How to Fail at Corporate Fraud

Working with forensics experts from the FBI, Ernst & Young’s Fraud Investigation and Dispute Services Practice developed a piece of linguistic, fraud-monitoring software that identified language commonly used among employees engaged in corporate malfeasance. The accounting giant plans to offer their newly developed fraud-detection capacity as a service to their clients.

FBI, E&YWorking with forensics experts from the FBI, Ernst & Young’s Fraud Investigation and Dispute Services Practice developed a piece of linguistic, fraud-monitoring software that identified language commonly used among employees engaged in corporate malfeasance. The accounting giant plans to offer their newly developed fraud-detection capacity as a service to their clients.

So, if you are thinking about charging some “special fees” or exploiting a “grey area” in order to pick up some “off the books,” “friendly payments” that “nobody will find out” about, think twice, even if you think your employer “won’t miss it,” because E&Y determined that these and some 3,000 other phrases commonly indicate the existence of employees attempting to defraud their employers.

The most common fraud phrases, according to an E&Y press release, are “cover up,” ”write off,” “failed investment,” “off the books,” “nobody will find out,” and “grey area.” E&Y and the FBI produced these common fraud phrases by monitoring email conversations that take place within what they call the “fraud triangle,” which is apparently that dubious place where “pressure, rationalization, and opportunity meet.”

The software revealed that rogue employees under pressure to commit various wrongdoings often sent emails containing the phrases “not comfortable,” “want to be part of this,” “don’t leave a trail,” and “make the number.” The technology also found that such employees rationalize their behavior via email with phrases like “told me to,” “not hurting anyone,” “won’t miss it,“ and “fix it later.” The report highlighted other phrases like “off the books,” “off balance sheet transactions,” and “pull earnings forward” as common indicators of employees with the opportunity to commit fraud.

The software will also scan for emails in which it appears that employees are attempting to avoid the possibility of being overheard by others, for example the words “call my mobile” or “come by my office” raise flags in the detection system. In addition, the software also tracks and evaluates code words and notes obvious and uncharacteristic changes in tone.

E&Y claims that targeted analyses in concert with human judgment could save companies’ millions by rooting out fraud preemptively instead of reactively.

“Most often such email traffic is only seized upon by regulators or fraud investigators when the damage has been done,” said Ernst & Young Fraud Investigation & Disputes Services director, Dr. Rashmi Joshi. “Firms are increasingly seeking to proactively search for specific trends and red flags – initially anonymously –but with the potential for investigation where a consistent pattern of potential fraud is flagged.”

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