Financial Services Anti–Fraud Risk and Control Workbook

<p>Preface ix</p>
<p>Acknowledgments xiii</p>
<p>Introduction: Brief History of Fraud in the Financial Services Industry xv</p>
<p>Chapter 1 Why No Financial Services Institution Is Immune to Fraud 1</p>
<p>Statistical Perspective 1</p>
<p>What Is Fraud? 4</p>
<p>Myths and Realities about Financial Services Fraud 5</p>
<p>Review Points 9</p>
<p>Chapter Quiz 9</p>
<p>Chapter 2 The Human Element of Fraud 11</p>
<p>Who Are the Bad Guys? 11</p>
<p>Insider Threat 12</p>
<p>The Fraud Triangle 13</p>
<p>The Fraud Triangle in Financial Services 15</p>
<p>Pressure at Lehman: An Extreme Example 15</p>
<p>Opportunity and Rationalization 16</p>
<p>Rationalizing High–Level Fraud 19</p>
<p>A Fraud Diamond? 21</p>
<p>Review Points 21</p>
<p>Chapter Quiz 22</p>
<p>Chapter 3 Internal Fraud: Loan and Mortgage Fraud 25</p>
<p>Loan Fraud (Nonresidential Mortgage) 25</p>
<p>Mortgage Fraud 31</p>
<p>Types of Internal Mortgage Fraud to Beware Of 32</p>
<p>Red Flags of Employee–Level Loan and Mortgage Fraud 33</p>
<p>Preventing Employee–Level Loan and Mortgage Fraud 36</p>
<p>Review Points 47</p>
<p>Chapter Quiz 48</p>
<p>Chapter 4 Employee–Level Embezzlement 51</p>
<p>Looting Customer Accounts 51</p>
<p>Looting Noncustomer Funds 55</p>
<p>Theft of Confi dential Information 73</p>
<p>Insider Abuse of Computer Systems 75</p>
<p>Red Flags of Employee–Level Embezzlement 76</p>
<p>Preventing Employee–Level Embezzlement and Information Theft 81</p>
<p>Review Points 90</p>
<p>Chapter Quiz 90</p>
<p>Chapter 5 Internal Fraud: Management Level 93</p>
<p>Looting and Embezzlement 94</p>
<p>Illegal Financial Transactions/Corruption 97</p>
<p>Fraudulent Financial Reporting 102</p>
<p>Deceiving Borrowers, Investors, and Regulators 106</p>
<p>Red Flags of Management–Level Internal Fraud 109</p>
<p>Management–Level Fraud Prevention Checklists 113</p>
<p>Review Points 119</p>
<p>Chapter Quiz 120</p>
<p>Chapter 6 External Fraud against Financial Services Companies 123</p>
<p>Externally Perpetrated Loan Fraud (Nonmortgage) 123</p>
<p>Externally Perpetrated Mortgage Fraud Schemes 127</p>
<p>New Forms of Identity Theft and Fraud 139</p>
<p>Red Flags of External Fraud 152</p>
<p>External Fraud Prevention Checklists 160</p>
<p>Review Points 170</p>
<p>Chapter Quiz 171</p>
<p>Chapter 7 Conducting a Successful Fraud Risk Assessment 175</p>
<p>Getting It Done 175</p>
<p>Procedures for Conducting a Fraud Risk Assessment 177</p>
<p>Roles of the Board and Management in Fraud Risk Assessments 181</p>
<p>Review Points 183</p>
<p>Chapter Quiz 183</p>
<p>Chapter 8 Legal and Regulatory Compliance for Controlling Fraud Risk 185</p>
<p>Fraud Rules to Take Seriously 187</p>
<p>Hypothetical Case: Compliance and InfoSecurity 192</p>
<p>Develop and Implement a Response Program 193</p>
<p>Future Regulation: A Prediction 197</p>
<p>Review Points 197</p>
<p>Chapter Quiz 198</p>
<p>Chapter 9 Fraud Detection in Financial Services Companies 201</p>
<p>Basic Detection Methods 203</p>
<p>Advanced Fraud Detection Tools and Techniques 208</p>
<p>Essentials of Fraud Auditing in Financial Institutions 212</p>
<p>Essentials of Automated Auditing 215</p>
<p>Conclusion 215</p>
<p>Review Points 216</p>
<p>Chapter Quiz 218</p>
<p>Appendix A: Answers to Chapter Quizzes 221</p>
<p>Appendix B: Answer Key for Case Studies 225</p>
<p>Notes 237</p>
<p>Glossary 249</p>
<p>About the Author 255</p>
<p>Index 257</p>