May 2006 Fraud Terminology Topics
Lock the Barn Door After the Horse Is Stolen,
Debit Block, Blow and Go, Dot Con Artist,
Starburst, RECOL, Relator, Rolling Revenue,
and Blue Snarfing
 

Fraudulent ACH debits were used to make withdrawals
from the bank accounts of 45% of large organizations
and 28% of smaller organizations in 2004.
 

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

 

Lock the Barn Door After the Horse Is Stolen
This ancient proverb cautions people to keep their valuable property safe - before it’s too late. A variation of the proverb appeared in “Asinaria,” a popular comedy about cheating and swindling, written by Roman playwright Titus Maccius Plautus (c. 254 – 183 B.C.). Plautus scripted the Latin phrase, “Ne post tempus prœdœ prœsidium parem,” which means, After the time of plunder, one provides protection. In modern times, people use cars and garages instead of horses and barns. Some owners don’t lock their garages until after their vehicles are stolen. Others don’t obtain automobile insurance until after they have accidents. Too many wi-fi computer users don’t turn on the encryption features until after a competitor or identity thief has accessed the user’s programs and stealthily copied critical files and e-mail. Robert Baden-Powell, a British army officer who founded the Boy Scouts in 1908, chose a simpler motto for his organization - “Be Prepared.” Unfortunately, many companies delay implementing anti-fraud controls and employee training until after their companies, shareholders, employees, or customers become victims of fraud. Early protection steps are the best; but it’s still a wise action to lock the barn door even after the horse is gone. Fraudsters prefer easy access targets and the thieves might come back for more.
Charles Earl Funk, “Heavens to Betsy,” Galahad Books, New York, 1955.
Photo: Int'l Fund for Horses, www.fund4horses.org/info.php?id=405.

 

Debit Block
A fraud control service offered by an ACH (Automated Clearing House) or a bank to prohibit or restrict electronic withdrawals from the bank account of a business or a consumer. An ACH debit block feature for a bank account works similar to a “stop payment order” used for a paper check. Fraudulent ACH debits were used to make withdrawals from the bank accounts of 45% of large organizations and 28% of smaller organizations in 2004, according the “Payments Fraud and Control Survey” (2005) from the Association of Financial Professionals (AFP). A debit block can be created to allow no ACH debits to an account, or to allow only ACH debits by payees on an approved list. An approved list might include utility companies, vendors, customs offices, or tax agencies that are paid electronically. A debit block can designate certain dates on which withdrawals can be made, or set a dollar ceiling limit. All unblocked bank accounts should be reconciled daily to look for suspicious transactions. A fraud ring can quickly withdraw your funds by initiating ACH debits and using your bank account number and nine-digit ABA (American Banking Association) Routing Number. Unauthorized transactions and errors should be reported to the bank within two days for corporate accounts and 60 days for consumer accounts. If problems are not reported promptly, a company might not be able to fully recover the lost funds. ACH debits are subject to different regulations than checks, wire transfers, consumer credit cards, corporate purchasing cards, or consumer debit cards.
“Everyone Is Learning to Love ACH – Including the Crooks,” Treasury & Risk Management, New York, January 2004.

 

Blow and Go
An air duct cleaning scam. The scheme is called a “blow and go” because it stirs up the dust, pollen, mold, and other contaminants rather than effectively removing them, and the rushed job is finished in an hour. The fraudster uses a small vacuum cleaner with a two-inch diameter hose and no special filters, brushes or cleaning tools. A “blow and go guy” offers a special US$99 whole-house duct cleaning, or US$199 for a small business office. After he starts the job, he claims that additional ducts, vents, and equipment were not included in the original price. He pressures the homeowner to pay for a long list of higher priced options. He offers annual cleanings that aren’t necessary. The scammer makes sweeping unsubstantiated claims about the health benefits, better air quality, or improved heating and cooling efficiency. A blow and go operator might claim to be certified by the Environmental Protection Agency (EPA), but the agency neither establishes duct cleaning standards nor certifies, endorses, or approves duct cleaning companies. Some states require special licenses. Many duct cleaners aren’t licensed HVAC (heating, ventilation, and air conditioning) contractors. If they don’t clean the heating and cooling components, they leave the job half done. That’s like changing the oil in your car without replacing the oil filter. If the duct cleaners aren’t adequately trained, they can damage the HVAC equipment and the homeowner has to make costly repairs or system replacements. Air duct cleaning scams started after July 1976, when an outbreak of pneumonia occurred among people attending an American Legion convention in Philadelphia. The previously unknown bacterium that caused Legionnaire’s disease was carried through the air ducts of a hotel.
Stacy Downs, “Avoid Blow and Go Duct Cleaners,” Kansas City Star, September 4, 2004.

 

Dot Con Artist
A person who runs an Internet-based scam. A common “top level” suffix for a company’s domain name is “.com” and it’s pronounced aloud as “dot com.” The slang term changed dot com into dot con and started appearing in articles in 1999. A “dot con artist” or con man uses a Web site to gain the confidence of his potential victims.
Paul McFedries, “The Word Spy,” www.wordspy.com/words/
dotconartist.asp, March 3, 2005.

