Frauds and Scams

Frauds and scams in insurance
Introduction to Insurance Fraud

Many Texans know firsthand the harm caused by insurance fraud. Consumers who buy policies from unauthorized or unlicensed insurance companies can be left without coverage or forced to pay the full cost of their claims. But in a broad sense, anyone with an insurance policy has experienced the adverse effects of insurance fraud. Fraudulent claims drive up the cost of insurance coverage for everyone. Nationally, insurance fraud costs consumers an estimated $150 billion annually, an average of nearly $1,000 per family each year in additional insurance premiums and added costs to consumable goods.
Fraud is a deception or misrepresentation for financial gain. Insurance fraud can be committed against policyholders or insurance companies. Since companies divide the costs of claims among policyholders, fraudulent insurance claims drive premium costs up. The consequences of insurance fraud are wide ranging and often severe.
What is Insurance Fraud?
Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer. Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise.
Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are very diverse, and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities also affect the lives of innocent people, both directly through accidental or purposeful injury or damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a very significant problem, and governments and other organizations are making efforts to deter such activities. Fraud occurs when someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and to which someone is entitled. Depending on the specific issues involved, an alleged wrongful act may be handled as an administrative action by the Department or the Fraud Division may handle it as a criminal matter. What Types of Insurance Fraud or Other Crimes Does the Fraud Division Handle? The Fraud Division is charged with enforcing the provisions of Chapter 12 of the California Insurance Code, commonly referred to as the "Insurance Frauds Prevention Act," California Penal Code, Sections 549-550 and California Labor Code, Section 3700.5. Current law requires the Fraud Division to investigate various felony provisions of the Penal and Insurance Codes. Most often, investigations conducted by the Fraud Division involve some aspect of a "Suspected Fraudulent Claim" or other related crimes. Cases investigated by the Fraud Division most often involve criminal acts involving automobile property and personal injury, workers' compensation, health insurance and residential and commercial property claims. Insurance fraud/false insurance claims are insurance claims filed with the intent to fraud insurance provider companies. Insurance fraud hurts the average person in two ways. First, all fraud costs, including losses, investigations, etc. are recovered by the insured people through higher premiums, or, in the case of government insurance by higher taxes. Second, if a particular individual is the target for the fraud, they have costs such as deductible payments, loss of property use, etc, as well as higher premiums from the claim loss and the potential for denial of future coverage. Insurance claims filed with the intent to defraud an insurance provider is known as Insurance fraud. In the United States insurance fraud estimated-ly cost US$875 per person annually but with The Coalition Against Insurance Fraud working, it decreases each year loss to estimate $80 billion per year. Health insurance fraud is defined as an intentional act of deceiving or
misrepresenting information that results in health care benefits being paid to an individual or group. Studies prove that over 30 billion dollars get lost annually to health care fraud in the United States. In order to control costs, insurance companies investigate fraud for the benefits of their members. Fraud can be committed by both a member and a provider. Member fraud consists of members not eligible, alterations on enrollment forms, prescription drug fraud, etc. Provider fraud consists of claims submitted by fake/bogus physicians, billing for services not provided, for higher level of services, diagnosis or treatments that are outside the scope of practice, and providing services while the license have been revoked.
Fraud Defined
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him to enter into the contract; (1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent.
Causes
The chief motive in all insurance crimes is financial profit. Insurance contracts provide both the insured and the insurer with opportunities for exploitation. One reason that this opportunity arises is in the case of overinsurance, when the amount insured is greater than the actual value of the property insured This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy. Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims. This allows fraudsters to file claims for damages that never occurred, and so obtain payment with little or no initial cost.
Fundamentals
Fraud can be defined as an act or omission intended to gain dishonest or unlawful advantage for the party committing fraud or for other related parties. In the case of insurance fraud, this would usually involve an exaggeration of an otherwise legitimate claim, premeditated fabrication of a claim and/or fraudulent misrepresentation of material information. Insurers rely greatly on the accuracy and completeness of information provided by policyholders, claimants and intermediaries whenunderwriting risks and processing claims. However, they face various constraints in verifying the legitimacy of the information provided due to factors such as high volume of transactions (for some insurance products), complexity of
circumstances leading to a claim and asymmetric information. Insurance fraud can pose serious risk to insurers and may result in significant costs to its stakeholders. If prevalent and not mitigated, insurance fraud can potentially affect the financial soundness of individual insurers anderode both consumers and shareholders confidence in these insurers as wellas the insurance sector at large.
Classification of frauds
Insurance fraud can be classified as either hard fraud or soft fraud.[12] Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to receive payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars. Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in a collision an insured person might claim more damage than was really done to his or her car. Soft fraud can also occur when, while obtaining a new insurance policy, an individual misreports previous or existing conditions in order to obtain a lower premium on their insurance policy.
Broad categories of fraud
Fraud can be categorised under three broad headings: Internal Fraud: Perpetrated by management or employees - this is the most common form of fraud found in organisations.
External Fraud:
Where the fraud is perpetrated by someone outside the organisation. This could include the targeting of your business by organised criminals. Fraud perpetrated with the cooperation of an inside employee and an outsider. This is one of the most difficult frauds to recognise.
Corruption or collusion:
Most indications of internal fraud fall into one of six categories: 1. 2. 3. 4. 5. 6. Accounting anomalies Internal control symptoms Analytical anomalies Lifestyle symptoms Behavioural symptoms Tips and complaints.
Fraud occurs when pressure, opportunity, and rationalisation come together. Most people have pressures. Everyone rationalises. When internal controls are absent or overridden, everyone also has an opportunity to commit fraud. Detecting fraud is a matter of acknowledging:

That fraud exists That any organisation can become either a victim of fraud or a perpetrator of fraud That certain weaknesses in internal controls and human character can be conducive to fraud That certain tests of internal controls and tests of the organisation's motivational environment can provide some insight on the possibility of fraud in that environment
Organizations make the mistake of not actively searching for fraud. They tend to trust their employees and trust the procedures in place to safeguard company assets. It may be good business to trust employees and empower them to make real contributions to the growth of the company. However, it is not wise to turn a blind eye to signs that a trusted employee may be stealing.
Types of insurance fraud
The types of insurance fraud that exist are as diverse as the types of insurance policies that are available. Some of the major areas in which insurance fraud occurs are in the life, health care, automobile, and property insurance industries.
Life insurance
An example of life insurance fraud is the John Darwin disappearance case, an ongoing investigation into the faked death of British former teacher and prison officer John Darwin, who turned up alive in December 2007, five years after he was thought to have died in a canoeing accident. Darwin was reported as "missing" after failing to report to work following a canoeing trip on March 21, 2002. He reappeared on December 1, 2007, claiming to have no memory of the past five years.
Unfortunately, the large sums of money involved with life insurance mean that the industry has to protect against people setting up fraudulent policies and transactions. As a result there are three vital concepts that must be understood as they relate to a senior life settlement. They are; Contestability, Rescission and Insurable Interest.
Contestability Period and Life Settlements The contestability period is the first two years a new life policy is in force. During this two-year period;
A death claim may be denied or "contested" (NOT paid) due to a fraud on the life insurance application or the suicide of the insured. The life settlement value of a policy is typically higher after the contestability period. Investors assess less risk in owning policies after the contestability period. An overwhelming majority of life settlement buyers will not purchase policies during the contestability period. Life insurance companies do not like life settlements but are particularly averse to life settlement transactions during the contestability period.
Seniors should be aware that life insurance companies are not proponents of the life settlement market. The fact is that life insurance companies profit greatly when a policy lapses without them having to pay a death benefit. When a policy is sold to an investor in a life settlement, it becomes a virtual certainty that the policy premiums will be paid and the death benefit will have to be honored. Also, professional investors pay the absolute minimum premiums until the anticipated death of the insured. These factors lower life insurance company profits. Seniors have every right to sell life insurance policies that have been acquired legitimately and the life settlement market provides them a profitable avenue to do that. However, seniors cannot just buy life insurance with the intention of selling it in a life settlement to make money. To do so may be fraudulent because life insurance applications all ask the intent of the buyer.
Rescission of Life Insurance and Life Settlements A rescission is a cancellation of the life insurance contract by the issuing life insurance company. If during the two year contestability period the life insurance company suspects fraud it can rescind the life insurance policy. If the fraud is related to a lack of insurable interest at the time the policy was issued, the recession can take place at any time. Obviously, life settlement investors will only purchase policies that they believe are in good standing and without any fraud in the origination. In order to rescind a policy the following conditions need to be met.

No death has occurred; i.e, the insured is still alive. The company believes a fraud or misrepresentation was perpetrated on the application.
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Medical information misstated.
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o o
Financial information misstated. A misstatement of purpose that indicates bad insurable interest.
Health care insurance
According to Roger Feldman, Blue Cross Professor of Health Insurance at the University of Minnesota, one of the main reasons that medical fraud is such a prevalent practice is that nearly all of the parties involved find it favorable in some way. Many physicians see it as necessary to provide quality care for their patients. Many patients, although disapproving of the idea of fraud, are sometimes more willing to accept it when it affects their own medical care. Program administrators are often lenient on the issue of insurance fraud, as they want to maximize the services of their providers. The most common perpetrators of healthcare insurance fraud are health care providers. One reason for this, according to David Hyman, a Professor at the University of Maryland School of Law, is that the historically prevailing attitude in the medical profession is one of fidelity to patients. This incentive can lead to fraudulent practices such
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as billing insurers for treatments that are not covered by the patients insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, than that which was rendered. Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. Public healthcare programs such as Medicare and Medicaid are especially conducive to fraudulent activities, as they are often run on a fee-for-service structure. Physicians use several fraudulent techniques to achieve this end. These can include up-coding or upgrading, which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are not medically necessary; scheduling extra visits for patients; referring patients to another physician when no further treatment is actually necessary; "phantom billing," or billing for services not rendered; and ganging, or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services.
Automobile insurance
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The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, vice president of research for the Insurance Fraud Bureau of Massachusetts, lists several ways that auto-insurance fraud can occur. Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to injuries, or reporting higher costs for car repairs than those that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called "rate evasion". For example, some drivers in Brooklyn drive with Pennsylvania license plates because registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Another form of automobile insurance fraud, known as "fronting," involves registering
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someone other than the real primary driver of a car as the primary driver of the car. For example, parents might list themselves as the primary driver of their children's vehicles to avoid young driver premiums. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent auto-insurance claims. "Crash for cash" scams may involve random unaware strangers, set to appear as the perpetrators of the orchestrated crashes. Such techniques are the classic rear-end shunt (the driver in front suddenly slams on the brakes, eventually with brake lights disabled), the decoy rear-end shunt (when following one car, another one pulls in front of it, causing it to break sharply, then the first car drives off) or the helpful wave shunt (the driver is waved in to a line of queuing traffic by the scammer who promptly crashes, then denies waving) Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Dornstein, author of Accidentally, on Purpose: The Making of a Personal Injury Underworld in America. In this scheme, known as a swoop-and-squat, one or more drivers in swoop cars force an unsuspecting driver into position behind a squat car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other drivers insurance company. This claim often includes bills for medical treatments that were not necessary or not received.
Property insurance
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Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed, or to destroy and subsequently receive payment for goods that could not otherwise be sold. According to Alfred Manes, the majority of property insurance crimes involve arson. One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. According to the United States Fire Administration, in the United States there were approximately 31,000 fires caused by arson in 2006, resulting in losses of $755 million. Example: The Moulin Rouge in Las Vegas was struck by arson twice within 6 years.
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Another types of insurance frauds
Airbag fraud
Imagine you and your family are driving along a rainy highway. Another car suddenly careens across the lane into yours. As the cars collide, you count on your airbags to open and protect everyone. But your airbags don't deploy. They were stolen. Crooked body shops are stealing airbags from vehicles to make a quick dollar at your expense. Mechanics can easily remove your airbag without your knowing it. Airbag fraud places the lives of you and your passengers in danger if you're in a crash. The swindles also cost you money. Your next drive should be in a safe car, not an ambulance. Here's how airbag scams work, the price you pay, and how you can protect yourself.
The scams
Here are several scams you should watch for... The pullout. A dishonest body shop pulls out your airbag so it seems like the bag deployed during the accident. The mechanic then inserts a cheap knockoff bag after your insurer finishes the estimate for replacing the original airbag. Or worse, the mechanic stuffs old rags, cardboard or beer cans into your empty airbag space. The body shop bills your insurer full price for "replacing" the bag up to $2,000 or more even though your original is long gone. The switch.
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The body shop removes your un-deployed airbag and installs another deployed one to make it seem the original bag inflated during the accident. The mechanic then puts back your original bag after the insurance company makes a repair estimate. Or, the mechanic may simply insert rags and other junk, then sell your original bag on the black market. Used & salvaged vehicles. Maybe you're buying a used or salvaged vehicle (which was rebuilt after the insurer declared it totaled). Be careful. You may have a hard time tracing exactly what's happened to the vehicle, who repaired it, and whether they tampered with your airbags. You may only have an unsafe used or cheap knockoff bag. Or just rags and beer cans. Cars that were totaled in a flood may still have the original airbags, but they may not open properly if the module was soaked.
The price you pay Lives & safety. Your life is in danger every time you step into a vehicle without good airbags. Your passengers' lives also are at stake if you crash and the airbags don't work right. Innocent drivers have died in crashes when crooked body shops stole their airbags. Are you and your friends or family members next? Pay higher premiums. Airbag fraud also takes hard-earned money out of your pocket. The swindles raise auto premiums for every honest driver because insurance companies must pass the cost to all policyholders. Your own auto premiums also might go up even faster, since an airbag scam against you unfairly inflates claims against your own auto policy.
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Fight Back Check out the insurance company. Contact your state insurance department to see if the company is licensed in your state. Even if the insurer is licensed, make sure its financially healthy. A.M. Best lists financial ratings of insurance companies. Know what benefits you get. Know exactly what benefits you want from your policy, then carefully check the policy to make sure youre getting what you expect. Dont rely on TV ads with celebrity endorsements, slick marketing literature, a verbal say-so during the sales call, or written policy summaries youre given. You should rely only on the full policy itself. Know the policy restrictions. Policies contain limits on whats covered, what isnt, and under what circumstances. Make sure the policy clearly spells out the criteria for qualifying for specific benefits, and that you understand the criteria fully. Rely only on the policy wording, not on sales pitches or marketing material.
Medical identity theft frauds

