May 2005 Topics
Geolocation, Finger Inking, Cahoots,
Chinese Wall, Clue, Dormancy Fee, and XBRL
 

75% of fraudulent online orders
with U.S. billing addresses
are placed from overseas.
 

Fraud In Other Words
Professional Jargon and Uncensored Street Slang
by Larry C. Adams, CFE, CPA, CIA, CISA

 

Geolocation
Pinpointing the current real-world location of a customer while he is making a transaction on the Internet. Geolocation software is used to flag fraud risks, customize advertising, direct users to the proper localized version of a Web site, and comply with restrictions on local sales, licensing, and exports. Online retailers, financial institutions, and casinos use geolocation. It helps to screen their customers, reduce credit card chargebacks, and find their enemies. A study by LexisNexis found that a retailer’s customer billing address did not match the state from which the order was actually placed in 85 percent of fraudulent domestic transactions. The study also found that 75 percent of fraudulent orders with U.S. billing addresses had been placed from overseas. Geolocation can estimate the location of a customer’s registered IP (Internet Protocol) address by region, city, latitude, and longitude. It can calculate the distances between the IP address, billing location and delivery location. Geolocation can match the IP address with the country address and country code. It can determine if an anonymous proxy server is used to hide the customer’s IP address. It can rate the likelihood that an open proxy server or other spam source is used. MaxMind’s guidelines say 40 percent of fraudulent transactions come from open proxies, which are used by organized credit card fraud rings. Geolocation is transparent to the customer. Automated verification can be supplemented with manual verification for high-value transactions. Geolocation can block suspicious transactions and identify red flags, so customer service representatives can ask follow-up security questions.
“How Geolocation Can Reduce the Risk of Online Fraud,” Internet Retailer, www.internetretailer.com/dailyNews.asp?id=13766, Jan. 6, 2005.

 

Finger Inking (Electoral Finger Staining, EFS)
In many countries, ink is applied to one finger on each voter, to deter them from voting more than once in an election. In Belize, the forefinger of a voter’s right hand is marked once with indelible ink. If there is no forefinger, the presiding election officer marks an alternate finger or part of the body. Indelible ink cannot be easily washed off, bleached, removed with solvents or degraded by light. It remains bonded to the skin for several days. In Nigeria, a poll clerk first inspects a voter’s thumbs and won't issue a ballot if any sign of ink exists. Next, the clerk wipes dirt, grease, oil, and nail polish from a voter’s left thumb (or right thumb on presidential election day). Then the clerk uses a small stick to apply indelible ink to the base of the thumbnail and cuticle. The voter isn't allowed to leave the clerk’s table until the ink is dry, which is generally in about 30 seconds depending on the humidity. In Haiti, a voter who refuses finger inking won't have his electoral card returned after he casts his ballot. Voters in Iraq dip their thumb or forefinger into a pot of purple indelible ink. In India, dots of indelible ink are drawn on two corners of the fingernail base and cuticle. Both dots are inked a second time before the voter puts his signature or thumbprint on the ballot’s counterfoil, the detachable stub retained by the ballot issuer. In Afghanistan in 2004, a few inexperienced electoral workers used the wrong ink, which could be rubbed off easily, but the problem was corrected quickly. In Canada, some electoral commissions mark the open palm of a voter’s hand using indelible ink, a stamp pad, and a roll-on rubber stamp of the commission’s logo. Some countries use permanent marking pens. In Kosovo, Bosnia and Herzegovina, a poll queue controller uses a battery-powered ultraviolet (UV) light to inspect a voter’s hands for UV ink, which is evidence the person already voted in the previous seven days. The ballot issuer uses a pump bottle to spray the right index finger of a voter with waterproof invisible ink containing photosensitive silver nitrate.
“Election Integrity: Inking Procedures,” ACE Project, www.aceproject.org/main/english/ei/eix_m026.htm, Jan. 30, 2005.
Photo 1: Associated Press, "Millions Cast Ballots Despite Violence," www.foxnews.com/story/0,2933,145825,00.html, Jan. 31, 2005.
Photo 2: BBC News, "Afghan Vote Boycott Creates Turmoil," news.bbc.co.uk/2/hi/south_asia/3727324.stm

 

Cahoots (In cahoots with)
“In cahoots” is an 18th century North American phrase for colluding or conspiring together secretly. It was derived from “cahute,” an Old French word for a hut, or “kajuit,” a Dutch word for cabin, or “cahorte,” a French word for a gang. "In cahoots" suggests that two or more persons lived or met in small quarters to form a questionable collaboration or a partnership in crime.
Oxford Dictionaries, www.askoxford.com, February 2, 2005.

