The Rise in Insurance Fraud by Individuals
Insurance fraud is a growing concern worldwide, with individuals resorting to elaborate schemes to deceive insurers and cash in on substantial payouts. Among the many alarming cases that have come to light, one particular incident from 2015 stands as a stark example of the devastating consequences of such deceit. California resident Ali Elmezayen orchestrated a tragic car accident that claimed the lives of his two autistic children and almost drowned his wife.
Unbeknownst to the authorities, this horrifying event was staged as part of an elaborate insurance fraud plot, leading to a $260,000 payout. In a heart-wrenching twist, the ill-gotten funds were used to purchase real estate in Elmezayen’s native Egypt and a boat, leaving behind a trail of deceit and sorrow. This gripping case highlights the urgency in addressing the rise in insurance fraud by individuals and the need for vigilance in safeguarding the integrity of insurance systems.
What Is An Insurance Fraud?
Insurance fraud refers to the intentional deceit carried out against an insurance company or by an insurance agent, with the aim of gaining financial benefits. These illicit acts can be committed by policyholders, applicants, third-party claimants, and even insurance brokers and providers. Some common instances of insurance fraud involve “padding” or exaggerating claims, providing false information on insurance applications, making claims for injuries or damages that never happened, and staging accidents.
Estimates from the Federal Bureau of Investigation (FBI) indicate that insurance fraud costs the United States over $40 billion annually. This staggering figure underscores the severity of the issue and highlights the urgent need to address and combat fraudulent activities within the insurance industry.
Health insurance companies have faced numerous instances of insurance fraud by individuals. Some individuals have submitted false or exaggerated medical claims, forged medical records, or intentionally misrepresented their medical conditions to obtain insurance benefits fraudulently. Such fraudulent activities have cost health insurance companies millions of dollars annually.
Consequences of Insurance Fraud by Individuals for Companies in the USA
Insurance fraud by individuals can have far-reaching consequences for insurance companies in the USA. For example:
Financial Losses
Insurance fraud places a significant financial burden on companies as they end up paying for fraudulent claims that were deceitfully submitted. These losses can add up quickly, impacting the company’s bottom line and overall profitability. The funds that could have been invested in growth or development initiatives now must be diverted to cover fraudulent claims, hampering the company’s financial stability and growth prospects.
Reputational Damage
Insurance fraud cases can severely tarnish a company’s reputation, eroding the trust and confidence of customers, potential investors, and business partners. The negative publicity and association with fraudulent activities can lead to a loss of loyal customers and a damaged brand image. Rebuilding trust after reputational damage can be a challenging and time-consuming process, impacting the company’s ability to attract new customers and retain existing ones.
Legal Consequences
Companies found to be involved in insurance fraud may face serious legal repercussions. They may be subject to hefty fines imposed by regulatory authorities, endure costly legal battles, and even face criminal charges against the individuals responsible. These legal consequences can result in significant financial losses and damage to the company’s reputation.
Increased Insurance Costs
Insurance companies often pass on the costs of insurance fraud to their customers through increased insurance premiums. The rise in premiums affects honest policyholders who must bear the burden of fraudulent activities committed by a few individuals. Higher insurance costs can lead to decreased customer satisfaction and potential customer attrition.
Lower Employee Morale
Insurance fraud cases can create an atmosphere of distrust and suspicion within the company, negatively impacting employee morale. Employees may feel demotivated when they witness fraudulent activities going undetected or not adequately addressed. Lower employee morale can result in reduced productivity, decreased job satisfaction, and an increased likelihood of employee turnover.
Business Shutdown
For smaller or financially vulnerable companies, the cumulative impact of widespread insurance fraud can be devastating. The financial losses and reputational damage may become insurmountable, leading to business closure. Insurance fraud-induced business shutdowns can have severe implications for employees, customers, and other stakeholders.
Regulatory Scrutiny
Companies involved in insurance fraud may face heightened regulatory scrutiny. Regulatory authorities may closely monitor their operations, leading to additional compliance requirements and the diversion of resources toward addressing regulatory concerns. The increased scrutiny can further strain the company’s finances and impede its day-to-day operations.
Decreased Shareholder Value
Insurance fraud can negatively affect a company’s stock value and shareholder confidence. Shareholders may lose faith in the company’s management and decision-making processes, leading to a decrease in the value of their investments. The decline in shareholder value can have a cascading effect on the company’s ability to raise capital and attract new investors.
Opportunity Costs
Dealing with the impact of insurance fraud can divert the company’s attention and resources from other strategic opportunities and initiatives. The focus on investigating fraudulent activities and implementing measures to prevent future fraud may result in missed business opportunities or delayed projects.
Difficulty in Attracting Talent
Companies tainted by insurance fraud may struggle to attract and retain top talent. Potential employees may be hesitant to join an organization with a damaged reputation, fearing the impact on their own professional standing. Difficulty in recruiting skilled and qualified employees can hinder the company’s growth and competitiveness in the market.