Identity theft, the fastest-growing crime in America, has spawned a vicious new strain: medical identity theft. Thieves steal your personal information to line their own pockets with fraudulent claims against your own health policy. Medical thieves can heist your health-insurance number, Social Security number and other personal information. Often the information is stolen by employees at medical facilities, and resold on the black market.
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Thieves also may hack into medical databases or break into medical facilities. Medical ID theft can cost you thousands of dollars, constant stress, and even threaten your life and health. Unless you check your medical records closely, you may discover you were defrauded only after the damage has been done. As many as 500,000 Americans have been victims of medical identify theft, says the World Privacy Forum. And this crime is spreading fast: The Federal Trade Commission received almost 19,500 reports of medical ID theft from January 1992 to April 2006. About one every four reports came in 2006 alone. The scams Illegal and bogus treatment. Medical ID thieves bill your health plan for fake or inflated treatment claims. The crooks often are doctors and other medical personnel who know how the insurance billing system works. Organized theft rings also are involved. They buy stolen patient information on the black market, and set up fake clinics to make bogus claims against the health policies of honest consumers. Buy addictive drugs. Medical personnel with access to your data may use your identity to obtain prescription drugs to sell, or feed their own addictions. Dishonest pharmacists might bill your policy for narcotics, or nurses may call in prescriptions in a patients name but pick it up themselves. Obtain free treatment. Medical ID thieves who dont have their own health coverage often receive free medical treatment, courtesy of your policy. They assume your identity at a hospital or clinic, and your policy receives the bills. The price you pay
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Medical ID theft can cause serious and long-lasting damage. Recovering can take years. Ruined credit. Thieves often ring up large hospital bills in your name, then disappear without paying. This can ruin your credit. Straightening out inaccurate credit records can take months or even years of time-consuming headaches. Meanwhile, you could be hounded by bill collectors, turned down for loans or mortgages, and forced to pay higher lending costs. You also could lose jobs; some employers check a candidates credit history. Loss of health coverage. Fraudulent insurance claims can max out your health-policy limits. This can leave you with no coverage when you have a medical emergency, or need an expensive operation or other treatment. Inaccurate records. Medical ID theft can threaten your health or even life. A thiefs treatment history can end up on your medical records. This could include the wrong blood type, or medicine to which youre allergic. Your life thus could be on the line if you receive the wrong treatment based on the thiefs treatment. Your records also could be falsely saddled with damagingand inaccuratediagnoses such as mental illness. This could follow you throughout your life. Legal troubles. A pregnant woman stole the medical identity of a mother, and delivered a baby who tested positive for illegal drugs. Social workers tried to take away the real mothers four children, falsely thinking she was the addict. She had to hire a lawyer to keep her family. Higher health premiums. False claims against a health insurance policy can raise your health premiumscosting you yet more money.
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Fight Back Compare policies. Check out policies from different insurance companies before deciding. Never buy the first one youre offered especially if youre pressured to buy. Also avoid buying on price alone. The cheapest policy isnt always the best value. Avoid duplicate policies. Avoid sales pitches that say you need more than one policy you dont. One suitable long-term care policy is enough. Get trusted outside opinions. Have a trusted friend, relative or credentialed financial advisor review the policy with you to make sure it meets your unique needs and ensure youre paying a fair premium. Are the agent and insurer licensed? Make sure the agent and insurance company are legitimate and licensed in your state. Contact your state insurance department.
Long-Term Care Insurance Fraud

Long-term care insurance can help make extended medical help affordable for many Americans, especially disabled seniors. It covers benefits not typically protected by Medicare and private health coverage. Some of these benefits include nursing home care, hospice, adult daycare and in-home medical equipment. More and more people in the 40s, 50s and 60s are buying long-term care policies to help pay for these potentially large medical expenses if they arise in their later years. Long-term care insurance also will play a growing role as the nations 78 million Boomers continue aging.
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Most insurance agents and insurance companies are honest and reputable. But long-term care coverage can be complex, confusing and expensive. Watch out for fraud and deception. Insurance schemes could drain your hard-earned savings, threaten your financial security, deny you vital medical care, and jeopardize your health.
The Scams
Here are just some of the scams and abuses to watch for: Selling unsuitable policies. Dishonest insurance providers knowingly sell expensive policies to people who cant afford the high premiums. Another scam involves selling two expensive and overlapping policies when only one is needed. Low-income people and seniors on fixed incomes often are targeted. Sales pitches may aggressively prey on peoples fear that high medical costs will leave them destitute or a burden on family members. Churning policies. Youre urged to cancel a perfectly good policy and trade up to a better policy from your current insurer or another company. The replacement policy may be more expensive and offer little or no improvement. Youre also forfeiting years of premiums youve paid for your previous policy. You also may be denied key benefits under the new policy based on pre-existing conditions if your medical needs have changed. Deceptively watered coverage. To close the sale, the seller may deceptively eliminate or reduce vital policy features so you can afford the premium. You arent told that critical benefits such as inflation protection were watered down or eliminated. Nor are you told how such changes could affect your medical care or expose you to high out-of-pocket costs. Overstating benefits.
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You might be told the policy covers all of your long-term medical expenses. But this may not be true read the policys fine print. For example, does the policy adequately adjust current benefits for future inflation when you need care in future years? Are you aware of other stated policy limits and restrictions? If not, you may have to pay a large portion of medical expenses out of pocket. Making misstatements on applications. Deliberate misstatements about your current medical condition, age, past medical history or other key information are entered onto the policy application to secure the coverage or lower the premium. Agents or policy applicants might use this fraudulent tactic. Selling phony policies. Watch out for fake coverage, especially bogus home health care coverage. These schemes steal your premiums and leave you without vital protection when you need it the most.
Health fraud
Health care scams cost Americans billions of dollars each year. Taxpayer-funded programs such as Medicare, Medicaid and others are among the biggest victims. This makes health-care fraud one of America's largest taxpayer ripoffs. Organized crime rings hatch many schemes. Hospital chains, individual employees and even patients also can be involved as victims or perpetrators. The scams Phantom treatments. Dishonest medical providers will bill health insurers for expensive treatments Most medical providers are honest and ethical. But here are just some of the health care scams you should know about...tests or
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equipment you never received and for illnesses or injuries you don't even have. Double billing. Unethical providers may double or triple bill health insurers for the same treatments, hoping the insurer won't discover the overruns in the big stack of bills. Shoddy care. You might receive shoddy or substandard treatment for real and urgent medical problems. One eye doctor shined pen lights into patients' eyes and said he'd performed cataract surgery. Surgeons have used defective pacemakers and catheters during heart surgeries, which have killed patients or required more surgeries to correct the problems. Unneeded care. You might receive dangerous and even life-threatening treatment you don't need. One surgeon performed heart surgery on patients who didn't need it. Bogus insurers. Insurance agents or brokers sell you low-cost health coverage from fake insurance companies. Then they take your premiums and disappear. You're left without vital health coverage, and don't even know it until you make a claim. Identity theft. Cheaters steal your medical ID number, then use it to bill health programs tens of thousands of dollars for phantom treatment. Crooks steal your health info from dumpsters behind medical clinics, break into doctor offices and steal files, and hack into computer databases containing your records. Rolling labs. Mobile diagnostic labs give needless or fake tests or physical exams to consumers, then bill health insurers for expensive procedures. Runners.
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A person hired by a medical provider to drum up business trolls through neighborhoods, often low-income areas, enticing people to come to a clinic for tests. These runners will even roundup children for unneeded tests and procedures.
The price you pay Coverage drained. Your coverage limits might be drained by worthless and unnecessary treatments. Financial disaster. Inflated or phantom medical bills can increase your co-payment, beyond your ability to pay. This could force you into collections and damage your credit rating. And if you bought health insurance that ends up completely fake, you could face financial disaster if you must pay large medical bills with your life savings because your policy's worthless. False medical record. Your medical record contains false information about illnesses, diseases, injuries or other problems you never had. Your information is available to insurers, so you could be denied health coverage or pay higher premiums because of a trumped-up medical record. Premiums rise. Your health premiums rise because insurers pass the cost of fraud on to policyholders. High health premiums discourage employers from offering this needed employee benefit. Personal distress. You receive bogus or needless treatments that are painful, distressing, can threaten your health and even kill you. Fight back Taxpayer ripoff.
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Billions of your tax dollars pay for fraudulent claims against Medicare, Medicaid and other taxpayer-funded health programs every year. These are your tax dollars being stolen. Fill out the application accurately. An insurer may deny a claim or cancel a policy if your application is inaccurate. Sign and return the application only after youve doublechecked all information whether you or the agent fill out the application. If you later find an error, notify the insurer immediately. Word of caution: Making serious and willful misstatements could be grounds for criminal charges of insurance fraud. Never pay cash. Pay your premiums by check or debit or credit card; never use cash. Also make checks payable to the insurance company instead of the agent whenever possible. Use the free-look period. Lets say youve bought the policy but now have second thoughts. By law, you can cancel the policy within 30 days and receive a full premium refund. (Dont think this is the case in every state.) Use this free-look period to re-check your coverage if need be. If you cancel the policy, notify the company by certified mail to prove you cancelled in time. Keep a copy of all documents you return. Have you received your policy? If you dont receive your policy within 60 days, contact the insurance company immediately.
Auto repair fraud

A trustworthy auto repair shop is vital to the safety of every motorist. Your shop can keep your vehicle running smoothly, fix dangerous crash
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damage, save you money, and protect you and your passengers from life-threatening harm while on the road. Most body shops are honest and professional, but some will try to defraud you and your insurance company. In fact, auto repairs rank third among the top 10 consumer complaints compiled by the Consumer Federation of America. Drivers lose tens of billions of dollars each year to faulty or unnecessary car repairs, the National Highway Traffic Safety Administration estimates. The scams Dishonest repair shops may try a number of scams. Among them: Padding charges. Shops may offer reasonable verbal repair estimates, but present final bills that are far beyond the estimates. Or a mechanic may leave the estimated amount blank when you sign a repair authorization, then secretly fill in an inflated amount. Needless repairs. A shop may pad bills by repairing mechanical problems and damage that dont exist. True story: A motorist on vacation noticed his car was leaking oil. He stopped at a local car dealership whose mechanic said he needed a new vacuum pump for $1,820. Stunned, the driver bought a seal for just $13 from an auto-parts store. Counterfeit or used parts. Some dishonest shops install parts that are counterfeit, substandard or used, but charge you for expensive new parts. These parts can give out when youre on the road, putting you and your family at risk. Used parts are viable for some repairs, but crooked body shops will bill you for new parts but install used ones. Shoddy work or none at all.
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A shop may cut corners by doing quick and shoddy work. True story: One mechanic held car parts together with nothing more than bailing wire. Sometimes the mechanic also does no work at all, but bills you and your insurer for a full repair job. You may have to return several timeswasting your valuable time and causing needless headaches. Specials and maintenance hook schemes. Dishonest repair shops advertise super-low prices on specific repairs or check-ups, then use these specials to bilk their customers. A simple oilchange-and-lube job can turn into expensive and unneeded repairs. The price you pay Fraudulent repairs cost you in many ways: Stress & wasted time. Nothing is more frustrating than getting repairs repaired. Avoid the headaches and wasted time. Get it done right, and safely, the first time. Higher insurance premiums. Inflated charges and unnecessary repairs can raise your auto premiumsand premiums of every honest driver because the costs of fraud are passed to all policyholders. Fight back Get a written estimate. This should include parts and laborand get the estimate before you authorize repairs. Also make sure the shop agrees, in writing, to contact you for approval before performing work that exceeds a certain dollar amount. Watch out for waiving the deductible. Be leery if the shop offers to help you recover or waive your deductible. For example, a mechanic might suggest installing a used
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part, billing your insurance company for a new one, and passing on the illegal cost savings to you. This is insurance fraud. Its a crime that can put you in jail and ruin your family.
The scams Here are several scams you should watch for... Stealing your premiums. An agent pockets your insurance premiums instead of sending it to the insurer. Crooked agents may steal your premiums to support their business, feed a gambling or drug habit, or buy luxury goods such as cars or jewelry. Sometimes insiders at an insurance company loot the insurer, causing it to go bankrupt. Selling phony insurance. An agent or company rep sells you fake coverage from a phony insurance company. Or the agent sells you bogus coverage using a legitimate company's name or a name that's similar to a legitimate insurer. You might receive an official-looking policy or proof of insurance that's worthless. You could lose thousands of dollars if you suffer a loss and don't have a real policy to pay your claim. Selling coverage you don't want or need. Maybe the coverage is real, but it's expensive, unnecessary, and your current policy may already cover that risk. Three examples: Churning: Dishonest agents might convince people to use the built-up value of their current whole life policy to buy a "better" policy even though their present life coverage is perfectly suitable. The agent gets a nice commission, but you must start building up cash value all over again. Sliding: An agent or insurer slips you extra coverage you didn't ask for but do pay for. This can easily add $100, $200 or more to your
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premium. The agent cheerfully says it's simply part of a "package," or doesn't tell you about the coverage at all. Motor club memberships, accidental death coverage and guaranteed renewable life insurance are three policies that crooked agents sometimes sell to unwitting policyholders. Twisting: An agent may urge you to change policies prematurely by "twisting" the truth about the downside. If you have an illness, injury or other medical condition, for example, will that "affordable" new health policy refuse to cover it because it's a pre-existing condition?
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What Are the Different Types of Insurance Fraud Jobs?

