Yearend Buffet

I planned to use the end of 2018 to publish a collection of items but life got in the way.  So now these small posts will be a bridge from 2018 and into 2019.  None of these are enough for a post by themselves but they are all related.  Think of this as a buffet of fraud and risk of all sizes.

Lots of fraud out there and the elderly lose the most when they are victims.  The Federal Trade Commission (FTC) puts out a summary each year of consumer complaints and reports.  In their 2017 book 1.1 million consumer complaints involved fraud.  That is the fewest consumer fraud complaints reported in the last 7 years.  The median loss in 2017 was $429 per complaint (that is $472 million lost to scams).  As you would expect the older the victim is the greater the losses.  Median losses were between $400 and $500 when a victim is between the ages of 20 and 69.  People in their 70’s lost over $600 in each incident while those age 80 and older lost over $1,000 per incident.

Your personal data is available for sale…and it is incredibly cheap.  By now most people are aware of the Marriott data breach.  A reported 500 million people had their personal information stolen.  In an earlier post (https://www.raiderfraudconsulting.com/coincidence/) I quoted Breach Level Index that stated over 4,000 data breaches were reported during 2015-2017 resulting in the release of personal information on 2.8 billion people.  As one FBI agent said in a Wall Street Journal article about the Marriott breach, “Every American person should assume all of their data is out there.”  Once the data has been stolen the criminals quickly market it to other groups who specialize in types of customers, types of credit cards, etc.  This data can quickly lose value if the victims update passwords, get new credit cards or close accounts.

Another article in the Wall Street Journal pointed out how inexpensive some of this stolen data is.  Credit card numbers can be acquired for $7-$11 each.  A social security number can be purchased for anywhere from 5 cents to $3 depending on whether it is a random person or the number of a specific individual.  The value of a bank account user’s name and password varies with the average balance in the account but runs between $200 and $1,000.

If I have to spend time and money fixing the damage from a breach it adds insult to injury if my social security number gets sold for only $3. 

Five Most Scandalous Fraud Cases of 2018.  The Association of Certified Fraud Examiners (ACFE) identified these from across the world.  They all involved many players, lots of money and took place over a period of years.  Here is your (close to) one sentence explanation of each in chronological order.

February 2018 – $2 billion fraud of India’s Punjab National Bank.  Punjab issued guaranty’s for short term loans made by other Indian banks to famous Indian jeweler and diamond merchant Nirav Modi.  Modi allegedly used the guaranty’s to borrow money fraudulently.  Punjab blames criminal employees and the other banks blame Punjab.  The original loss was thought to be only $40 million but has now grown to $2 billion.

March 2018 – Elizabeth Holmes and Theranos $1 billion investment fraud.  Elizabeth Holmes founded Theranos which was to be a company that could use a single drop of blood to instantaneously  test for a myriad of health issues. The company never could match the promises and even secretly used existing commercial equipment to test blood.  In 2018 the SEC charged the company, Holmes and others with defrauding investors.

Read the book Bad Blood by John Carreyrou for an excellent explanation of this company and its fraud.  The book is being made into a movie by the same name with Jennifer Lawrence playing Elizabeth Holmes.

June 2018 – Federal government announced arrests in the largest healthcare fraud ever.  Over 600 arrests, including more than 150 healthcare professionals, for defrauding Federal medical programs and insurers of over $2 billion.

July 2018 – Malaysian official arrested for defrauding sovereign investment bank.  Malaysian prime minister Najib Razak was arrested for corruption and fraud related to 1MDB, the Malaysian government owned investment fund.  Razak allegedly diverted $700 million to himself.  New allegations recently surfaced that other players may have diverted over $4 billion and that US investment bank Goldman Sachs earned over $500 million in fees arranging bond deals for 1MDB.  Stay tuned for more details.

This fraud also involves Hollywood.  Supposedly 1MDB veered from its original charter and funded the production of The Wolf of Wall Street and other films. 

September 2018 – Danish Bank profits from laundering over $200 billion.  Danske Bank, a respected European bank since 1871 allowed its Estonian branch to launder over $200 billion between 2007-2015.  Russia’s central bank even warned Danske in 2007 that they suspected money laundering was occurring in the Estonian branch including funds that were associated with Vladimir Putin.  Because that branch generated sizable profits for Danske little was changed for years.  Ultimately, the CEO was allowed to resign but 10 Estonian employees were arrested.  The investigation continues.

Let me know if you want more details on any of these articles.   Watch for my next post in March

Let me know what you think………

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