CRI Group™: Mitigating Insurance Fraud Risks for Businesses
Insurance fraud by individuals poses significant challenges for businesses, leading to financial losses, reputational damage, and legal repercussions. To combat this pervasive issue, CRI Group™ offers a comprehensive suite of services designed to help businesses avoid insurance fraud and protect their interests.
Fraud Risk Assessment & Fraud Risk Management
CRI Group™ provides businesses with expert Fraud Risk Assessment and Fraud Risk Management services. By conducting thorough assessments, CRI Group™ identifies potential vulnerabilities in a company’s operations and systems that could be exploited by fraudulent individuals. Through this proactive approach, businesses can implement tailored risk management strategies to prevent insurance fraud before it occurs.
CRI™ Corporate Accountability Services
CRI™ Corporate Accountability services help businesses establish robust compliance and accountability mechanisms. By ensuring meticulous records of due diligence actions, risk assessments, and corrective measures, CRI Group™ empowers businesses to demonstrate their commitment to ethical practices and adherence to regulatory requirements. This transparency serves as a strong deterrent to potential fraudsters who may seek to exploit loopholes in a company’s processes.
Insurance Fraud Investigations Services
CRI Group™ offers specialized
Why Choose CRI Group™ for Insurance Fraud Investigations
CRI Group™’s service offerings are designed to empower your organization to combat insurance fraud by individuals effectively. With our comprehensive solutions, you can proactively detect and prevent fraudulent activities, safeguarding your financial health, reputation, and business integrity.
Fraud Risk Assessment & Fraud Risk Management
Our certified fraud examiners conduct a thorough review and assessment of your current fraud risk management program. We objectively evaluate your policies, procedures, controls, reporting functions, responsibilities assignment, and investigative requirements to identify vulnerabilities and susceptibility to fraud within your organization.
Tailored Fraud Prevention Measures
Based on the assessment findings, we work closely with your team to develop and implement customized fraud prevention and investigation measures. Our anti-fraud controls are designed to strengthen your organization’s defenses against potential fraudulent activities, reducing the risk of financial losses and reputational damage.
Effective Detection Methods
CRI Group™ defines detection methods that encompass a comprehensive range of approaches. From internal audits and suspicious transaction reporting to whistle-blower strategies and program enforcement, our solutions empower you to detect and address potential fraud incidents proactively.
Due Diligence and Corporate Accountability
Our due diligence services extend beyond standard commercial or financial analyses. CRI® Group™ specializes in Integrity Due Diligence, which provides reliable and pertinent, but raw, information. We ensure complete independence in our research, relying as little as possible on information provided by the researched subject, thereby reducing risks associated with FCPA and UK Bribery Act compliance.
Informed Business Decisions
CRI Group™ supports your informed decision-making process by offering in-depth research and analysis. Our due diligence services allow you to make confident choices when pursuing takeovers, mergers, or business relations. With a focus on objectivity, our assessments provide valuable insights to minimize risks.
Diverse Range of Investigations
CRI Group™ handles a comprehensive range of investigations related to insurance fraud. Our expert investigators conduct factual claims investigations, background checks, and asset searches. We specialize in medical fraud investigations, workers’ compensation, injury, liability, and property claims.
Thorough and Professional Approach
With a commitment to professionalism and attention to detail, our investigators gather evidence, conduct interviews, and verify claims to uncover the truth behind suspicious activities. Our thorough investigations help you take prompt and effective actions against fraudulent individuals.
Trusted Global Partners
CRI Group™ serves as a trusted partner to businesses and institutions worldwide. Our dedicated team works with energy, insight, and care, ensuring a positive experience for all parties involved, including clients, reference providers, and candidates.
Proven Methodologies and Expertise:
Effective Solutions Based on Experience:
With a focus on integrity, CRI Group™ employs proven methodologies in our investigative and due diligence services. Our experienced team delivers reliable information while maintaining complete independence, ensuring you receive accurate insights to make well-informed decisions.
Mitigating Fraud Risks
We help you implement anti-fraud controls, making it challenging for potential fraudsters to exploit weaknesses within your organization. Our detection methods, such as internal audits, suspicious transaction reporting, and whistle-blower strategies, provide early warnings to prevent fraudulent activities.
Unbiased Fraud Risk Evaluation
Our certified fraud examiners bring objective and independent expertise to auditing your fraud prevention program. Through our unbiased assessments, we provide valuable insights to strengthen your organization’s defenses against fraud.
CRI Group™ stands out as a leading provider of fraud investigations and due diligence services, offering objective expertise, comprehensive assessments, advanced detection methods, and a commitment to integrity. As your trusted partner, we help your organization fortify its fraud prevention program and make informed decisions, reducing risks and ensuring compliance with legal requirements. With our experienced team and proven methodologies, CRI Group™ empowers your business to navigate the complex landscape of fraud risk management successfully.