InsuranceI fraud occurs when someone files a false or fabricated claim with an insurance company. Such a claim may be submitted to any type of insurance agency including auto, home, or medical. Insurance fraud jobs are used to evaluate these types of claims and to verify the validity of the report prior to payment. Investigations into insurance fraud can occur with both personal insurance policies and commercial insurance policies. Personal insurance fraud jobs typically include positions such as private investigators, claims adjusters, and insurance investigators. Each of these fraudrelated positions focus on insurance claims filed by individuals. Governments may also hire insurance fraud specialists to handle claims made by people or businesses that are covered by governmental policies. For instance, a person in the United States who is covered by Medicaid may have their medical claims reviewed by a government insurance investigator. These insurance investigators will often gather information through activity checks, claimant surveillance, and fact-checking of the claim information. Fraud investigators tend to work in the field more often than in an office, which means extensive travel may be necessary at times. Once the information about the claimant, or the claim, is collected, the investigator usually files a report, and the claim will either be approved or denied based upon the investigation results. If a false claim has already been paid, the insured person may face legal ramifications. Commercial insurance fraud jobs are often similar, and involve work that is very much the same as, personal cases. Business and accounting knowledge may be required, however, to calculate the net loss of income a business has suffered and the effect of any damage on future business profits. The insurance investigation of a business may also require extensive inventory checks to validate any claims of property loss. Both personal and commercial insurance investigators must be comfortable with undercover surveillance. Insurance fraud jobs generally require investigators to obtain truthful information about the claimant without their knowledge, which can
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mean long hours spent watching a person or business. Patience is often an essential requirement. If the investigation uncovers that a report is a false claim, an insurance lawyer may file suit against the claimant. Many major insurance companies employ a staff of fraud lawyers to handle all court cases. An insurance company may only choose to file a lawsuit if the claimant has received payment as a result of a false claim. If no payment to the insured has been made yet, a false claim is typically denied
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Ghana Scams on the Rise
Ghana appears to have adopted many of the fraud methods used in Nigeria. In fact, many professional scammers have relocated to Ghana in order to escape the "bad reputation" of Nigeria for its high level of fraud. Other fraud operations simply have affiliate, criminal networks in Ghana that they hope will diminish their Nigeria stigma. This transition of advance fee fraud and scams means Ghana is the emerging market for fraud. Accra is capital of Ghana and the home of an estimated 6 million people, and the population is growing very rapidly. The city continues to attract foreign investment and is the center for Ghana's international commerce and foreign trade. International business is becoming a way of life here. Doing business in Accra, Ghana can mean opportunity and profit. With this big potential reward, however, comes new substantial risks. Foreign businesses aren't alone in this increasingly risky market. Similar to a small business in London or Singapore having to verify its business relationship in Accra, many individuals are finding personal relationships in Ghana. Whether its romance or a new business contact , Most of us think the scams, such as advance fee fraud, simply aren't going to happen to us. Unfortunately, as the world has grown wise to Africa's scams, the fraudsters have grown quite sophisticated. Business scammers now have
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the industry know how, and they use the lingo. They have resumes and references. Beautiful women (including white women) in Accra definitely exist, but the number of men portraying to be these women is staggering. Here too, the players are professional. They carry on phone conversatons, send email, provide visa and passport copies, and more. Ghana scammers are some of the best. How can one entering into a business or personal relationship in Ghana learn the truth? We strongly recommend a professional background check, preferably a firm not based in Africa but with local investigators who understand the local customs, etc. Wyoming International is currently the industry leader for Ghana background checks. According to Vice President, David Wilkerson, businesses and individuals should always "enter into relationships with insurance given the amount of fraud here, and a professional background check is prudent policy."
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How to Prevent Affiliate Fraud

Affiliate fraud is any type of illegal activity designed with the intention of cheating merchants, other affiliates or buyers. An article about affiliate fraud, ways of detection online fraud and tips for preventing it. The emergence and rise of the Internet has brought new opportunities for businesses, allowing them to reach new market segments and niches that would have been intangible otherwise. To a certain extent, the power of online businesses comes from affiliate marketing. Affiliate Marketing has been around for the last 10 or so years, but merchants are nowadays confronted with one of the newest types of scams, namely known as affiliate fraud. As affiliate fraud happens mostly because there is money involved, it's a sure sign it will never stop. While Affiliate Networks have the technology and know-how to fight affiliate fraud, individual merchants might not be aware of the phenomenon. Here are my 2 cents.
What is Affiliate Fraud?

Affiliate fraud is any type of illegal activity designed with the intention of cheating merchants, other affiliates or buyers. The merchants are at a loss by fraud affiliates that mislead them into paying commissions that they shouldn't be paying. The extent of such practices ranges from repeated clicks on incomegenerating links of CPC (cost-per-click) programs to using sophisticated software that will simulate human activity. Affiliates take loses due to black hat affiliates that redirect the sale to a parasite site and cash the commission that this way never gets to the rightful,
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hard working affiliate. There are more parasite techniques described in the next chapter. Buyers are affected by spam, deceiving marketing techniques or by being miss-informed about the product/service they need. The negative effects are obvious for both individual merchants and Affiliate Networks. Affiliate marketing networks face the much dreaded peril of losing their members (i.e. merchants), who will no longer want to become involved in affiliate programs for fear of having to face affiliate fraud, which also translates into merchants losing their customers. How to Recognize Affiliate Fraud and What to Do About it If you already have an affiliate program set up and working, and you notice that things are not going the way you hoped they would, maybe it's time to do your homework and make some research. Here are some symptoms specific to affiliate fraud. They may actually help you with the detection of online fraud. Check your activity logs (together with your specialized personnel) and look for anything that looks suspicious, any unusual pattern. On the other hand, if you outsource your affiliate marketing to an affiliate network, they do most of the work to fight and eliminate fraud, meaning you are safe
4 Tips to Avoiding Affiliate Fraud

As long as there are internet businesses, there will be people trying to steal your income. Affiliate theft and fraud are on the rise. More than ever merchants need to monitor the actions of their affiliates and arm themselves against fraud. Especially if you consider that the FTC is now making
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merchants responsible for the action of their affiliates. While good affiliates can make you money, naughty ones can cost you a lot. As long as there are internet businesses, there will be people trying to steal your income. Affiliate theft and fraud are on the rise. More than ever merchants need to monitor the actions of their affiliates and arm themselves against fraud. Especially if you consider that the FTC is now making merchants responsible for the action of their affiliates. While good affiliates can make you money, naughty ones can cost you a lot. The first action to take is to find out what type of frauds your affiliates may be capable of. Below are a few examples. Typo squatting: Also know as URL hijacking. Typo squatters register several variations of a high traffic domain names and then sign up for that same merchants affiliate program to sell them what should have been their own traffic. Spammers: Affiliates who send unsolicited e-mails featuring a net marketers product, this can essentially tarnish the product. Spammers also make it difficult for the legitimate e-mailers to separate themselves. In many cases complaints have gotten the merchant's domain on blacklists Fraudulent and Fake Transactions: This can be in the form of the fraudster creating scripts to generate phony clicks, leads, or transactions. Or they may sign up as affiliates and then make large purchases using a stolen credit card. Malware: Some affiliates use adware that is inadvertently installed on a person's computer is designed to steal traffic from legitimate affiliates by replacing their links with new ones. Thus legitimate affiliates don't get paid and eventually move on. Once you are aware of the types of frauds out there, you will want to screen
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all your affiliate. Yes, you may have hundreds or even thousands of people signing up for your affiliate program, but among these may be unserious hobbyists, spammers and sophisticated con artists. It is important to weed people out in order to be left with serious marketers. You can not afford to be lazy.
Fraud prevention
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Introduction
Major corporate fraud and collapse have hit the headlines in recent times. The people involved have been high profile and the amounts quite spectacular. The issues associated with these frauds may seem far removed from your organisation, however, the simple truth is that fraud can affect organisations of all sizes. Whether you employ a small team or a significant workforce, we consider how you can increase your awareness of the factors that indicate fraud and the defences that you can implement to minimise the risk within your organisation.
It couldnt happen here It is easy to think that fraud is something that couldnt or wouldnt happen here. However while large organisations have the resources to implement what they hope are effective systems of internal control to prevent fraud, smaller and medium-sized organisations often have to rely on a small team of people who they trust. No doubt you can think of a handful of key employees who you couldnt imagine being without! Sadly some organisations have found out the full extent to which this trust can be abused. A key difficulty faced by smaller organisations is the lack of options to segregate duties. Individuals have to fulfil a number of roles and this can lead to increased opportunity and scope to commit fraud, and for some, the temptation can be too great
Areas where fraud can occur
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While the precise nature of any fraud will be specific to the nature of an organisation and the opportunities afforded to a potential fraudster, there are a number of common areas where fraud can occur. Employees abusing their position Most fraud impacts on the profit and loss account, where either expenses are
overstated or income understated. Frauds here could range from a few

pounds of fiddled expenses, where no one checks supporting documentation or reviews the reasonableness of the claims made, to more significant frauds involving the setting up of fictitious suppliers and the production of bogus invoices. Positions could also be abused where an organisation requests tenders. Here there is a risk of kickbacks where the individuals involved in the tender process accept bribes or sweeteners from potential suppliers. This could result in inefficient contracts being signed perhaps for dubious quality goods. The individual amounts involved in these types of fraud may not be large, so they go unnoticed for some time. However as time progresses the amounts involved can become significant. Many fraudsters gain in confidence and the amounts involved escalate as they become greedy. Of course large scale frauds are more likely to be discovered and greed often plays a part in the identification and capture of fraudsters. Nevertheless the time taken to detect fraud is vital. It may make all the difference to cash flow as fraud drains an organisation of resources that it needs to grow. Suppliers taking advantage Where an organisation has few or weak checking controls, a supplier may
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recognise this fact and take advantage. For example fewer items may actually be delivered than those included on the delivery note. Invoices may include higher quantities or prices than those delivered and agreed. This highlights the importance of checking both delivery notes and invoices and following up any discrepancies promptly
Other risk areas Theft of confidential information such as client or customer lists or intellectual property such as an industrial process could cause a business untold problems if these are stolen by disgruntled employees. Information could also be vulnerable to attack from outside. Advances in technological developments mean that all organisations connected to the internet need to consider the risks associated with this. The same advances in technology sometimes lead us to believe that the computer is always right, so fewer manual checks are completed generally within the organisation as a result. Certain types of organisation are at greater risk of fraud, for example those that are cash based can be more vulnerable due to the difficulties in implementing effective controls over cash. Similarly businesses that deal in attractive consumer goods are at increased risk. Organisations that are growing rapidly may also be more susceptible to fraud. When both company resources and directors personally are stretched to capacity, it is even more difficult to maintain an overview. Indicators of fraud may go unnoticed
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Fraud detection
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The detection of insurance fraud generally occurs in two steps. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by computerized statistical analysis or by referrals from claims adjusters or insurance agents. Additionally, the public can provide tips to insurance companies, law enforcement and other organizations regarding suspected, observed, or admitted insurance fraud perpetrated by other individuals. Regardless of the source, the next step is to refer these claims to investigators for further analysis. Due to the sheer number of claims submitted each day, it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud. Instead, many companies use computers and statistical analysis to identify suspicious claims for further investigation. There are two main types of statistical analysis tools used: supervised and unsupervised. In both cases, suspicious claims are identified by comparing data about the claim to expected values. The main difference between the two methods is how the expected values are derived. In a supervised method, expected values are obtained by analyzing records of both fraudulent and non-fraudulent claims. According to Richard J. Bolton and David B. Hand, both of Imperial College in London, this method has some drawbacks as it requires absolutely certainty that those claims analyzed are actually either fraudulent or non-fraudulent, and because it can only be used to detect types of fraud that have been committed and identified before. Unsupervised methods of statistical detection, on the other hand, involve detecting claims that are abnormal. Both claims adjusters and computers can also be trained to identify red flags, or symptoms that in the past have often been associated with fraudulent claims. Statistical detection does not prove that claims are fraudulent; it merely identifies suspicious claims that need to be investigated further
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Fraudulent claims can be one of two types. They can be otherwise legitimate claims that are exaggerated or built up, or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified, insurance companies usually try to negotiate the claim down to the appropriate amount Suspicious claims can also be submitted to special investigative units, or SIUs, for further investigation. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims. These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough
Ten step guide to preventing and detecting fraud