 

Chinese Wall (Dutch Dyke)
A barrier that's created to discourage conflicts of interest, prohibit an exchange of insider information, provide a separation of duties, or uphold the good reputation of a business. A Chinese wall policy or procedure combines ethics, commercial discretion, and controls for regulatory compliance. The term refers to the Great Wall of China, an isolation barrier that runs for 4,163 miles (6,700 km) and includes a system of watchtowers. Investment bankers frequently have access to sensitive non-public information that could substantially influence the price of a client’s securities. A Chinese wall policy for a brokerage firm prohibits investment bankers from leaking that information to the firm’s traders and retail sales personnel. Another common communications barrier is created between the investment banking and research divisions. In 2002, Salomon Smith Barney paid US$400 million and Merrill Lynch paid US$100 million to settle conflict of interest charges. In Australia, solicitors within a law firm might be permitted to act for opposing clients, if procedures are adopted to stop confidential information from passing between them. Some Chinese wall policies require separate buildings, locations, departments, or dining arrangements. Separate support staffs, computers, printers, fax machines, photocopiers, and records storage areas might be required. Security officers, computer programmers and database administrators might use Chinese wall logic to restrict users from gaining access to specific database files and archival reports. Employee training programs can discuss types of breaches and how to maintain proper records if they occur. Compliance officers should monitor the effectiveness of Chinese walls and the disciplinary actions taken for any breach. A Chinese wall should be established as an overall policy and not used for just a selected case or client.
“What is a Chinese Wall?” Law Institute of Victoria, Australia, www.liv.asn.au/regulation/ethics/about/ethics-Conflict.html, Feb. 10, 2005.

 

Clue (Clew, Clewe)
A fact or piece of evidence that helps to investigate a mystery. Anything that guides a person to the solution of a problem or puzzle. Originally, clewe was a Middle English word for a ball of yarn, string or thread. According to Greek mythology, Theseus and 13 young men and women were sent into an incredibly difficult labyrinth in Crete to be sacrificed to the Minotaur, a man with the head of a bull. Theseus unraveled a ball of thread along his way into the complex maze and later used that clue to help them find their way out.
“The Heroes – Theseus,” www.cliffsnotes.com/WileyCDA/LitNote/id-83,pageNum-56.html, Feb. 11, 2005.

 

Dormancy Fee (Inactivity Fee, Servicing Fee)
A fee that the issuing retailer or bank deducts from the remaining value on a gift card, shopping card, prepaid ATM card or gift certificate if it isn't used during a certain period of time. The issuer does it to boost its revenue and reduce the card liability on their financial statements. Retailers claim it pays for their recordkeeping costs, but most don’t keep separate records for each card issued. The consumer doesn’t get what she expects because of these hidden fees. The value of the card is eaten away. Many issuers don't disclose the fee on the exterior of the retail package or gift box for the card. Often the fee is mentioned in very fine print on the back of the card, which is not seen when it is attached to the retail package with rubber cement. Sales of gift cards totaled US$55 billion in 2004, according to the National Retail Federation. Some cards assess a monthly dormancy fee if an account is not used for three to 24 consecutive months. The fee may be retroactive for the entire inactive period – a card inactive for 12 months would be charged US$36. Some issuers charge a monthly “servicing fee” whether a card is used or not. Some cards have an expiration date, so the issuer can charge a fee equal to the remaining balance on the card. Consumers fail to redeem 33 percent of the value of gift cards. A cardholder isn't aware of the charges until she tries to redeem the card. Some banks charge monthly dormancy fees for checking or savings accounts that have been inactive for three to six months. Twenty-three states have enacted laws to limit dormancy fees, mandate disclosure standards, and close loopholes in sales tax and escheat laws.
Howard Fischer, “Officials seek gift card rules: Want law disclosing fees charged for use,” Arizona Republic, Dec. 4, 2004, pages B1 and B8.

 

XBRL
The eXtensible Business Reporting Language (XBRL) is designed for better electronic communication of business and financial data. An international non-profit consortium of 250 major companies, organizations, and government agencies is developing XBRL. XBRL allows accountants, industries, and regulatory bodies to use standard definitions and identify items that are unique to business reporting. Each item within a financial statement can be marked with an identifying data tag (XBRL tag). It creates the ability for users to index, search, extract, analyze, and display financial information. The XBRL financial data set is used by NASDAQ, AMEX and OTCBB to determine their companies' qualifications and listings standards. Microsoft and other software vendors are adding XBRL features to their spreadsheet and accounting applications. XBRL documents can be opened using Internet browsers. XBRL has an advantage over HTML (Hypertext Markup Language). It offers an easy way for analysts, investors, suppliers, insurers, tax agencies, and lenders to do side-by-side and line-by-line comparisons of corporate results. An XBRL document can be easily converted to different formats to reduce duplication and rekeying errors. XBRL is based on XML (eXtensible Markup Language). Auditors need to review their clients’ controls and procedures used in the XBRL tagging process and the taxonomies (definitions) being used. Starting with the 2004 year-end financial results, the U.S. Securities and Exchange Commission (SEC) allows companies to submit supplemental electronic reports, formatted with XBRL data tags, to its EDGAR database (Electronic Data Gathering, Analysis, and Retrieval system).
XBRL International, www.xbrl.org, Feb. 9, 2005.

 

ã Copyright 2005 Larry C. Adams. All rights reserved.
 

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