UAE Imposes Fines on Non-Compliant Corporations: Is Your Business At Risk?
UAE Businesses Beware: AED 22.6 Million in Fines for Non-Compliance with Anti-Money Laundering and Terrorism Financing Regulations!
That’s right, the UAE’s Ministry of Economy has cracked down on 29 companies operating in the designated non-financial business or professions (DNFBP) sector for failing to comply with AML/CFT legislation. Violations ranged from a lack of internal policies and procedures to check customer databases against terrorism lists to failure to identify financial crime risks in their fields of work.
The message is clear – compliance with these regulations is no longer a choice, but a requirement. Businesses operating in the DNFBP sector must prioritize AML/CFT programs, including regular risk assessments, robust internal controls, and employee training.
Importance of AML/CFT compliance
The importance of anti-money laundering (AML) compliance cannot be overstated, especially within the UAE’s landscape, where the government is cracking down on non-compliant corporations. A robust AML compliance policy can not only protect against money laundering and terrorist financing but can also prevent fraud. Here are five key reasons why AML compliance is critical for businesses operating in the UAE.
Threat Evolution:
Criminal methods have become more sophisticated and complex, making them difficult to detect. Lone-wolf terrorists, cyber-enabled criminals, and e-commerce criminals are trending types of criminals in the UAE. It’s essential for businesses to stay ahead of these threats by complying with AML regulations.
Reputational Risk:
A crisis in Anti Money Laundering compliance can severely harm a company’s reputation and negatively affect customer trust. Companies that have been investigated or fined for non-compliance may need to appear more trustworthy to customers, leading to a loss of business. Protect your reputation by implementing a robust AML compliance program.
Poor Client Experience:
Non-compliance with AML regulations can increase the potential risk of fraud. A successful fraud attack can also affect the customers of a company. Don’t put your clients at risk – ensure that your business is fully compliant with AML regulations.
Regulatory Action:
The UAE has strict AML regulations that require financial institutions and businesses to comply with customer due diligence, transaction monitoring, and reporting of suspicious activities. Failure to comply can result in hefty fines and penalties imposed by regulatory authorities. Non-compliant businesses may face severe legal consequences, including criminal liability for individuals within the organization.
Financial Crime Persistence:
Enforcing AML regulations is crucial as financial crimes remain a persistent issue in the UAE. Money laundering enables criminal organizations to disguise the origin of their illegal proceeds, which can lead to economic instability, funding of terrorism, and loss of public trust in the financial system. Stay ahead of the game and maintain the integrity of your business by complying with AML regulations.
Penalties and Consequences
The UAE’s Ministry of Economy is intensifying field inspections and providing awareness and training support to DNFBP companies to ensure compliance with AML/CFT legislation and international standards issued by the Financial Action Task Force (FATF). With further punitive measures on the horizon, it’s more important than ever for businesses to stay ahead of the curve and ensure that they are fully compliant with AML/CFT regulations.
The penalties for non-compliance with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations are severe, and businesses must take them seriously. Failure to comply with AML/CFT laws can result in heavy fines, damage to reputation, and even criminal prosecution.
The consequences of non-compliance are not to be taken lightly. Heavy fines can severely impact a business’s bottom line, while damage to reputation can harm its ability to attract and retain customers. In some cases, non-compliance can even result in criminal prosecution. The risks are too great to ignore, and businesses must take the necessary steps to protect themselves.
Stay Ahead of the Curve: Protect Your Business with Robust AML Compliance
Are you concerned about the potential risks of money laundering and terrorist financing within your organization? Compliance with AML regulations is critical to protect your business and maintain the financial system’s integrity. At CRI Group™, we understand the importance of Anti-Money Laundering (AML) compliance and offer advisory services to analyze your systems and develop effective solutions to combat money laundering. Our unmatched investigative capabilities and worldwide presence make us uniquely qualified to resolve regulatory concerns and help businesses ensure compliance with AML/CFT regulations.
If you operate in the financial sector, complying with AML regulations is essential. Failure to comply can result in fines, reputational damage, and even criminal prosecution. That’s why we recommend registering with our anti money laundering services to ensure you’re following regulations for the prevention of money laundering.
At CRI Group™, our vast Anti-Corruption and Compliance network offers the protection you need when making critical bottom-line decisions. Leave it to our experts to help you with AML compliance and provide the protection you need to combat money laundering. With our 360-degree analysis of your challenges, we can ensure that your business is fully compliant with AML/CFT regulations, reducing the risk of fines and reputational damage. Here’s how CRI Group™ Group can help:
In-Depth AML Risk Assessment:
Our team of experts will undertake a comprehensive AML risk assessment to analyze the vulnerabilities and potential threats within your organization’s operations. The assessment will incorporate an evaluation of your existing AML policies, procedures, controls, and the nature of your company’s products, services, customers, and geographic locations. Our analysis and evaluation will help in identifying potential risks and emerging trends that are necessary for effective AML risk management.