1: Given the wide range of fraud that could be committed, what steps can you take to minimise the risk of fraud being perpetrated within your organisation? Consider our top ten tips for detecting and preventing fraud. 2: Begin by recruiting the right people to work in your organisation. Make sure that you check out references properly and ensure that any temporary staff are also vetted, particularly if they are to work in key areas. 3: Ensure that you have a clear policy that fraud will not be tolerated within the organisation and ensure that this is communicated to all staff. 4: Consider which areas of your organisation could be at risk, then plan and implement appropriate defences. Target the areas where most of your revenue comes from and where most of your costs lie. Develop some simple
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systems of internal control to defend these areas.
5: Wherever possible dont have only one person who is responsible for controlling an entire area of the organisation. This in particular includes the accounting function but will also include other key areas. For example ordering goods, stock control and despatch in a business where stocks include attractive consumer goods. 6: Always retain a degree of control over the key accounting functions of your business. Dont pre-sign blank cheques other than in exceptional circumstances and ensure that the corresponding invoices are presented with the cheques. 7: Be on the lookout for unusual requests from staff involved in the accounting function. 8: Watch out for employees who are overly protective of their role - they may have something to hide. Similarly watch out for disaffected employees, who might be bearing a grudge or those whose circumstances change for the worse or inexplicably for the better! 9: Watch out for notable changes in cash flow when an employee is away from the office, on holiday for example. Similarly be aware of employees who never take their holiday. These could both be indicators of fraud, something we see when we look back retrospectively. 10: Prepare budgets and monthly management accounts and compare these against your actual results so that you are aware of variances. Taking prompt investigative action where variances arise could make all the difference by
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closing the window of opportunity afforded to fraudsters. Where a fraudster is caught, make sure that appropriate action is taken and learn from the experience.
Guide to Fraud Detection and Control

From internal control structures that are not fraud-specific to insufficient communication in the fraud discovery-to-investigation and conviction process, fraudulent activity is a widespread fact of life in the business world. Historically, the corporate tendency has been to react to fraud after the fact, rather than to be proactive in its prevention. And in most cases, blame is directed at accountants and auditors. Unfortunately, these officers are rarely provided with the resources, proper training, and commitment from top management that are essential to effective fraud detection and control. The Accountant s Guide to Fraud Detection and Control offers comprehensive direction for this largely uncharted area.
Two types of fraud are addressed in this book: fraudulent financial reporting, also known as "Treadway" fraud, usually originating in the top management sector; and "asset-theft" fraud, the more common and more costly type, likely to be practiced by virtually anyone, including outsiders. Treadway fraud is being adequately detected by independent auditors (CPAs) in their annual audits. Asset-theft fraud is not being adequately detected by anyone, with very few exceptions. From following clues to achieving a prosecution, here is sound advice that accountants and auditors will find invaluable. Businesses lose over $100 billion a year to fraud. Only 20 percent is discovered. Who s to blame? Accountants and internal auditors are often the scapegoats for management
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s insufficient fraud detection operations and guidelines. At last, here is comprehensive, intermediate training for evaluating, devising, and installing fraud-specific internal controls, and for conducting proactive fraud-specific examinations. Including actual case studies, the authors show accountants and auditors how to: * Anticipate problems and follow clues * Successfully disclose fraud * Compile the evidence necessary to prosecute acts of fraud * Develop investigative techniques * Create effective internal controls . . . and much more, to fill the needs of this crucial area. For those of us blessed with perfect health, taking out a health insurance policy seems like giving away money. Akash Sharma is one man who decided that it was time to make the insurance companies pay. Using different names, he swindled the ICICI Lombard General Insurance Company to the tune of several lakhs of rupees before being found out and arrested. But the icing on the cake of this fraud was that not only did he take out policies under different names, he also created a fictitious hospital to manufacture the papers required for a mediclaim. Imagine the shock of the vigilance official from ICICI Lombard who went to track down a Sympathy Hospital only to find a three-storey house in its place. Akashs scam was almost perfect. He had it all planned down to the last letterhead for 'Sympathy Hospital and the pathology reports to buttress his claims. What he failed to account for was the vigilance checks carried out by the insurance company. Initially we never suspected anything because the amount in the claims was always under Rs 50000. Had he made a big claim, he would have been put through greater checks and would have been required to submit more document. Between January and June of this spokesperson for ICICI Lombard General Insurance said.
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Growing threat of insider fraud

Insider fraud poses a growing threat to financial firms in the UK. But despite strengthening their fraud management capabilities, firms have been told they need go further to protect
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themselves and their customers from fraudsters. The Fraud Governance report from government regulator the Financial Services Agency (FSA) looked at how senior management is tackling fraud risk in 16 mainly larger financial services groups. It found that CEOs or other senior figures generally recognise that the increasing threat of fraud needs to be managed in a more effective and integrated way. But it adds that there areas where firms need to work harder. In particular, the report urges firms to be more proactive in collecting more detailed and accurate data and investing in systems and controls to detect mounting fraud threats at an early stage. Without this, it warns, some firms are currently not in a position to adequately assess where and why they are at risk from fraud. "A robust fraud strategy is one that is sponsored at the highest level within a firm and embedded within the culture," said Philip Robinson, financial crime sector leader at the FSA. "While the larger firms have been forced to wake up to fraud, those that have so far remained outside the fraudsters' radar are not as developed. "Fraud threats are dynamic and fraudsters constantly devise new techniques to exploit the easiest target. Firms need to continue to invest in systems and controls and manage their responses to fraud in order to avoid being targeted as the weakest link." Firms that underinvested in anti-fraud measures tended to suffer relatively high levels of losses. The report found firms that underinvested in anti-fraud measures tended to suffer relatively high levels of losses. Insider fraud - whether arising from collusion, coercion, infiltration or existing employee
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action - was cited by firms as one of the most serious threats. The most common example offered by firms was incidents of staff being approached outside work and offered money to sell confidential information. To counter this rising threat firms have tightened their employee vetting procedures. The intensity of vetting varied between firms but did not always apply to both temporary and permanent staff. One firm applied seven levels of screening with the degree of due diligence tailored towards the seniority of the role. Another firm stated that 8 per cent of potential hires were rejected after vetting Investment in systems and a focus on robust anti-fraud operational processes, which are embedded in business units, are key to improvements in fighting fraud, the FSA said. Where firms are getting better at identifying, assessing, mitigating and reporting fraud risk, this is a recent improvement and needs to be sustained. Only a handful of firms were found to be developing formal risk assessment processes and, as a result, firms tended to respond to fraud in an incident-driven manner. In particular, the report warns smaller firms to analyse their vulnerability to attack and consider the threats to their business in a structured way because the impact of an attack or series of fraud events could be particularly damaging. The report noted some unclear or inappropriate allocation of anti-fraud responsibilities within firms. For example, accountability in individual roles was not always clearly defined and responsibility may be de-prioritised in favour of other business needs. There is increased co-operation within the industry, and firms see this as critical to the success of anti-fraud measures. There was particular support for the lead taken by some trade associations and initiatives such as information sharing between firms. The report also found evidence of competing priorities between fraud mitigation and customer experience. Firms were found to be wary of putting customers off by implementing protective measures
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that risk causing inconvenience to them over and above what their competitors do. Firms recognise that customer education and awareness is vital to reduce fraud, the report said, but they should ensure that sufficient resources are applied to these areas.
Securities fraud
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Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws. Generally speaking, securities fraud consists of deceptive practices in the stock and commodity markets, and occurs when investors are enticed to part with their money based on untrue statements. Securities fraud includes outright theft from investors and misstatements on a public company's financial reports. The term also encompasses a wide range of other actions, including insider trading and front running and other illegal acts on the trading floor of a stock or commodity exchange. According to the FBI, securities fraud includes false information on a company's financial statement and Securities and Exchange Commission (SEC) filings; lying to corporate auditors; insider trading; stock manipulation schemes, and embezzlement by stockbrokers.
Types of securities fraud

Corporate fraud
Fraud by high level corporate officials became a subject of wide national attention during the early 2000s, as exemplified by corporate officer
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misconduct at Enron. It became a problem of such scope that the Bush Administration announced what it described as an "aggressive agenda" against corporate fraud Less widely publicized manifestations continue, such as the securities fraud conviction of Charles E. Johnson Jr., founder of Purchase Pro in May 2008.[6] FBI Director Robert Mueller predicted in April 2008 that corporate fraud cases will increase because of the subprime mortgage crisis.
Internet fraud
According to enforcement officials of the Securities and Exchange Commission, criminals engage in pump-and dump schemes, in which false and/or fraudulent information is disseminated in chat rooms, forums, internet boards and via email (spamming), with the purpose of causing a dramatic price increase in thinly traded stocks or stocks of shell companies (the "pump"). When the price reaches a certain level, criminals immediately sell off their holdings of those stocks (the "dump"), realizing substantial profits before the stock price falls back to its usual low level. Any buyers of the stock who are unaware of the fraud become victims once the price falls.[ The SEC says that Internet fraud resides in several forms:
Online investment newsletters that offer seemingly unbiased information free of charge about featured companies or recommending "stock picks of the month." They are sometimes used for fraud. Bulletin boards that often contain fraudulent messages by hucksters. E-Mail spams from perpetrators of fraud
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Insider trading
Insider trading is the trading of a corporation's stock or other security by corporate insiders such as officers, key employees, directors, or holders of more than ten percent of the firm's shares. Some insider trading is illegal. In illegal insider trading, an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise misappropriated.
Microcap fraud
In microcap fraud, stocks of small companies of under $250 million market capitalization are sold fraudulently to the public. Its prevalence has been estimated to run into the billions of dollars a year. Microcap fraud includes pump and dump schemes involving boiler rooms and scams on the Internet. Many but not all microcap stocks involved in frauds are penny stocks, which trade for less than $5 a share.
Accountant fraud
In 2002, a wave of separate but often related accounting scandals became known to the public in the U.S. All of the leading public accounting firms Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, PricewaterhouseCoopers and others have admitted to or have been charged with negligence to identify and prevent the publication of falsified financial reports by their corporate clients which had the effect of giving a misleading impression of their client companies' financial status. In several cases, the monetary amounts of the fraud involved are in the billions of USD.
Boiler rooms
Boiler rooms or boiler houses are stock brokerages that put undue pressure on clients to trade using telesales, usually in pursuit of microcap fraud
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schemes. Some boiler rooms offer clients transactions fraudulently, such as those with an undisclosed profitable relationship to the brokerage. Some 'boiler rooms' are not licenced but may be 'tied agents' of a brokeradge house which itself is licenced or not. Securities sold in boiler rooms include commodities and private placements as well as microcap stocks, non-existent, or distressed stock and stock supplied by an intermediary at an undisclosed markup.
Mutual Fund fraud

A number of major brokerages and mutual fund firms were accused of various deceptive acts that disadvantaged customers. Among them were late trading and market timing. Various SEC rules were enacted to curtail this practice.[15] Bank of America Capital Management was accused by the SEC of having undisclosed arrangements with customers to allow short term trading.
Short selling abuses

Abusive short selling, including certain types of naked short selling, are also considered securities fraud because they can drive down stock prices. In abusive naked short selling, stock is sold without being borrowed and without any intent to borrow.[17] The practice of spreading false information about stocks, to drive down their prices, is called "short and distort." During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that shorts were spreading rumors to drive down Bear Stearns' share price. Sen. Christopher Dodd, D-Conn., said this was more than rumors and said, "This is about collusion."[18]
Ponzi scheme
A Ponzi scheme is an investment fund where withdrawals are financed by subsequent investors, rather than profit obtained through investment activities. The largest instance of securities fraud committed by an individual ever is a Ponzi scheme operated by former NASDAQ chairman Bernard Madoff, which was worth an estimated $64.8 billion prior to its collapse.
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Pervasiveness of securities fraud

Securities regulators and other prominent groups estimate civil securities fraud totals approximately $40 billion per year. Fraudulent schemes perpetrated in the securities and commodities markets can ultimately have a devastating impact on the viability and operation of these markets. Class action securities fraud lawsuits rose 43 percent between 2006 and 2007, according to the Stanford Law School Securities Class Acton Clearinghouse. During 2006 and 2007, securities fraud class actions were driven by market wide events, such as the 2006 backdating scandal and the 2007 subprime crisis. Securities fraud lawsuits remained below historical averages.[22] Some manifestations of this white collar crime have become more frequent as the Internet gives criminals greater access to prey. The trading volume in the United States securities and commodities markets, having grown dramatically in the 1990s, has led to an increase in fraud and misconduct by investors, executives, shareholders, and other market participants. Securities fraud is becoming more complex as the industry develops more complicated investment vehicles. In addition, white collar criminals are expanding the scope of their fraud and are looking outside the United States for new markets, new investors, and banking secrecy havens to hide unjust enrichment. A study conducted by the New York Stock Exchange in the mid-1990s reveals approximately 51.4 million individuals owned some type of traded stock, while 200 million individuals owned securities indirectly. These same financial markets provide the opportunity for wealth to be obtained and the opportunity for white collar criminals to take advantage of unwary investors.[ Recovery of assets from the proceeds of securities fraud is a resource intensive and expensive undertaking because of the cleverness of fraudsters in concealment of assets and money laundering, as well as the tendency of many criminals to be profligate spenders. A victim of securities fraud is usually fortunate to recover any money from the defrauder.
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Sometimes the losses caused by securities fraud are difficult to quantify. For example, insider trading is believed to raise the cost of capital for securities issuers, thus decreasing overall economic growth.
Characteristics of victims and perpetrators
Any investor can become a victim, but persons aged fifty years or older are most often victimized, whether as direct purchasers in securities or indirect purchasers through pension funds. Not only do investors lose but so can creditors, taxing authorities, and employees. Potential perpetrators of securities fraud within a publicly-traded firm include any dishonest official within the company who has access to the payroll or financial reports that can be manipulated to: 1. 2. 3. 4. overstate assets overstate revenues understate costs understate liabilities
Enron Corporation exemplifies all four tendencies, and its failure demonstrates the extreme dangers of a culture of corruption within a publicly-traded corporation. The rarity of such spectacular failures of a corporation from securities fraud attests to the general reliability of most executives and boards of large corporations. Most spectacular failures of publicly-traded companies result from such innocent causes as marketing blunders an obsolete model of business inadequate market share or noncriminal incompetence
Other effects of securities fraud
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Even if the effect of securities fraud is not enough to cause bankruptcy, a lesser level can wipe out holders of common stock because of the leverage of value of shares upon the difference between assets and liabilities. Such fraud has been known as watered stock, analogous to the practice of force-feeding livestock great amounts of water to inflate their weight before sale to dealers.
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Reasons Why Fraudsters Target Seniors

