Bank Fraud Forum would like to welcome guest blogger Tom Chmielewski, VP Product Management at Lexis Nexis. Tom shares Bank Fraud Forum’s belief that open discussion and collaboration ultimately lead to improved fraud detection. He recently finished reading Insidious and had these comments.

Insidious is a great summary of what we all know, but don’t want to talk about.  The examples and interviews helped drive the messages home - they were great.  Almost all of the references were current (2009), which is not something I always see, and that helped reinforce that this is a ‘today/current’ problem.

The references in Chapter 6 to the growing cultural acceptance of fraud ( “hey, everyone is doing it…”) is unfortunately true.  We continue to see the fraud being committed everywhere, not just in the financial market.  And we hear of more executives being indicted. I fear the rank and file will succumb to the thinking that ‘if the executives think it’s OK to do, why shouldn’t I as well.’ 

Though not 100% of the time, I do often hear bank executives tell me of their policy of going after only significant fraud, or fraud over a certain threshold (due to budget, resources, whatever). I always shake my head at this.  The chapter on the real value of addressing internal fraud was spot on here.  As the book points out, for the most part, fraud starts small, and if left unchecked, it grows. Imagine Wal-Mart having a sign that read “Shoplifting under $50 will not be prosecuted.”  Or banks saying robberies under $5,000 will not be prosecuted - due to lack of resources.  It has been published and I have personally heard the FBI say that they don’t have enough resources to go after mortgage fraud schemes that have less than $1M in losses.    An agent told me that the FBI will not even go after straw-buyers (individuals that allow or sell their credit to perpetrators of fraud) unless the straw buyer shows up in at least five or more cases.    That mentality allows small fraud to occur everywhere. And eventually grow larger.

For me, the chapter in Insidious that talked about people, process & technology (PPT) was a little down on it.  “First, consider the shortcomings of the traditional prescription, the kind that you’ll hear from a lot of very well-paid and generally well-intentioned consultants. Though consultants may state their case differently, it generally boils down to taking a careful look at your people, processes, and technology.” At the end of the day, that is all you can look at - really, there isn’t anything else.  PPT needs to be tailored to each company to be useful, and enforced,  but in my opinion, the chapter started off by making you think there was something else than PPT.

A lot of what is in the book is what we have been talking about at LexisNexis (ChoicePoint), including the references to Don Cressey.  Kevin Ashworth and I co-authored a white paper back in July of 2008 and the content mirrors a lot of that in Insidious. Here is a link to a public version of the whitepaper.

BC and Shirley, I really enjoyed the book. Your efforts to advance the discussion of this ‘insidious’ fraud are commendable.

Opinions expressed here and in any corresponding comments are the personal opinions of the original author, not of LexisNexis

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