GAP Analysis for the Scope of ISO 37301 Compliance Management System:
Our team of consultants will perform a detailed GAP analysis of your organization to ensure compliance with the ISO 37301 standard. We will evaluate your current system and processes, identify shortcomings, and present recommendations to help your company fill the existing gaps. Our analysis will facilitate the understanding of the roles, responsibilities, and competencies required for compliance with the standard.
Provision of AML Framework:
We will provide a comprehensive framework to guide your organization in establishing and maintaining an effective AML compliance program. This framework will include policies, procedures, and protocols for risk assessment, customer due diligence, transaction monitoring, and reporting. Our team will work closely with your staff to implement this framework for compliance with relevant laws, regulations, and industry best practices.
Global Sanction Screening & Third-Party Risk Management:
Our screening services will help identify, assess, and mitigate the potential risks associated with third-party relationships. With our global database, we can monitor a wide range of regulatory lists and relevant databases, providing you with peace of mind that your company’s dealings with third parties will not put your organization at risk of non-compliance with AML regulations.
Money Laundering Reporting Officer (MLRO):
Our team will assist your organization in the appointment of an MLRO. This officer will be tasked with overseeing your company’s AML policy and reporting matters to relevant regulators. We’ll help you identify a qualified MLRO who possesses the experience and knowledge required for carrying out this crucial duty effectively.
Policy Statement:
We will work with you to develop a clear and concise policy statement outlining your organization’s commitment to AML compliance. Our policy statement will outline the roles and responsibilities of all parties involved in the implementation of the AML policy, including the board of directors, senior management, employees, and applicable third parties/vendors. This statement will provide clarity on the compliance requirements, enhancing risk awareness and making it easier for employees to comply with AML legislation.
Identifying Financing Terrorism:
Our experts will assist you in identifying potential risks associated with financing terrorism. By conducting risk assessments and due diligence checks, we can help identify unusual transactions that could be linked to terrorist financing. Our team will help in the implementation of preventive and control measures, ensuring that your organization is always one step ahead of potential risks.
Corporate Principles – An Ethical & Integrated Business Approach:
We’ll help develop corporate principles that emphasize an ethical and integrated approach to doing business. Our team will work with you to identify fundamental values that your company stands for, and ensure that these are integrated into your operations. We’ll also help with the development of programs to encourage ethical behavior and integrity in your workforce. These corporate principles will help to build a positive reputation while displaying governance and a strong ethical culture.
Industries We Serve
At CRI Group™, we are committed to helping businesses across a wide range of industries to stay compliant with AML/CFT regulations. Our services are tailored to meet the specific needs of each industry, including:
- Automotive: Whether you’re a car manufacturer, dealer or supplier, our AML services can help you mitigate risks and ensure compliance with AML regulations.
- Aviation: Airlines, airports and other aviation companies face unique AML risks that require specialized solutions. Our experts can help you detect and prevent money laundering and terrorist financing activities.
- Finance & Professional Services: Banks, financial institutions, law firms and accounting firms all require robust AML compliance programs to protect their clients and reputation. We provide tailored solutions to meet the needs of each business.
- IT & Telecommunications: With the rise of online transactions, the IT and telecommunications industry faces new challenges in preventing money laundering and terrorist financing. Our AML solutions can help you stay ahead of the curve.
- Insurance: The insurance industry is vulnerable to money laundering and fraudulent activities. Our AML services can help you detect and prevent these risks, ensuring the integrity of the insurance system.
- Property: The real estate industry is also vulnerable to money laundering and terrorist financing. Our AML solutions can help property developers, agents, and managers detect and prevent these risks.
- Pharmaceutical & Healthcare: The pharmaceutical and healthcare industry faces a range of financial crime risks, including money laundering and bribery. Our AML services can help you ensure compliance and mitigate these risks.
- Oil, Gas & Energy: The oil, gas and energy industry is subject to unique risks that require specialized AML solutions. Our experts can help you detect and prevent money laundering and terrorist financing activities.
No matter what industry your business operates in, compliance with AML/CFT regulations is crucial. With CRI Group’s industry-specific solutions, you can rest assured that your business is fully protected against the risks of financial crime.
Don’t let your business fall prey to the threat of money laundering and financial crimes. Trust CRI Group™ to provide you with the expert advisory services and protection you need to ensure compliance and success in the financial sector. Contact CRI Group™ Group for Anti-Money Laundering (AML) Advisory service today and take the necessary steps to ensure compliance with AML regulations.
Supply Chain Due Diligence Act: New Risk Management & Reporting Duties for German Businesses
This article looks at the Supply Chain Due Diligence Act (LkSG) that applies to companies operating or trading in Germany and will enter into force on 1 January 2023.