Con artists target seniors, particularly in insurance fruad and health scams because they are seen to be easily trusting and gullible. According to the FBI, some other reasons why seniors are targeted for fraud include: 1. Older citizens are likely to accumulate savings over the years and are likely to own their home and/or have a decent line of credit. They often are in a financial stable position. This attracts con artists who whip up new schemes and fake health products or insurances to scam the savings of the elderly. 2. Individuals who grew up in the 1930s to the 1950s were raised to be polite and trusting. These are two positive traits, but can make an individual more vulnerable to con artists. Because these individuals tend to be too polite to say "NO" or just hang up the phone. 3. Elder people are the least likely to report fraud for one or more reasons. Some of these reasons include they lack information on how to report a fraud, they have a hard time admitting that they fell into a scam, or they may not realize that they have been scammed or defrauded. As well as, elder victims of fraudsters often worry that their family members will began to think that they lack the mental capacity to manage their own financial affairs if they admit being defrauded. 4. When an elderly victim reports fraud, they often make poor witnesses. The con artists knows the affects of age on memory and knows that by the time the victim realizes they have been defrauded, which may be weeks or months after the incident they won't be able to provide detail information to the investigators. Information about how many times the fraudster called, the time of the day they called, if it was always the same person who called, the last time they talked to the person, if the person had an accent, what the person promised, etc. 5. Lastly, older individuals often become the victim of health scams, promising improved cognitive functions, longevity and cancer fighting products. This is because in a country like America that has new medical breakthroughs in vaccinations to cure older diseases, it gives individuals new hope. Hope that fraudsters use in their advantage as they promote their phony health improving or fake health insurance plans.
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How to Avoid Health Insurance Fraud

For some tips on how seniors and other avoid health insurance fraud include:

Avoid signing blank insurance claim forms. Review your insurer's benefits statement carefully. Call if you have any questions or need clarifications. Ask your health care providers what they charge for a visit, treatment, procedure, and what you will need to pay out of your pocket. Refuse to do business with door-to-door or telephone salespersons who offer free medical services or equipment. Give your insurance/Medicare number only to those who provided you with certified medical services. Make note of all of your health care and medical appointments. Know if your doctor ordered special equipment for you.
In 2003,
m Frauds That Target The Elderly
Beware of Strangers Bearing Gifts It's true senior citizens are often the targets of fraud and financial crimes. Among the reasons: Some older people have built substantial assets (including their own home and large savings accounts), they're easy to find at home, and they can be swayed by fears of losing their financial independence. "Also, despite the efforts of law enforcement, criminals are getting smarter and using technology to their advantage to commit fraud and other financial crimes, such as identity theft," said Michael Benardo, manager of the FDIC's Financial Crimes Section.
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The following are common cons designed to trick consumers especially elderly people into giving up money, property or valuable personal information. These scams often are committed by strangers posing as legitimate business people, government officials or other "trusted" individuals. (For a look at frauds committed by relatives or caregivers. The information is based on reports from the U.S. Justice Department, FDIC fraud specialists, the Federal Trade Commission (FTC) and other sources: Prize and Sweepstakes Frauds: This type of scam may involve a congratulatory phone call or letter informing a consumer that he or she has won a prize or a large sum of money in a lottery or sweepstakes. But before any "winnings" are delivered, you are told you must pay for fees, taxes, shipping and handling or other charges. Of course, the prize never comes or any products that do arrive are essentially worthless. "Prize and sweepstakes fraud is more prevalent among older consumers than among the public at large, and is particularly prevalent among consumers age 70 and older," Lois Greisman, an Associate Director in the FTC's Bureau of Consumer Protection, said in testimony before the U.S. Senate Special Committee on Aging in July. She said nearly 12,000 older consumers complained to the FTC that they lost almost $35 million in fraudulent prize or sweepstakes promotions in 2004, with the median loss being about $2,000. "These frauds can be devastating to consumers who sometimes cash out retirement funds to claim their purported prizes," Greisman said. Fraudulent Investments: A firm or individual "guarantees" fantastic returns on investments, business opportunities, gems and other "no-risk" deals. These will sound attractive compared to what local banks are paying on deposits. At some point the seller takes the money and runs, leaving the investor with a big loss. Charitable Donation Scams:
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Crooks disguised as charities collect donations or money for raffles. While you think you're helping people in need, you're really helping con artists pad their pockets. You should make donations only to charities you are familiar with or after consulting with the Better Business Bureau (BBB), which maintains reports on national and local charities. Contact your local BBB as listed in the phone book or check out charities online at Home or Auto Repair Scams: Someone calls or knocks at your door offering a super deal to fix your roof or driveway or repair your car. After you hand over the funds you discover the work hasn't been completed, is of poor quality or wasn't needed in the first place. Some scammers have billed consumers for maintenance or repairs that were never performed. Loan or Mortgage Fraud: These typically involve unscrupulous "predatory" lenders (typically from the non-bank or home improvement industries) that use false or misleading sales tactics to make high-cost loans to consumers in need of cash, including older homeowners concerned about paying bills. Victims often can't afford the loan, and they may be pressured to refinance a loan repeatedly and pay high fees each time a scam known as "loan flipping." Borrowers who pledge their house as collateral and can't repay the loan could lose the home in a foreclosure. Help for Avoiding Foreclosures: The fraudster goes through records at the local courthouse listing homes facing foreclosure. He or she then contacts the homeowners and offers assistance to prevent the foreclosure from taking place. Instead, the homeowner is then tricked into signing documents that, in the fine print, transfer the ownership of the property to the fraudster. "I-Need-Your-Help" Scams: Unlike the previous scams that involve selling or giving something to the victim, here the con artist is asking to receive some assistance... and in the process obtains account information or access to funds. Example: Someone claiming to be a bank examiner, bank security officer or police officer calls
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asking for help investigating a possible fraud by withdrawing cash from your bank account or providing account information. If the trick works, the bogus investigator can walk away with the money or use the confidential information to raid the victim's bank account. Counterfeit Checks: In one example, you sell an item over the Internet and the buyer sends a cashier's check for more than the agreed-upon price. The buyer instructs you to wire the excess funds back. If you comply, you will most likely find out that the check you received is phony and the money you wired cannot be returned to you.
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Employee Fraud
Emerging businesses are much more vulnerable proportionally to

employee theft, and are much less able to absorb these losses than large corporations. Upon completing its 2008 Report to the Nation on Occupational Fraud & Abuse, the Association of Certifie Fraud Examiners (ACFE) in Austin, Texas, reported that businesses employing less than 100 persons "were the most vulnerable to fraud and abuse" by employees. Emerging companies were the victims of fraud more often than large corporations, and the resulting losses were much larger commensurate with their resources. "Participants in our survey estimated that U.S. organizations lose 7% of their annual revenues to fraud. Applied to the projected 2008 United States Gross Domestic Product, this 7% figure translates to approximately $994 billion in fraud losses. "Occupational fraud schemes tend to be extremely costly. The median loss caused by the occupational frauds in this study was $175,000. More than onequarter of the frauds involved losses of at least $1 million. "Occupational fraud schemes frequently continue for years before they are detected. The typical fraud in our study lasted two years from the time it began until the time it was caught by the victim organization.
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"This Report focuses on 11 distinct categories of occupational fraud. The most common fraud schemes were corruption, which occurred in 27% of all cases, and fraudulent billing schemes, which occurred in 24%. Financial statement fraud was the most costly category with a median loss of $2 million among the 99 financial misstatements in this Report. "Despite increased focus on anti-fraud controls in the wake of Sarbanes-Oxley and mandated consideration of fraud in financial statement audits due to SAS 99, our data shows that occupational frauds are much more likely to be detected by a tip than by audits, controls or any other means. Forty-six percent of the cases in this Report were detected by tips from employees, customers, vendors, and other sources. Tips were also the most common means of detection in 2002, 2004, and 2006. "The implementation of anti-fraud controls appears to have a measurable impact on an organizations exposure to fraud. We examined 15 specific anti-fraud controls and measured the median loss in fraud cases depending on whether organizations did or did not have a given control at the time of the fraud. In every comparison, there were significantly lower losses when the controls had been implemented. For example, organizations that conducted surprise audits suffered a median loss of $70,000, while those that did not had a median loss of $207,000. We found similar reductions in fraud losses for organizations that had anonymous fraud hotlines, offered employee support programs, provided fraud training for managers, and had internal audit or fraud examination departments. "The Report includes frauds that impacted organizations in a number of different industries. The
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industries most commonly victimized by fraud in our study were banking and financial services (15% of cases), government (12%) and healthcare (8%). Among industries with at least 50 cases, the largest median losses occurred in manufacturing ($441,000), banking ($250,000), and insurance ($216,000). "Small businesses are especially vulnerable to occupational fraud. The median loss suffered by organizations with fewer than 100 employees was $200,000. This was higher than the median loss in any other category, including the largest organizations. Small businesses also suffered the largest losses in our 2006 study. Check tampering and fraudulent billing were the most common small business fraud schemes. "Lack of adequate internal controls was most commonly cited as the factor that allowed fraud to occur. Thirty-five percent of respondents cited inadequate internal controls as a primary contributing factor in the frauds they investigated. Lack of management review and override of existing controls were each cited by 17% of respondents. "Seventy-eight percent of victim organizations modified their anti-fraud controls after discovering that they had been defrauded. The most common change was to conduct management review of internal controls, which occurred in 56% of cases. Implementation of surprise audits was the next most common response, followed by fraud training for managers and employees. "Occupational frauds were most often committed by the accounting department or upper management. Twenty-nine percent of frauds in this Report were
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committed by persons in the accounting department, while 18% were committed by executives or upper management. Frauds committed by executives were particularly costly, resulting in a median loss of $853,000. "Occupational fraudsters are generally first time offenders. Only 7% of fraud perpetrators in this study had prior convictions and only 12% had been previously terminated by an employer for fraudrelated conduct. These results are consistent with our 2004 and 2006 Reports. "Fraud perpetrators often display behavioral traits that serve as indicators of possible illegal behavior. The most commonly cited behavioral red flags were perpetrators living beyond their apparent means (39% of cases) or experiencing financial difficulties at the time of the frauds (34%). In financial statement fraud cases, which tend to be the most costly, excessive organizational pressure to perform was a particularly strong warning sign." Previous studies have observed that there are two general characteristics of emerging businesses that make them especially vulnerable to employee fraud: First, because of the closer relationship between the owner/managers and their employees, "you generally have a higher degree of trust" that facilitates the fraud of the dishonest employee. The survey disclosed about 200 incidents in emerging companies where a "trusted" bookkeeper had simply stolen money from the firm, the scheme often continuing for many years. The report describes one case in which a bookkeeper stole $150,000 by salting checks drawn to himself in the piles of legitimate
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checks presented for the owner/manager's signature. Invariably laid before the owner/ manager at the busiest periods, reliance was placed on this trusted employee and the checks were not scrutinized carefully. And second, the financial controls in the emerging business are generally casual and unsophisticated. The refined security and audit procedures found in the large corporation do reduce the level of fraud significantly. However, the emerging business can employ some low-cost weapons to combat employee fraud. The most critical measure is to undertake meticulous background checks on all new employees. Resumes should be checked thoroughly to ascertain that the applicant did graduate from the schools claimed. Any unaccountedfor time in the person's past must be acceptably explained. To guard against bogus employment references, a prospective employer should never rely on the resume as the source for the telephone number of an applicant's previous employer. The owner/manager of the emerging business must exercise some simple precautions to thwart employee fraud. Each employee handling money should be removed periodically from their job so that any malfeasance may not be continually concealed; this can be accomplished through required vacations and short-term job rotation. (The classic embezzlement is the handiwork of the trusted employee working long hours and never taking a vacation most thefts would surface if the employee had to take their hands off the job.) It is essential that other employment and business relationships of all key employees be known fully. Even family members working within the business should be subject to the same checks and controls as other employees. And an independent audit at least annually is an expense the smaller business cannot afford not to incur. The emerging business often cannot survive the losses of significant employee theft. The owner/manager of the emerging business wants
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to be trusting, but must have his/her eyes fully open and not be gullible. Recognizing that even the "nicest" employees may be subject to temptations and failures of character, prudence demands that procedures and practices be established to preclude the possibility of any employee fraud. The survival of your business depends upon it!
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Scams at their Most Elaborate: Insurance Fraud
--Newest "Hall of Shame" entries put a Truly Bizarre Touch to Con Games A real down-home hunk of logic, Epstein's Law, tells it like it is: If you think the problem is bad now, just wait till you've solved it. The investigative arms of insurance companies are perhaps the most effective scam fighting machines on the planet Earth. Their rating for the number of con artists convicted is about the highest for any group of crime fighters. Yet, for every con artist nailed, it seems a more sophisticated scam specialist springs up--to extend their challenge. From the Archives of the Coalition Against Insurance Fraud, here are some examples (from their "Hall of Shame"): A self-proclaimed gypsy, a wedding dancer, swallows broken glass. Purpose? To shake down restaurants and other food providers, cash in on their insurance coverage. Says he was seeking a dowry for his sons. But, instead, is serving a 5year stretch, and will have to cough up $340,000 in restitution. Florida gay man torches his home after painting "Idle Fag" across it's front steps-in order to collect the insurance money. and make it look like a hate crime. He gets 18 months in state prison to contemplate the wisdom of this approach. Say some, if at first you don't succeed, you'll never succeed.
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A New York school teacher fakes cancer to collect the insurance money, then moves to New Hampshire to try a repeat performance. When her valiant struggle makes the local newspaper, she is exposed, and is now serving 1 to 3. A new way to celebrate mediocrity? A life insurance agent kills 4 homeless people, and fakes their deaths so he can collect $1,000,000 in insurance proceeds. He's serving a life sentence--more than enough time to pray for forgiveness of his sins. New York woman, poses as a Princess, member of the Saudi Royal Family. (This sounds about as challenging as trying to tune a bagpipe.) Finally, pleads guilty to insurance fraud and attempted grand larceny. Must have had a sharp lawyer. She's able to trade down from a 15-year sentence to 1 year in a psychiatric facility. Almost sounds like political influence. Power corrupts; absolute power is pretty neat though. A Manhattan Stock Market Day Trader has an effective scam going, makes a small fortune, in fact. Claims he lost his right eye on 3 different boat cruises. First time is allegedly the result of a sun filter falling off a ship's telescope while he's looking through it. Second claim is for an exploding champagne bottle on another cruise. Third time around, on still another cruise, he is supposedly hit in the eye by a flying toy disc. This guy's luck holds. He's still at large. Sounds like an unusually talented con man, a guy who could probably jump start a car without cables. A Texas couple digs up the grave of an elderly woman and dresses her in the husband's clothing, stuffs her body in his car, and pushes it over a cliff. Object? To collect the insurance money, hoping the blackened body would obscure identity. DNA gives them away, and they are now serving a long, all-expenses-paid stay in a Texas slammer. (Why is it everyone seems normal--until you get to know them?) Illegal meth lab blows up, yielding $40,000 in insurance proceeds for a man who
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says his severe burns occurred while he was working in his mother's bakery. Anyone can set low standards, then consistently fail to meet them. Doctor performs 750 worthless heart operations on homeless people to collect $2,000,000 in Medicaid payments. Good maxim is: Live your life so that, when you die, the preacher will not have to lie at your funeral. Obviously ignored by this physician. An insurance adjuster rams a huge chunk of tree through a hole in his roof in order to inflate an insurance claim. He is nailed when it comes to light that a nosey neighbor had videotaped everything. Washington, D.C. man tries to blow up his father by wiring his SUV to explode upon entry, an insurance "reward" being his goal. But, his brother borrows the car and blows himself up instead. The man is now serving 32 years of hard time in a 6 x 9 cell, plenty of space to think about his mistake. We can only assume that, if your handle on life breaks, you are capable of coming up with some very zany ideas on how to scam the system to make yourself rich. These examples, we submit, are clear evidence of this. But insurance fraud, like the return trip of a boomerang, always seems to come back to haunt the con artist perpetrator. Pickings in this area of scamery are slim indeed. Just about everyone participates in mild insurance fraud, at one time or another. Slight exaggeration of insurance claims are common. But when it comes to the elaborate, big time stuff, it's best to have a positive attitude about the con man's destructive habits, and, in a wide arc, steer clear. Where the blind leadeth the blind, it's best to merely get out of the way.
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What the FSA expects insurance firms to do?

