax Scams for 2022

The IRS has compiled the annual Dirty Dozen list for more than 20 years as a way of alerting taxpayers and the tax professional community about scams and schemes. The list is not a legal document or a literal listing of agency enforcement priorities. It is designed to raise awareness among a variety of audiences that may not always be aware of developments involving tax administration. #1-4 - POTENTIALLY ABUSIVE ARRANGEMENTS (Source: IR-2022-113, June 1, 2022)   The potentially abusive arrangements in this series focus on four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those four abusive transactions involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.   "Taxpayers should stop and think twice before...

25 Sep 2022
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Don’t Let Fraud Break the Bonds of Your Family Business

Roger Rossmeisl, CPA
Fraud Briefs
Dont Let Fraud Break the Bonds of Your Family Business

According to Family Enterprise USA, 87% of U.S. companies are family businesses, which are responsible for 54% of gross domestic product or $7.7 trillion. Although family businesses are an economic pillar of strength, several studies have found that they’re more vulnerable to occupational fraud than other companies. Here’s what you need to know if you run a family business. Loyalty can hamper prevention Why might family businesses be more vulnerable to fraud than other companies? For one thing, prevention efforts can be hampered by loyalty and affection. One of the biggest obstacles to fraud prevention is simply not being able to acknowledge that someone in the family would be capable of initiating or overlooking unethical or illegal activities. Like any other business, family enterprises must include a system...

24 Sep 2022
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Protect Your Public Company with an Insider Trading Policy

Roger Rossmeisl, CPA
Fraud Briefs
Protect Your Public Company with an Insider Trading Policy

Successful stock trading requires access to information — preferably publicly available information. However, some investors attempt to get a jump on the market by using insider knowledge to make buying, selling and holding decisions. Federal and state laws prohibit trading by anyone with material nonpublic information about a stock’s underlying company. And it’s illegal for holders of material nonpublic information to share it with others who then use the tips to trade. Insider trading policies aren’t required of public companies. However, having a policy can reduce your company’s risk and help insiders understand what actions might constitute a violation of securities law. 5 elements A good insider trading policy typically answers the following questions: 1. Why does the policy exist and whom does it cover? Your policy should define...

24 Sep 2022
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Using Adverse Media to Head Off Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Using Adverse Media to Head Off Fraud

Many financial companies search for negative news, also known as “adverse media,” as part of their due diligence process for potential customers. But this type of screening isn’t only effective for banks. Any company can use adverse media to scrutinize customers, vendors and business partners. Screening these subjects can help uncover issues — such as accusations of fraud or litigation for nonpayment — that could negatively affect a business relationship. 4 steps Given the vast amount of data available online, conducting adverse media screening requires a methodical approach. Consider taking these steps: Develop a policy. To ensure that your organization’s use of adverse media screening meets your needs without creating legal risk, draft a policy governing its usage. Make sure that your legal team reviews the policy,...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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