The new German law, known as the Supply Chain Due Diligence Act (LkSG, short for Lieferkettensorgfaltspflichtengesetz in German) imposes due diligence obligations on environmental protection and on human rights, with all businesses having to introduce iterative and ongoing, or in certain circumstances ad hoc, due diligence processes specified by the Act.
Identification and management of an organisation’s supply chain and the risks that come with it require the implementation of due diligence processes.
The term “supply chain” refers to all products/services of a business, including all manufacturing and services, in Germany and/or abroad, from the extraction of raw materials to their delivery to the end customer.
Furthermore, due diligence processes should implement the following criteria:
- type and scope of the business activities of the company subject to the due diligence obligations,
- the ability of the company subject to the due diligence obligations to exert influence (so-called leverage),
- typically expected severity of the violation, and
- type of contribution by the company subject to the due diligence obligations to cause a violation.
More details can be had in our FREE Supply Chain Due Diligence Act (LkSG) eBook.
Who is Affected by the Supply Chain Due Diligence Act?
- As of 1 January 2023: Companies with at least 3,000 employees that have their head office, administrative seat or statutory seat in Germany OR companies that have a branch in Germany and usually employ at least 3,000 employees in this branch;
- As of 1 January 2024: Companies with at least 1,000 employees that have their head office, administrative seat or statutory seat in Germany OR companies that have a branch in Germany and usually employ at least 1,000 employees in this branch.
From 2024, the law will apply to businesses with more than 1,000 employees.
Even if companies with fewer employees are not addressees of the Supply Chain Act, they may still be indirectly affected. This is because the companies directly affected would be obliged to enforce compliance to the best of their ability with human rights in their supply chain. The measures necessary for this can have a direct impact on their suppliers, for example, through the implementation of a code of conduct. In addition, the directly affected companies will often be dependent on the active support of their suppliers and thus have this support be contractually assured, e.g. in the form of reporting obligations as part of their risk analysis.
DOWNLOAD THE SUPPLY CHAIN DUE DILIGENCE ACT (LkSG) EBOOK.
Due Diligence Investigations: Mitigate Critical Risks
At CRI®, we provide corporate reporting and due diligence services wherever you are. Use our DueDiligence360™ reports to help you comply with anti-money laundering, anti-bribery, and anti-corruption regulations ahead of a merger, acquisition, or joint venture. You can also use them for third-party risk assessment, onboarding decision-making, and identifying beneficial ownership structures.
Due Diligence helps you Identify key risk issues clearly and concisely using accurate information in a well-structured and transparent report format. Our comprehensive range of reports includes specialised reports that support specific compliance requirements. Protect your reputation and the risk of financial damage and regulator action using our detailed reports. They enhance your knowledge and understanding of the customer, supplier, and third-party risk, helping you avoid those involved with financial crime.
The CRI® Group invites you to schedule a quick appointment with them to discuss in more detail how conducting due diligence and compliance can help you and your organisation.
Based in London, CRI Group™ works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening,
We have the largest proprietary network of background-screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are we have the network needed to provide you with all you need, wherever you happen to be. CRI Group™ also holds BS 102000:2013 and BS 7858:2012 Certifications, is an HRO certified provider and partner with Oracle.
Unemployment Insurance Fraud During COVID-19
The Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury that collects and analyses information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes launched an Advisory on Unemployment Insurance Fraud During the Coronavirus Disease 2019 (COVID-19) Pandemic.
This advisory is aimed “to alert financial institutions to unemployment insurance (UI) fraud observed during the COVID-19 pandemic. Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic. This advisory contains descriptions of COVID19-related UI fraud, associated financial red flag indicators, and information on reporting suspicious activity”.
We published recently that COVID-19 continues to affect businesses in a myriad of ways. Organisations are having to adapt quickly to the fast-changing climate of the pandemic, and unfortunately, we’ve recently noticed some business practices of cutting steps in a few internal processes, such as hiring, or lack of risk management controls. It’s a vulnerable time for organisations – earlier we wrote that a crisis can bring out the worst in some people. Fraudsters who prey on people’s fear and confusion tend to waste no time when a global pandemic strikes. COVID-19 is relatively new, yet fraud schemes are multiplied much like the virus itself as criminals look for vulnerabilities among a fearful population. This pandemic also creates risks for employee fraud – CRI Group’s survey revealed that nearly 77 percent of HR professionals accept that there is a risk that employees can initiate fraudulent activity because of the work-from-home arrangement.
But employee fraud might not be the only risk the organisations face today. Earlier this year, we published that some organisations commit fraud themselves and abuse the Coronavirus Job Retention Scheme by engaging in furlough fraud. They do this by accepting taxpayer money designed to help them pay salaries for furloughed workers, who are essentially “deactivated” due to loss of business and quarantine – yet they pressure them to work (or they accept furlough benefits without the employees’ knowledge).