The FSA regulates over 29,000 firms. We require firms we regulate to have effective systems and controls in place, adequately designed and effectively implemented, to address their financial crime risks in a proportionate way and prevent financial crime from occurring. For instance, in response to this increasing risk of information security, firms need to ensure that customer personal data is stored safely to reduce the risk of financial crime being perpetrated against them, other firms and their customers. As many of you will be aware, the FSA is moving increasingly to a principles-based approach to regulation. We do not, therefore, advocate a 'one-size fits all' approach, which would be overly burdensome for most firms. The risk-based approach will only succeed if the use of judgment by senior management prevails over a box-ticking approach. In other words, we're interested in how you think managing risks in your firm makes the most sense in relation to your products' vulnerabilities or your firm's specific channels of business for instance. What we seek to assess when we visit a firm is whether a firm has a strong anti-fraud culture, with a clear and consistent lead being given from senior management and a clear allocation of responsibility for the day to day management of risk. We look at the staff training arrangements, and at how information on financial crime risks is captured and presented to senior management and to the board. One of the FSA divisions carried out in 2006 some thematic work on claimant fraud in both the life and non-life sectors. Some of the weaknesses this work identified included a lack of management information as well as over-reliance on front line staff to report fraudulent activity. So what does this thematic work tells you? Well that a 'clear allocation of responsibility' is crucial to fight financial crime risks. And senior management must play an active role in establishing the right cultural ethics and policies within their firm, and take financial crime issues seriously but not just when a financial crime incident is discovered! Senior management need to ensure that they receive timely, regular and appropriate management information to enable them to monitor the firms performance on fighting crime. Management Information should be qualitative, as well as quantitative. Firms need to determine proportionate key risk and key control indicators that are appropriate to their business. Product proofing, adequate customer due diligence (CDD) as well as 'Know Your Intermediary' procedures are absolutely key for the insurance sector. Intermediaries
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cannot consistently meet their financial crime responsibilities if it is unclear whether they act for the customer or the firm. Insurers and brokers need to be clear on where they have responsibility e.g., which party has responsibility for performing customer due diligence. Obviously, I am not trying to say that this is an easy route, since it is often difficult to identify who the customer of the insurance contract really is. And KYC on third parties receiving payments would be no easy task, but perhaps the ability to perform this type of 'reverse' CDD could greatly improve the transparency of the payments system. Complex distribution channels (eg. sub-delegation) and multi-national transactions require a particularly robust anti-financial crime control environment and adequate audit arrangements. Firms also have a duty to report significant frauds to us. And we look into these reported frauds carefully, since individual incidents may be indicative of more general and pervasive trends. Being aware of specific fraudulent patterns, we can then disseminate information to the relevant sector about these risks. In March of this year, we launched a streamlined system for reporting financial crime in the insurance industry. Under the new system, insurance firms and intermediaries are being called on to tell us when they suspect criminal behaviour may be taking place. This may arise, for instance, when an insurer terminates an agency agreement with an intermediary where they see doubtful practice or suspect misconduct. Examples of possible financial crime involving insurance fraud include: misappropriation of client money or money held under risk transfer agreements; falsifying customer details to obtain insurance business that would otherwise be turned down or be more expensive; and Firm behaviours of this kind have led us to take action against a number of insurance intermediaries. As this is a voluntary initiative, so we REALLY need the insurance industry to work with us to turn this project into a useful and successful initiative in the fight against financial crime. We have long recognised that the most effective way to tackle fraud is by working in partnership with our stakeholders, who encompass organisations and bodies including government, law enforcement, consumers and very importantly firms themselves. We want to foster an environment where information sharing is not only encouraged, but actively seen by all as a means both to reduce crime and to increase profitability. And this remark leads me to address some of the challenges we see in tackling financial crime in the insurance sector.
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The acceptable face of fraud?
How much battering would your finances have to take before you would consider breaking the law? "I'd never do that!" you are no doubt crying. But according to a survey from Royal & Sun Alliance, 1.4 million of us consider insurance fraud more acceptable now than we did 12 months ago. Apparently that makes a total of almost 5 million of us that do not think making a false claim is wrong. Typical examples of insurance fraud include failing to disclose motoring convictions or previous claims when applying for cover, or exaggerating claims by adding extra items to a genuine claim. More drastic examples include people hiding their valuables and staging a burglary in an attempt to claim thousands on their insurance policies, or dropping their old television down the stairs so they can claim for a new flat-screen model. There are signs that people are not just considering fraud, but are going through with it. Fraudulent travel claims were up 80% by the end of last summer, according to the Association of British Insurance. Holidaymakers were pretending that expensive cameras and iPods had been stolen, or were upping the value of what had been stolen in the case of genuine theft. Other travellers who suddenly realise the holiday they booked in more buoyant times is going to be unaffordable have been cancelling trips, feigning illness and then conning doctors into providing them with medical certificates to verify their "illness". It may sound like a victimless crime, but some of the insurance fraud being committed is actually dangerous "crash for cash" accidents staged by motorists planning to claim on their car cover are apparently putting other drivers at risk. And before you jump to
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conclusions about who is behind these crimes, no it is not necessarily the "Shameless" demographic. Richard Davies, the group fraud risk manager for Axa, told the Telegraph: "Often they are middle-class families who are looking for a way of getting extra money to help with the mortgage or to service other debts." Fraud costs the insurance industry an estimated 1.6bn every year. And where does this extra cost go? Yep, straight on to your insurance policy, adding 40 to the average annual household premium. But would you consider trying to get one over on your insurer? Have you perhaps added an iPod you never owned to your genuine theft claim, an expensive camera to your stolen suitcase, perhaps? Or does the idea of this "middle-class theft" just appal you?
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Various types of scams
There are many types of scams you need to watch out for. These scams include:

literary scams poetry scams jury duty scams credit card scams
Literary Scams: Writers Watch Out! Credit card scams, lottery scams, internet scams, investment scams, domain name registration scams, and adding to this quite endless list of scams are even literary scams. It seems that scammers spare no one. Not even writers. Literary scams include everything from scammers persuading potential writers to purchase pointless services to surrendering their legal rights by providing false information and promises of publication. Victims of Literary Scams The victims of literary scams are often new writers' eager to enter the publishing world with little or no idea about how the publishing industry works. New writers should be aware that publishing requires a lot of research from writing a good proposal to finding out what a publisher or agent is looking for. Also susceptible to these literary scams are writers who have been submitting their works for years with no or little success. How to Avoid Literary Scams
Writers can avoid scams in the literary world by simply being aware of the telltale signs of the scams. These signs include:
Recommendations of all and any sorts:
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A red flag should be go up if you send your work to an agency or small publisher and receive a reply praising your work and recommending you to pay a certain agency to "fix-up" your work before publishing.
Requests for a fee:
Any agency requesting a feea reading, marketing, or contract feeupfront, is only interested in your money and not your work.
"Co-publishing" or "Joint venture":
Beware of publishers asking you to share the risks and rewards of publishing and/or publishers willing to publish anything backed by a cheque for a huge sum of money.
"Purchase this and you're in":
Be cautious of literary agents asking you to pay to receive a copy of the book that features your writing.
"We're looking for writers":
Regard these advertisements from literary agents with skepticism. Successful literary agents never have to ask for submissions. Do and Don't
Real publishers don't tell writers to pay for services to polish their work before
publication. Good literary agents don't charge fees upfront. Real publishers pay writers and poets for their work. Or at the very least give writers and poets a free copy of their published work.
Poetry Scam: The Facts
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Perpetrators of these poetry scams attempt to appear legimate by quoting credible sources and previous winners of their international contests. They often post calls for submissions through emails, in newspapers, and on their websites. These scam artists lure writers to submit poems for a chance of winning $1,000 and also having their poems published in an anthology. Poetry scam artists rake up to $10 million a year from poetry contestants with promises of cash and prizes and publications affecting millions of hopeful poets and writers. More than often theses awards are never delivered and the contestants poems are never published without a fee. A fee, that increases with more promises of greater rewards, and publications. How Poetry Scam Contests Work Often these deceptive poetry contests place no restriction on the types of poetry contestants can enter. However, they may ask contestants poems to be a maximum of 20 lines. If you follow the requirement youll likely receive a letter in the mail in a co uple weeks congratulating you as the semi-finalist. The letter will go on to tell you how your poem will be published in an anthology. However, to receive a copy of the anthology, you have to pay $49.95 plus $4.95 shipping and handling. Contestants are often all too thrilled after reading how their poems will be published to spot the scam. Contestants may end up buying numerous copies of the anthology for friends and family, not knowing that all contestants receive the same letter and that their poetry would not have been published if they didnt buy a copy. Despite that, thrilled contestants will continue to receive prestige letters nominating them as the Poet of the Year and telling them how they could attend an award ceremony for about $475a small price to pay for prestige.
Poetry Scam in the Media

Barbara Walters in a 1998 episode of ABCs 20/20 showed how reporter Arnold Diaz put one nationwide poetry contest to the test with the help of second graders. Diaz asked a class of second-graders at Thomas Jefferson Elementary School to compose a poem with a maximum of 20 lines about their pet. The eager beavers even without ever studying poetry in school, got right down to the task. All the students received a letter in the mail a couple weeks later announcing them as award-winning poets. The letter also told students by sending in $50 they could receive a copy of the anthology that featured their poem.
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Jury Duty Scams: How Scammers Catch You Off-Guard

