3 Ghostbusting tips for catching fraudsters

Published | Monday, October 31st, 2016


Who doesn’t love a ghost story? Whether you are into eerie classics like “The Legend of Sleepy Hollow” or the ridiculous poltergeists in “Ghostbusters”, there is a ghost story for everyone. Ghost stories may entertain and frighten us, but at the end of the day they aren’t real. The exception is: ghosts that commit fraud. These stories can be downright horrific and worse yet, they are very real—and commonly haunt government programs.

Wait! Ghosts aren’t real, how can they commit fraud?

In the lexicon of fraud, “ghosts” or “phantoms” describe the false entities that make claims to earn a profit. When it comes to defrauding organizations, fraudsters rely on their transaction being one of thousands processed, that can easily slip by as a legitimate payment. When this happens, not only are funds misappropriated, but there is also an erosion of trust.

How do I know if I have ghosts?

Although they look real on paper, ghost fraudsters leave data trails behind them. These data trails are not easy to spot if you are using traditional spreadsheet-based tools, or you are relying on random sampling.

The key to spotting ghosts is to review and monitor 100% of your transactions. You aren’t looking for random exceptions, but rather patterns that match known fraud profiles. But don’t stop at just running analytic tests; ensure you automate your reporting and follow-up that will ensure you can be successful. Think beyond simple data analytic technology and consider a solution that can help manage your entire process—so you not only spot, but catch ghosts too!

How do you find something that seems invisible?

Making sure you have the right tools to identify ghosts is the first step. You need to be able to spot the slime trail that will lead you to poltergeist fraudsters.

Understanding your fraudster’s profile will help you to find anomalies when testing 100% of the data. Let’s take a look just a few of the common scams and proven red flags for spotting them:

 

  1.  Ghost Vendors. If you have this type of ghost in your procurement process, it means payments to fictitious companies for goods never delivered or services never provided are happening. Think these ghosts are rare? Think again. A PwC survey found that 41% of global government organizations experienced procurement fraud at least once in the last 24 months. Fortunately, there are usually some obvious data markers that help you identify these ghosts. Here are some common analytics to find red flags and precautions to monitor for:
    • Sequentially-numbered invoices from the vendor
    • Invoice amounts just below the amount needing additional approval for payment
    • Companies with only P.O. Box; address or phone number that matches with employees; or companies lacking taxpayer identification numbers
    • Multiple vendors with similar sounding names
    • More than one vendor with the same address and phone number
  2.  Phantom Employees fall into the category of payroll fraud. There are accidents that happen where employees remain on the payroll after death or termination, but the true fraud phantoms are the bogus employees who collect payroll without working for your organization. A recent ACFE report estimates that the average length of time that employee fraud is perpetuated is 18 months. Continuous monitoring to catch—and stop—these activities quickly is essential. Known red flags for these boogeymen include:
    • Multiple employees with the same bank account details or same address
    • Invalid social security numbers or other invalid information
    • Employees with unused vacation and sick leave (real employees get sick and take vacations!)
    • Mismatches between your personnel file and payroll file
  3. Real Dead People. These are the only legitimate ghosts on the list and they have no place in your public assistance program. Whether you are talking about social security, Medicaid, housing, disability or any other benefit, when dead people are paid you have an improper payment. Paying deceased people puts your integrity at risk—and erodes cash flow. Identity theft is often the common fraud scheme committed with deceased identities. Spotting dead people is relatively straightforward if you are monitoring recipients for the following:
    • People who fall out of or above age thresholds deemed rare; for example, age 112 is highly unlikely
    • Matches between your recipient list and the death registry

Catching ghosts once you find them

If you’ve set up your data analytics to monitor for red flags, you will begin to spot potential ghosts. Finding fraudsters is only half the battle, you still need to catch them (without the use of a supercharged proton pack). Keep in mind that all red flags may not be fraud either. You may need to coordinate across multiple departments to review, investigate or remediate your highest risk cases. Managing that process in email and spreadsheets is error-prone and insecure. A data-driven GRC solution with sophisticated workflow for collaboration with other business units can help stakeholders to identify and act on any risk-related red flags in real-time.

Organisation with massive budgets will always be a tempting target for fraudsters. With modern technology, you can begin to create a ghost-proof system to protect your revenue and build trust. We want to make this easy for you, so we developed ACL Essentials analysis apps. These pre-built analysis apps put you on the fast-track to catch potential vendor and employee ghosts. Learn more about ACL Essentials here.

 

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