As we can see, a fraudulent activity might happen in a myriad of ways. Let’s dive in what are the red flag indicators of unemployment insurance (UI) fraud as unemployment claims across the globe have surged due to the COVID-19 pandemic.[/vc_column_text][vc_hoverbox image=”8095″ primary_title=”> The Unseen Enemy: Explore Insurance Fraud in-depth with our eBook!” hover_title=”GET YOUR FREE COPY”]DOWNLOAD NOW[/vc_hoverbox]
What are the Red Flags of Unemployment Insurance Fraud?
In the advisory, FinCEN lists the financial red flag indicators to alert financial institutions to fraud schemes targeting UI programs, and to assist them in detecting, preventing, and reporting suspicious transactions related to such fraud. The illicit activity might include employer-employee fraud-related activities, such as creating a fake company with fictitious employees and providing fabricated details such as wages, or conspiracy between the two parties when an employee receives UI payments while the employer continues to pay reduced and/or officially undisclosed salaries. The fraud scheme might also be happening under the ‘misrepresentation of income fraud’ when the applicant fails to provide the correct income/wage details, or even submits an application with stolen or fake identity information.
A similar case happened when the COVID-19 was in a full swing last year: one for-sale ad was published in the black-market specialising in selling stolen accounts and data – it was for access of the stolen UI claim in California that had been approved and offered benefits worth $17,550. This is just one example of the fraudulent activities – “in California, fraud was so pervasive that officials have suspended processing jobless claims for two weeks to put new controls in place and reduce a bulging backlog”. It also resulted in The U.S. Labor Department making fraud detection a priority and allocating $100 million to combat the issue. To support this fight against illicit activities, FinCEN identifies the following red-flag indicators:
- Account(s) held at the financial institution receive(s):
- UI payments from a state other than the state in which the customer reportedly resides or has previously worked;
- Multiple state UI payments within the same disbursement timeframe;
- UI payments in the name of a person other than the accountholder, or in the names of multiple unemployment payments recipients;
- UI payments and regular work-related earnings, via direct deposit or paper checks;
- Numerous deposits or electronic funds transfers (EFTs) that indicate they are UI payments from one or more states to persons other than the accountholder(s);
- A higher amount of UI payments in the same timeframe than similarly situated customers received.
- The customer withdraws the disbursed UI funds in a lump sum by cashier’s checks, by purchasing a prepaid debit card, or by transferring the funds to out-of-state accounts.
- The customer’s UI payments are quickly diverted via wire transfer to foreign accounts, particularly to accounts in countries with weak anti-money laundering controls.
- The customer receives or sends UI payments to a peer-to-peer (P2P) application or app. The funds are then wired to an overseas account, or withdrawn using a debit card, in a manner that is inconsistent with the spending patterns of similarly situated customers.
- Individuals quickly withdraw disbursed UI funds via online bill payments addressed to an individual(s), as opposed to businesses, as payee(s), with some individual payees receiving multiple online bill paychecks over a short time period.
- The IP address associated with logins for an account conducting suspected UI-fraud activities does not map to the general location of stated address in identity documentation for the customer or where the UI payment originated.
- Individuals direct UI-related EFTs, or deposit UI checks into suspected shell/front company accounts, which may be indicative of money mules transferring these funds in and out of the accounts.
- Multiple accounts receiving UI payments at one or more financial institutions are associated with the same free, web-based email account that may appear in more than one UI application.
- A newly opened account, or an account that has been inactive for more than thirty days, starts to receive numerous UI deposits.
- After a financial institution suspects UI fraud and requests additional identification documentation to verify the identity(ies) of the customer(s), queried individuals provide documents that are incorrect or forged, which may be an indicator of an account takeover or identity theft. After a financial institution suspects UI fraud and conducts due diligence, it determines that the customer does not have a history of living at, or being associated with, the address to which the UI check or UI debit card is sent, or within the geographical area in which the registered debit card is being used.
Insurance fraud is something that no company can afford. It is a serious crime that can result in serious consequences for fraudsters who may find their future job prospects impacted, find it harder to obtain insurance and other vital financial services, obtain a criminal conviction and even face the prospect of imprisonment. CRI Group’s insurance fraud investigations cover the full range of insurance fraud cases, from healthcare fraud to disability and even fake death claims. Our experts are trained to look for the tell-tale signs of fraud: they can view claims, medical and hospital records, conduct interviews, examine statements and documents, as well as perform on-site inspections.[/vc_column_text][/vc_column][/vc_row]
Enhanced Risk Management
At CRI Group™, we suggest you consider looking at your overall risk management process, involving not only potential insurance fraud risks during the COVID-19 pandemic, but a broader range of employee, bribery and corruption, compliance risks your organisation might face.