Your phone rings. You pick up the receiver thinking it may be a friend or another telemarketer trying to sell you unwanted services. Instead its a court official saying in a stern voice that you failed to show up for jury duty. You know you tend to forget things, but jury duty? How did you forget that? Or did you subconsciously try to get out of jury duty? The official continues unflustered by your protest of not receiving a letter about jury duty. He says a warrant has been issued for your arrest. The word arrest makes your heart pound faster. You insist that he has gotten the wrong person. He asks you for your birth date, social insurance number, and your credit card information for a verification process. You quickly give out your personal information, everything from your home address to your S.I.N. to sort out this unbelievable mistake. The court official may then apologize or ask you to pay a fine with your credit card if your refuse give out your personal information. Caught off-guard, you do whatever he requests so could hang up and go on with your daily activities. This represents one way millions of people a year become victims of identity theft. The jury duty scams give con artists an easy way to rob you of your identity and/ or your credit card information. So, prevent falling victim to jury duty scams and other scams that affect todays society by staying alert and learning how to spot scams. Learning to Spot Jury Duty Scams Stop yourself from falling victim to jury duty scams by knowing the following:
Court official never telephone to notify that you have been selected for jury duty or that you failed to show up for jury duty. Only time, but rarely, a court official might phone is after you completed and mailed back your juror questionnaire. Never give out your social insurance number, credit card number, and other personal information over the phone even if the caller claims to work for the government or an official bank. If the caller insists that you give him or her your personal information, get the caller to read you the data so you can answer yes or no to their questions. But, always refuse to give out your personal information like you S.I.N. over the phone to protect yourself from identity theft. Regularly monitor your monthly credit card bill and bank account activities. If you spot unauthorized charges made to your credit cart bill contact your credit card company immediately to stop becoming defrauded by credit card fraud.
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Credit Card Fraud

Unfortunately, fraud is becoming an ever more common threat to consumers - particularly when it comes to using you credit card. What's more, statistics show the price of credit card fraud is high - forcing cardholders and credit card issuers as much as $500 million a year. Indeed, as technology advances, scammers acquire increasingly sophisticated ways of stealing our personal information. However, despite the fact that credit fraud continues to rise, many consumers are still unsure of how to protect their information. That's why it's important to learn as much as possible about credit card fraud, credit card fraud prevention and even the history of credit card fraud. If you are hit by credit fraud, be sure you know how to handle it. Learn what's involved in reporting credit card fraud will help you take the best and most efficient steps possible towards regaining control of your information.
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TYPES OF INSURANCE FRAUD AND WHAT YOU CAN DO ABOUT THEM
STAGED AUTO ACCIDENTS: Some people actually cause automobile collisions to collect insurance payments for injuries that are either nonexistent or greatlyexaggerated. In one form of staged accident, the car in front of you stops suddenly so you cant avoid a collision. Another version of a staged accident occurs when you aremerging into traffic or pulling out of a parking space. The fraud criminal indicates its safefor you to proceed. He or she then intentionally smashes into your vehicle, and laterclaims to be injured and denies it was safe for you to proceed. Staged auto accident soften are caused by organized fraud rings that include an attorney and a medical care provider. What You Can Do: If you see traffic slowing, apply the brake. Dont tailgate. If you are in a collision, count the number of passengers in the other cars, and if possible, get names,telephone and drivers license numbers. Often more people will file claims than were actually in the vehicle. Call the police to the scene and get a police report, even if thereis little damage. If possible, take photographs of the damage to the other car(s) to help your insurance company dispute high auto repair bills to low impact damage. AUTO GLASS FRAUD: Auto glass fraud comes in many forms. Customers may bebilled by a glass company for a windshield replacement when only a chip repair was done. Or the bill to your insurance company could be for replacement rear wind shieldglass (which is more expensive) when the front windshield was replaced. There have also been cases where a persons insurance information was stolen out of their vehicle and false claims were made on their policies for glass repair. There have even been cases where prior work orders from glass companies were stolen or sold as leads toother glass companies so they could file false claims on your policy. What You Can Do: Watch out for windshield repair scams. Make sure that auto glass salesman at carwashes, door to door solicitations, or glass company phone solicitors are not giving you false information to make fraudulent insurance claims. Check out the information they give you. Check with your insurance agent on your claims history periodically to make sure you are not a victim of these type of scams.
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IDENTITY THEFT: Someone using your identity to seek medical attention and your health insurance company being billed for the treatments. Your identity being stolen out of medical clinics and fraudulent billings are then made to your health insurance company by non-existent medical centers and/or doctors. What You Can Do: Check your explanation of benefit forms your heath insurance company sends you to make sure you are aware of those billings and they are not fraudulent. If you have questions about the billings possibly being fraudulent, check with your insurance company. If you know the billings are fraudulent such as you never were treated on those dates, you have no knowledge of the medical clinic doing the billing and never seen a doctor by that name, contact the Fraud Unit as soon as possible. These organized medical fraud rings are operating in several states at this time. SLIP-AND-FALL FRAUD: Small businesses and fast food restaurants are targets of this form of fraud, in which a person pretends to slip and fall to the floor, often in a washroom, usually with no witnesses. Injuries may be exaggerated or nonexistent. What You Can Do: Business owners should notify their insurance companies of all claims, identifying those they believe are suspicious. If youre a customer who witnesses a slip-and-fall and are suspicious of its authenticity, notify a store employee.October 2009 MEDICAL PROVIDER FRAUD: This is the largest single fraud activity in the U.S.,costing $95 billion a year in losses. Some provides bill your insurance company for treatments not performed, or misrepresent the true cost of such services. What You Can Do: Review your medical bills. Make sure the treatments you were billed for were actually provided. If not, notify your insurance company. Be skeptical if your medical provider is prescribing excessive treatment for muscle sprains. Although the following practice is common and may be legitimate, be wary of medical providers who direct patients to a specific attorney and vice versa. WORKERS COMPENSATION FRAUD:
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Some employees falsely claim to be injured on the job when, in fact, the injury occurred outside the workplace. At other times, a real injury is exaggerated, and the dishonest employee receives benefits while sometimes working a second job. Workers Compensation Fraud costs Americans $5 billion a year. What You Can Do: If you suspect a co-worker of faking an injury, notify your employer. In some instances, the high costs associated with this fraud have forced layoffs and resulted in companies going out of business. AGENT FRAUD: Unscrupulous insurance agents collect your premium payment and fail to forward it to the company responsible for paying your future claims leaving you uninsured. What You Can Do: Never make a check payable solely to an agent. Never sign a blank check. If you are unfamiliar with the company named in the policy, check with the Arizona Department of Insurance to see if the company is licensed (602-364-2499, or 1-800-325-2548 in Phoenix area only). PHANTOM REPAIRS AND ESTIMATES: Crooked auto body shop owners offer to inflate the extent of damage to your vehicle to cover your deductible. In doing so, the shop owner over-bills the insurance company. What You Can Do: If you accept the offer, you would be committing insurance fraud,which is a felony. Politely decline the offer, then notify the insurance companyresponsible for payment.
OTHER FRAUD CRIMES OWNER GIVE-UP FRAUD: An individual reports his vehicle stolen when in fact, the owner and a co-conspirator have sold, dumped or burned the vehicle. The owner may collect twice: once on his insurance policy and then on the proceeds from the sale. In other owner give-ups, the vehicle is sold to a chop shop for its parts. ARSON-FOR-PROFIT:
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An owner deliberately burns (or hires someone to burn) a business, home or vehicle for the purpose of collecting on an insurance policy. FALSIFYING THEFT REPORTS: A property owner falsely reports items stolen or exaggerates the value of items taken in a burglary. POLICY MISREPRESENTATION: Some individuals misrepresent information on an application to obtain lower premiums. However, insurers can deny or adjust claims and cancel policies if there is misrepresentation. MULTIPLE POLICIES: An individual buys numerous policies insuring the same property(vehicle, artwork, etc.), and then reports an item stolen or destroyed collecting on all policies without disclosing the multiple coverage when the claim is filed.
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Insurance fraud. The billon dollar disaster
Billions of dollars are picked from Consumers' pockets each year by what many people consider a "victimless" crime. Most people are not even aware that it is happening.
This kind of theft is occurring in automobile repair centers, medical clinics, law offices and at your next door neighbor's house. Often white-collar criminals, including doctors and lawyers, have the quickest hands and generate the largest cash flow from unsuspecting Insurance Companies.
The crime is Insurance Fraud
Insurance Bureaux estimate that Insurance Fraud involves about 15% of Insurance Claims, which is thought to be a conservative estimate by Special Investigation Units which investigate insurance fraud. That estimate does not take into account the exaggerated claims which have come to
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be an accepted practice in North American Society. How many friends, family members and acquaintances do you know who have stretched the truth when submitting an insurance claim? Perhaps you have even convinced yourself that it is acceptable to exaggerate.l An exaggeration is paramount to a lie; a lie is an intent to deceive and that constitutes a fraud. Most Individuals never consider the consequences of Insurance Fraud or exaggeration, but what if a diligent Adjuster decides to question and investigate your Claim? An Insurance Claim can be denied if you misstate a fact, exaggerate or attempt to commit a fraud. If your claim isn't worth all that much you may not suffer a huge consequence, but if your Claim is worth thousands of dollars what would the consequence be then? You will probably lose your entire claim, and you may be denied insurance in the future as a result of having a denied insurance claim. Insurance Companies do not want to sell insurance to fraudsters. Have you ever wondered why your Insurance rates continue to increase even though you have not made a claim? Of course, the events of September 11 and various natural disasters in the last few years have certainly contributed, but by and large fraud has a big impact on the rate increase of Insurance Policies worldwide, and it is you, the Policy Holder, who is helping to pay for the fraud that is a common occurrence in the Insurance Industry. Some Drivers are paying exorbitant premiums for car insurance due to the number of accidents in which they are found to be at fault. But when the premiums are more than they can afford to pay some of these Drivers choose to drive without insurance and when they are involved in additional accidents without insurance coverage, YOU will end up paying for the uninsured motorist.
Organized Crime is also involved in Insurance Fraud?