 

Starburst
A deposit of dirty money that’s put into a bank with standing instructions to wire transfer it in small, random fragments to hundreds of other bank accounts around the world. Sometimes these other accounts are called “dummy accounts” or “pass-throughs.” Some accounts are “black holes,” located in countries where investigating financial transactions is difficult. Fraudsters, organized crime, and terrorists use a starburst to make it more difficult and time-consuming for law enforcement to trace the money. Professional asset secretion advisors in Switzerland, Liechtenstein, and the Cayman Islands also use the technique. A starburst ends when the fragmented wealth is brought together again into an aggregate, normally at a third or fourth level bank in the hiding chain. In a simpler money laundering method called “The Hopscotch,” the money is moved through a series of 10 to 20 banks within a two month period before it rests in the final “holding account.”
John Boaden and Martin S. Kenney, “The Language of Hiding,” The International Financial Intermediary, Geneva, Switzerland, April 2004.

 

RECOL
Reporting Economic Crime Online (RECOL) is a Canadian partnership between international, federal and provincial law enforcement agencies, plus regulators and private commercial organizations that have a legitimate investigative interest in receiving a copy of complaints of economic crime. Anyone can register online, for free, to privately file a fraud complaint. The RECOL service recommends the appropriate agency for potential investigation, and asks for your consent to forward the complaint to the agency. RECOL also tracks fraud trends with real time data. This service is administered by the National White Collar Crime Centre of Canada (NW4C) and is supported by the Royal Canadian Mounted Police (RCMP). The RECOL Web site was started in October 2003 and is available in English and French.
https://www.recol.ca/intro.aspx?lang=en, February 2, 2006.

 

Relator
An informer or whistleblower. A relator is often an employee or former employee of a company that commits fraud. As a plaintiff, a relator stands to benefit from participating in a legal action taken on his or her behalf by a country or state. If Mr. Goodman Sentinel is a relator and WeBeCheatin Co. is the defendant, the citation would read, State ex rel. Goodman Sentinel v. WeBeCheatin Co. The U.S. False Claims Act of 1863 (FCA) was amended in 1986 to increase the incentives for an informer. A relator in a qui tam lawsuit can now receive 15 to 30 percent of the money the government recovers. The largest settlement was for US$731 million in 2000 in a case against HCA, the largest for-profit hospital chain in the U.S. Another case against HCA was settled in 2003 for US$631 million, and the relator’s share of the recovery was $151 million (24%). At the beginning of the timeline of a case, the relator finds out about the fraud. Then the relator assesses the magnitude of the fraud and starts gathering strong evidence to help prove the case. To be covered by whistleblower protection provisions, the relator raises concerns with the employer and avoids public disclosure. The relator contacts a private attorney who prepares a complaint and a disclosure statement. Next, the relator notifies the government and his attorney files the complaint under seal. After the government decides whether to intervene and work together with the relator, the case might take several years of investigation, litigation and appeals.
“How Long Will My Case Take?” www.quitamonline.com/howlong.html, February 2, 2006.

 

Rolling Revenue
The practice of recording a single sale many times to inflate revenue reports. Rolling revenue often means paying salesmen several commissions in the process. The practice was used at WorldCom. With assets of US$101.9 billion in 2002, WorldCom filed the largest bankruptcy in U.S. history.
Jerry M. Rosenberg, “The Essential Dictionary of Investing & Finance,” Barnes & Noble Books, New York, 2004, page 359.

 

Blue Snarfing
Secretly making copies of all data stored in an open Bluetooth device. Snarfing, like pilfering, means to make off with the belongings of others. Computer security managers describe snarfing as grabbing a large document or file for the purpose of using it with or without the author’s permission. Bluetooth is an industry standard for wireless short-range (30 foot) communications of data between devices like mobile phones, PDAs (Personal Digital Assistants), palmtops, laptops, desktop computers, printers, household appliances, medical devices, and PANs (Personal Area Networks). Blue snarfing enables Bluetooth devices to connect and collect information from other Bluetooth devices without the usual alerts or requests for permission. Bluetooth devices are susceptible to covert remote control. Most users forget to turn off the Bluetooth feature and the “visible mode.” People with Bluetooth devices in restaurants and airport waiting areas are easy targets. From a distance, a stranger could eavesdrop on your phone conversations or rapidly download your phone book, contact lists, appointment calendar, passwords, security alarm codes, photos, videos, e-mail, or your phone’s serial number that can be used in cloning.
“Safety in Numbers,” Computer Times, AsiaOne, March 24, 2004.
Image: www.bluetomorrow.com.

 

Larry C. Adams, CFE, CPA, CIA, CISA, teaches fraud examination at the Keller Graduate School of Management of DeVry University in Arizona. He publishes the online edition of “Fraud In Other Words.” His Web site is www.larry-adams.com. His e-mail address is fraudwritr@aol.com.

 

ã Copyright 2006 Larry C. Adams. All rights reserved.
“Fraud In Other Words” is a trademark of Larry C. Adams.
 

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