The “Risk Management & ABMS Playbook” provides tools, checklists, case studies, FAQs and other resources to help you lead your organisation into better preparedness and compliance. Our experts share their own plays to help you reduce risk, thereby preventing and detecting more fraud. The first section addresses risk management directly: proper third-party due diligence and critical background screening take centre stage for this game plan. Section two tackles bribery and corruption, with tried-and-true measures you can implement to stay better protected and in compliance with strict laws and regulations.[/vc_column_text][vc_btn title=”GET YOUR FREE COPY NOW” link=”url:https%3A%2F%2Fcrigroup.com%2Fcase-study%2Frisk-management-abms-playbook%2F|target:_blank”][/vc_column][/vc_row]
Speak up – Report illegal and Unethical Behaviour
If you find yourself in an ethical dilemma or suspect inappropriate or illegal conduct, and you feel uncomfortable reporting through normal channels of communication, or wish to raise the issue anonymously, use our Compliance Hotline. This hotline is available to all everyone in a business relationship with CRI Group and ABAC Group. It is an anonymous reporting mechanism that facilitates reporting of possible illegal, unethical, or improper conduct when the normal channels of communication have proven ineffective, or are impractical under the circumstances.[/vc_column_text][vc_btn title=”REPORT NOW” link=”url:https%3A%2F%2Fcrigroup.com%2Fcompliance-ethics-hotlines%2F|target:_blank”][/vc_column][/vc_row][accordion_father][accordion_son title=”Who is CRI Group?” clr=”#1e73be”]Based in London, CRI Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening,
The Unseen Enemy: Insurance Fraud – Part III
This three-part series of articles examines the problem of insurance fraud, including its pervasiveness and general characteristics in the United States, the United Kingdom and the world. Insurance fraud is a widespread problem that requires real solutions and is often difficult to detect and combat.
Part One of the series, “What is Insurance Fraud,” provides an introduction to a topic that is important for any business leader, insurance professional, compliance agent or fraud investigator. Part Two, “How do Companies Detect Insurance Fraud,” details red flags of insurance fraud that help tip off investigators to possible illegal behaviour. Part Three, “Anatomy of an Insurance Fraud Investigation,” provides a look at case studies and reveals key tips for handling a successful investigation. To receive the next series subscribe to our monthly newsletter here!
Taken as a whole, this series is the perfect primer for any insurance fraud professional and companies looking to avoid becoming victims of insurance fraud claims. It provides the tools and knowledge needed to effectively combat insurance fraud.
Part Three: Anatomy of an Insurance Fraud Investigation
The insurance fraud epidemic is of serious concern to businesses, insurance providers and consumers worldwide. In Part One of this three-part series, we examined the scope of the problem, and discussed a few cases that illustrate the magnitude of insurance fraud. In Part Two, we looked at how companies can detect insurance fraud, including how to recognise the red flags that represent potential criminal behaviour.
In this final Part Three, we’ll examine the elements of an insurance fraud investigation, beginning with a case study that illustrates how CRI Group™’s insurance fraud investigators exposed fraud schemes – saving its clients thousands of dollars.
Case Study: Health Insurance Fraud
A CRI Group client requested an investigation of a health insurance claim filed by one of their employees, “Mr. Jones.” Mr. Jones claimed that while on an official visit to UAE from the U.S., he felt sudden abdominal pain with nausea and vomiting lasting 18 hours. He was admitted to a clinic and stayed under observation for two days, which cost him around $4,000 (US).According to the claim, Mr. Jones (name changed) was discharged from the clinic, but then felt the return of his sickness, so he was admitted to another clinic for two more days. During this time, he was kept under observation. For this second clinic visit, he was charged nearly $1,000.
As part of CRI Group™’s “experts in a field” approach, a local investigator visited both of the clinics involved in the claim. One clinic was located in Dubai, while the other was in Abu Dhabi. When he arrived at the Dubai clinic, CRI Group’s local expert immediately learned that the clinic deals specifically in cosmetic surgery for women. In fact, as advertised on the outside of the clinic, its services are only for women. The clinic’s administrator confirmed that the clinic is only in the business of providing cosmetic surgery for women.
CRI Group™’s local investigator then visited the clinic in Abu Dhabi. This clinic also appeared to be in the business of providing cosmetic surgery for women. When the local expert tried to contact the doctor who was named as the treating physician for Mr. Jones, the doctor was hesitant to meet the expert. CRI Group™’s expert showed the report to the doctor, and though it was on the official letterhead of the clinic, the doctor first denied involvement in the case.
Later, the doctor told CRI Group™’s expert that while “we don’t treat that kind of illness,” the patient “was in such bad condition that we treated him on a humanitarian basis.” Yet the doctor was hesitant to accept that the bills came from his clinic (the expert had already learned that the doctor in question was also the owner of the clinic). Regardless, CRI Group™ successfully secured the evidence that the health insurance invoices were fake and Mr. Jones was making false claims to get money from his employer.