Organized Crime is involved in the theft of vehicles and replacing the VIN tag on the dash with one that is from a similar model vehicle that has been written off and salvaged as a result of an accident. That is why you should heed the advice under the category Used Car Buyer Fraud on this web site. Your next used car purchase could be a stolen vehicle. Organized Crime is involved in the staging of motor vehicle accidents and making false bodily injury claims which involve everyone from car thieves to lawyers, doctors, chiropractors, physiotherapists and various other medical professions which can treat or
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give expert opinions on physical injuries and post-traumatic stress syndrome. Are you starting to realize why Insurance Fraud has been referred to as a billion dollar disaster? If Insurance Fraud is not controlled in the next decade; your children may not be able to afford the premiums for Insurance which protects them and their families. Have we considered the consequence of this? What can we do? For starters we have to change our attitudes. Insurance fraud is not acceptable and everyone who pays insurance premiums will pay more due to the cost of fraud. If you know of someone who has committed a fraud or is about to commit a fraud, you should report it. Noted below are two web sites where you can report information and tips. Or, you should be able to make a report to your local Police TIPS line.
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ICICI PRUDENTIAL FRAUDULENT SCAMS
ICICI Prudential cheats the people systematically and robs the money from innocent customers through their clever and cunning methods. Public should be warned not to make investment or take any such policy from this company. ICICI Prudential is running professional fraudulent scams cheating innocent people, robbing their money by their planned, cunning and heinous activities. They lure people by attractive offers that too approached by your own relatives and friends so called Advisors who are out-sourced by ICICI Prudential. These advisors themselves do not know the details of such investment policies. They do the canvassing just to get their salary or commission which ICICI Prudential pay them for this FRAUD You will be made to believe falsely that this is purely an investment scheme and you will be guaranteed for the money you invest would be doubled within five years by the Advisors and the local area Managers. Advisor would himself guarantee the amount getting doubled within five years and he would even call the local area Manager who is well trained to be a part of this fraudulent scam and to cheat the client by confirming him the same as Advisor said The details & facts of the actual policy will not be shown to you till it becomes late for you to get the refund. The policy is written in such a professional cunning manner that you would not get any single rupee from the money you invested. The entire money would be lost. You will be attracted by such false guarantees by the area managers and the advisors that your money would be doubled at the end of 5 years if you pay lump sum amount for three consecutive years (For example Rs 2 lakhs in 2007+ Rs 2 Lakhs in 2008 + Rs 2 Lakhs in 2009). You would be made to believe that this is totally an INVESTMENT DEPOSIT SCHEME similar to any bank fixed deposit or like INDIRA VIKAS PATHRA and ICICI Prudential is marketing this under the cover of some false name including free insurance policy etc. etc. You will be made to believe that ICICI Prudential guarantees 100% the money doubling in 5 years When you pay the first installment of such a huge amount that is it. You will lose that money completely. 25% of that money would be deducted from your amount as premium allocation charges, then they deduct as per their will, mortality charges, policy administration charges, service charges etc. Then the balance amount they would invest in some useless untold sinking funds all at the clients risk. Then by the time you realize this, it would be too late to recover the money. All your money would be totally taken up by ICICI Prudential Advisors or the Local Area Manager would never tell the facts that 25% of the money you invest at the first instance would be taken as some PREMIUM ALLOCATION CHARGES. If you pay Rs 10 lakhs, they would take straightaway Rs 2.5 lakhs as such charges. They also would not tell the fact
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that the balance amount would be invested in some fancy funds - market funds they call - totally at client's risk Giving nice fancy names like MULITIPLIER, RICH, OPTIMISER, LIFESTAGE etc. just to attract you. You would never come to know of these until very late when you realize that you are trapped by these people. Then you will find these such different fund names and you would never know what these funds are and which companies they invest. All BOGUS Not only that, they deduct again SERVICE CHARGES, MORTALITY CHARGES, POLICY ADMINISTRATION CHARGES etc. from the balance amount and further reduce your available amount to the least possible amount These cunning people make the clients to cancel this policy once they realize that this is a FRAUD. By the time it would become too late. There are professional cunning people in ICICI Prudential trained for answering the clients queries and e-mails. They are all MANAGERS called Customer Relations managers and some are PROCESS LEADERS. They switch over time to time and change by shift in answering and replying the clients to fool them. They have their standard replies to the customers - well planned and systematically executed by the company. Some well trained crooked & professional people are there who will act as though they are investigating the matter for the first time and later they reply with the standard replies very cunningly all well preplanned Some of those people are Ritu Mehra, Prince Sharma, Teena Katyal, Umapathy Iyer, Umashankar Chary, Aashik Hamad. The sample replies are " We wish to inform on investigating the case with the relevant department, we are unable to comply with your request for policy cancellation" " Further, we wish to inform you that every customer is entitled for a free-look period of 15 days from the date of receipt of the policy document, etc.etc." Everyone in ICICI Prudential is a Manager. There is no level junior to Manager. There are some Process Leaders who act as though they are the bosses for the Managers. These people are well designated to do this crime of cheating people and doing FRAUD and cheating Indians in a professional way. This is a very well planned professional way used by ICICI Prudential in cheating innocent people including NRIs and making money. A client would never get his money back. He would lose the entire amount he invested in the first year. ICICI Prudential knows that the client would not normally invest further similar amounts in the second year and the third year to lose still higher amounts. This also well planned and anticipated by ICICI Prudential and to cover this they have written in the policy rules " No surrender value if policy called at the end of first year or second year or third year" and thereby rob all your money This has to be brought into light and this FRAUDULENT SCAM should be exposed to all people and to Indian Government and proper disciplinary action should be taken against this company.
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The insurance sector seems to be the most vulnerable to frauds as companies are losing a whopping over Rs 15,000 crore every year due to exaggerated claims by customers or agents, a survey has found. A latest survey conducted by the India forensic Research, which is a Pune-based consultancy firm for fraud investigations, research and due-diligence, has revealed that insurance companies in India bear a loss of about Rs 15,171 crore due to different frauds every year.
Motor and health insurance are the most prone to insurance related frauds followed by life and property insurance, the report said. Documents such as fake medical bills and certificates are commonly used to cheat insurance companies in the country. These are followed by driving license and FIR related papers, the report said. "The survey states that unlike other industrial sectors, external parties like agents and claimants pose the biggest risk of frauds before the insurance sector," said Indiaforensic Research founder member Mayur Joshi. Frauds can also be committed through mis-appropriation (agent advisors depositing the premium cash money after a delay or not depositing the premium cash money at all), customer nonexistence (false policy sold to a non-existent customer) and through fraudulent claims (fake claims being submitted by customers with or without agent connivance. The report said that one in every two persons exaggerates their insurance claims. "There is a perception among customers that the insurance company always pays less than what you claim even if it is true damage assessment, which often motivates them to exaggerate their claims," it said. Majority of the respondents believe that most of the frauds are caused by insurance agents who are the critical interface between customers and companies. "Customers often approach them to seek advice when filing claims who in turn forge details and commit the fraud," Joshi said. The report was made on the basis of a case study and meetings with managerial personnel from insurance sector as well as large number of individuals from 23 out of 37 insurance companies working across the country, Joshi said.
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The study reveals that 88 per cent of the respondents agree that insurance sector is prone to external risks of frauds and "every insurance company loses 8.57 per cent of its revenues to the frauds." The insurance sector in India is growing with a consolidated turnover of nearly Rs 2,00,000 crore every year. According to the report, about 87.33 per cent of frauds were committed by individuals and the rest were done by syndicates. "Use of fraud analysis software and stringent laws for punishing fraudsters and adequate awareness among them can help in keeping a check on insurance frauds," Joshi said. Central Bureau of Investigation has in June this year arrested a senior manager of a nationalised insurance company here for allegedly collecting money from customer.
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Additional Tips to Prevent Fraud
Beware of unreasonably low premiums. Many schemes promise extensive coverage at a very low price. You can usually save money by shopping carefully, but be cautious of any plan or policy that costs significantly less than others youve priced.
Get information from TDI. In addition to license status, TDI can provide you with an agent and companys complaint index and financial ratings. The complaint index and financial rating help indicate whether a company provides good customer service and is financially stable.
Take your time. Take as much time as you need when buying any type of insurance. Dont let an agent or company representative pressure you into making a hasty decision. Consult with your family, an attorney, or a financial adviser if youre unsure of any details. If an agent is evasive when you ask about prices, coverage, or payment arrangements, be suspicious. Legitimate agents will respond to your questions and concerns and allow you all the time you need to make your decision.
Always pay by check or credit card. Check and credit card payments can usually be traced and verified. If you pay by credit card, the credit card company might reimburse you in the event of fraud. If you must pay cash, be sure to get a receipt that shows the name of the company, the date, and the amount paid.
Be cautious of policies sold door to door or over the phone. Unauthorized companies often use these methods to market their products. Insist on knowing a companys physical addr ess, and make sure you verify that the company and agent are licensed. Even though policies sold in this manner are sometimes legitimate, their rates are often higher and they provide less coverage than policies sold by traditional agents or brokers.
If you buy insurance over the Internet, take the same precautions as you would for any insurance purchase. Many legitimate companies have websites that allow you to purchase insurance online. This can make shopping for insurance easy and convenient. However, t he Internet provides the anonymity that also can allow illegitimate companies to flourish. Be especially cautious of insurance thats offered through unsolicited e -mails.
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Keep and protect your insurance documents. In addition to the actual policy, keep a copy of any correspondence between you and the insurance company, including advertisements, receipts, and details of any claims submitted. Also keep notes of any telephone or in -person contacts with the company, including the name and title of the person y ou spoke with, the date, and what was said. Good recordkeeping can protect you in the event of a broken promise.
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How to avoid insurance fraud
Scams are definitely among the most frightening and unfortunate things that you can experience in your financial life, especially when it has to do with life insurance. Life insurance is, after all, designed to protect you and your family in the event that you should pass away. You trust these "life insurance agents" with your money in order to ensure that their efforts and services safeguard you in some way. You rely on them for assistance and at the time you find yourself needing them most, they are missing in action. This is certainly not something anyone would want to deal with, which is why you need to do everything in your power to combat this discerning situation from the very beginning. The following includes some helpful suggestions about how you may avoid scams and cash in on the protection and services you pay for in the first place. Dont ever let fraudulent agents take advantage of you, your money, and your financial security and ruin the progression of protecting yourself and your loved ones. First and foremost, it is crucial to ask as many questions as possible when looking into a potential life insurance policy. This is obviously one of the best options you should use, and of course, you should be doing this from the very start of the buying process. You should be absolutely certain that all of your questions have reasonable answers that you can make use of. Furthermore, the more questions you have agents answer, the more the business model and conduct of that supposed company becomes clear. Doing this would give you a surefire way to catch a potentially fraudulent agent off guard. If they cant give you answers that youre comfortable with, then you may securely move onto the next company. Asking questions and voicing any possible concerns that you can think of keeps the communication open between you and the agent, as well as puts to rest any potential worries. Everything in the process should remain transparent. After all, they should be working for your business, and anyone who refuses to answer questions should raise an immediate red flag. Secondly, its good to know that insurance companies do expect things out of you. Youll have to make sure that youre completely aware of what these things are, and how your potential insurance agent will handle the situation. If you have good idea about what you have to do in certain situations, then youll be able to know if its some ridiculous request or not. Next, you will want to know what would happen with your potential policy that will end up benefiting you. This "if, then" situation is a two way street. You should not be getting the short end of the stick
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on this one, as it is your own insurance that you pay for, and it should be helping you, not hurting you. In theory, you should be the one giving and receiving the fair amount. Lastly, do not make any decisions too quickly. Most times in life if you rush into things, they dont turn out as well as they could have had you taken the proper time to evaluate everything. In the end, youre the sole decision maker with regard to insurance. Those fraudulent agents who are trying to sell you fake low cost life insurance will present the situation as if you have to act now to get the great deal offered. Do not be fooled into rushing, ever. Make sure you take all the time you need, and also make the agent in question aware that you are going to take your time. The moment you feed into their pushy and insistent nature and rush against your better judgment, you let them win. Dont ever give an insurance company an opportunity to make you do something you are not comfortable with. It is your money, your future, and your family they should be most concerned with. An agents job is to match you with the best life insurance for your many needs, and if they dont do that, walk away with no worries. There is too much at stake to risk losing it all .
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Conclusion
How insurer should manage a risk management strategy
An insurer should have a sound strategy to manage fraud risk arising from its operations. The fraud management strategy should form part of an insurers business strategy and be consistent with its overall mission,business strategy and objectives. It should: include a clear mission statement to indicate the insurerslevel of tolerance to fraud; facilitate the development of quantitative risk tolerance limit son fraud; and provide direction to the overall fraud management plan. A sound and prudent fraud management strategy must be compatible with the risk profile of the insurer. In determining its risk profile as well as its vulnerability to fraud, insurers should consider the following factors: size, composition and volatility of its business; organisational structure; complexity of its operations; products and services offered; remuneration and promotion policies; distribution modes; and market conditions.
To ensure its relevance and adequacy, the strategy should be
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reviewed regularly to ensure that it continues to be effective, especially when there are material changes to the insurers risk profile. The strategy should also be properly documented and effectively communicated to all relevant staff. There should be a process to approve proposed deviations from the approved strategy, and systems and controls to detect unauthorized deviations.
How insurer should build a structure
An insurer should adopt a risk management structure that is commensurate with the size and nature of its activities. The organisational structure should facilitate effective management oversight and execution of its fraud risk management and control processes. The structure should facilitate communication between departments and to senior management and/or the Board of Directors to ensure prompt responses to instances or suspicions of fraud. The Board is ultimately responsible for the sound and prudent management of fraud risk. It should recognise and understand the risk of fraud and its potential impact on the institution. The Board should approve the fraud management strategy and ensure that adequate resources, expertise and support are provided for the effective implementation of the insurers fraud management strategy, policies and procedures. Any deviation from the approved strategy and policies should be subject to the Boards review and approval. An insurer should consider establishing a fraud management function if warranted by its risk assessment. This function would be primarily responsible for the compliance with the insurers fraud management policies and procedures covering fraud identification, reporting and investigations. In order to be effective, this function should have the requisite authority,sufficient resources and be able to raise issues directly to the Board or relevant Board Committee.
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How insurer should frame policies and procedure
An insurer should establish clear policies and procedures for the management of fraud risk. These policies should be well-defined and consistent with the insurers fraud management strategy, as well as adequate or the nature and complexity of its activities. These include: the roles and responsibilities of the fraud management function or staff assigned to execute the insurers fraud management strategy, policies and procedures; measures to identify and mitigate the risk of fraud; measures to monitor and detect instances or suspicion of fraud; reporting of suspicions of fraud to designated person(s) for review and investigation; record keeping of suspicions of fraud and fraud cases; and relevant initial and ongoing training on fraud matters for its directors, management and staff.
The insurer should retain records of all reported cases of suspicion/incident of fraud together with internal findings and analysis done in relation to them. It should establish standards relating to the turnaround time for the assessment of fraud, documentation of analysis, and keeping of records on suspicions/incidents of fraud. The insurer should specify in its policies and procedures in respect of record keeping the following: information and analysis to be recorded; retention period; and staff access to records based on their confidentiality classification.
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The insurers anti-fraud policies should be communicated throughout the organisation. An insurer should also review the effectiveness of its policies, taking into account changing internal and external circumstances as well as identification of lessons from incidents of fraud or suspicions of fraud to enhance its management of fraud risk. Policies and procedures should be documented and set out in sufficient detail to provide operational guidance to staff.
The insurer should have in place proper and effective reporting systems to satisfy the requirements of the Board with respect to reporting frequency, level of detail, usefulness of information and recommendations to address issues of concern. There should be clear guidelines on the type of information to be reported to the Board on a regular basis as well as when certain information or development ought to be communicated immediately to the Board.
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Frauds and Scams

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Frauds and scams in insurance

Introduction to Insurance Fraud

What is Insurance Fraud?

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Broad categories of fraud

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Types of insurance fraud

Frauds and scams in insurance

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Medical information misstated.

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Health care insurance

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Frauds and scams in insurance

Frauds and scams in insurance

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Frauds and scams in insurance

Another types of insurance frauds

Frauds and scams in insurance

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Medical identity theft frauds

Frauds and scams in insurance

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Frauds and scams in insurance

Long-Term Care Insurance Fraud

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Auto repair fraud

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What Are the Different Types of Insurance Fraud Jobs?

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Frauds and scams in insurance

Ghana Scams on the Rise

Frauds and scams in insurance

Frauds and scams in insurance

How to Prevent Affiliate Fraud

What is Affiliate Fraud?

Frauds and scams in insurance

4 Tips to Avoiding Affiliate Fraud

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Frauds and scams in insurance

Frauds and scams in insurance

Areas where fraud can occur

Frauds and scams in insurance

overstated or income understated. Frauds here could range from a few

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Frauds and scams in insurance

Ten step guide to preventing and detecting fraud

Frauds and scams in insurance

systems of internal control to defend these areas.