When it’s Time to Open an Investigation
When red flags of fraud are uncovered, it’s time to begin an investigation. As you can see from the examples above, CRI Group’s investigations are based on a thorough approach that includes site visits and leaving no stone unturned. When you work with CRI Group, this is how the process will typically proceed. CRI Group will:
- Assign the appropriate investigators with the right expertise in that area to investigate the claim.
- Contact the parties involved to gather all relevant details about the incident.
- Use all resources available, including police reports, court filings, database records and other means to establish the truth in insurance fraud cases.
- Make site visits, speak to witnesses, take photos and establish timelines as needed to create a full, truthful story of the incident.
- Uncover useful evidence, carefully documenting and preserving it in a way that is admissible in court.
- Present investigation findings to the client, with recommendations on how to proceed. Sometimes, legal action is warranted.
Working with an insurance fraud investigation company like CRI Group provides the advantage of having an independent, impartial and unbiased third-party collecting the facts you need regarding any case that might involve potential fraud. CRI Group has been safeguarding businesses for more than 28 years, and you will be assured of the quality, professionalism and discreet nature of all investigations conducted by our experts.
Our global presence ensures that no matter how international your operations are, CRI Group™’s investigations have the network needed to provide you all necessary support, wherever you happen to be. We take great care to ensure that our trained and licensed investigators are the best at what they do.
3 types of insurance fraud investigations
1. Social Media Evidence
“Social media is an absolute gold mine” for insurance fraud investigations, according to Kelly Riddle, founder of private investigation company Kelmar Global. Many people think that setting high privacy settings on their social media accounts makes everything they post impossible to access. On the contrary, social media platforms usually hand over user information if they receive a subpoena for it.
Fraudsters often slip up online and post information revealing their fraud. For instance, someone receiving worker’s compensation for an injured foot may post a video of themselves playing soccer with their kids. Or, someone else may unintentionally expose their scheme, as is the case if friends and family tag the claimant in an incriminating post.
Fraudsters who are proud of their work may boast about it on social media, thinking they will never get caught. Make sure to search for alternate accounts as well as the claimant’s main social media pages to find as much of this type of evidence as you can.
2. Activity Check
In order to learn everything you can about the claimant, you need to see where and how they live. Good old-fashioned surveillance of their home or workplace can provide evidence. For example, someone who has claimed compensation for a shoulder injury leaving their home with a tennis racket, that is possible evidence for insurance fraud.
While you are in the claimant’s neighbourhood, canvass others in the community. Even if the neighbours don’t know the person well, they may have observed their lifestyle. Ask about the insured person’s financial situation, which can indicate if they are in need of quick money.
In property insurance fraud investigations, be sure to also ask neighbours if they have seen or heard anything out of the ordinary around the time of the claim. This can include moving trucks or more comings and goings than usual from the claimant’s home. They can also help you determine whether or not the claimant is actually living in their home.
3. Fake Documentation of the Claim
Just because a claimant has included all of the relevant documents in their claim doesn’t mean they aren’t committing insurance fraud. In fact, fake documentation is a very common way to pull off a fraud. Signs of false documents include:
- An unusual number of receipts.
- Falsified receipts.
- Fake affidavits.
- Photos or receipts used for more than one claim.
When studying accompanying documentation during an insurance fraud investigation, use a keen eye to spot signs of editing. Inconsistent lighting in photos and fonts that don’t match the rest of the document are some common examples. Be sure to also review the claimant’s history to see if they have claimed loss of the same items before.
6 Keys to Successful Insurance Fraud Investigations
1. Follow the Law
Nothing can derail your insurance fraud investigation quicker than finding out you have conducted it in violation of the law. Every jurisdiction is different, and privacy laws are the major consideration in these types of investigations. Understand the laws regarding filming or recording a subject or a witness, as doing it without their consent might be a violation of their rights. This is where it is helpful to engage the experts. At CRI Group, our investigators are trained and knowledgeable about local laws and the importance of proper evidence collection. Avoid trying to collect information by deceptive means, such as “friending” a subject on social media.
2. Conduct an Initial Assessment
It’s important to gather the known facts of the case at the outset of your insurance fraud investigation: You need to have some idea of the who, what, when where, and how of the case. With your baseline facts in place, your investigation will proceed much more smoothly. Keep in mind that the subject of an insurance fraud investigation might work quickly to conceal or destroy evidence if they know they are under suspicion. You should make sure to immediately secure all documents and other evidence that you might need late in your investigation. If you are conducting the investigation for a client, make sure they follow proper security measures to keep evidence intact, especially when it comes to digital evidence.
3. Plan the Investigation Well
An effective investigation is one that is carefully planned. Failure to do so can cause problems from the outset, such as missing important details and evidence in the case, or running afoul of regulations such as reporting to FinCEN in the U.S. or FINTRAC in Canada. Before you start the investigation, think about questions like:
- Who should be interviewed?
- In what order should you conduct those interviews?
- What supporting documents do you need to collect?
- Are there any other allegations against the subject?
- Which entities need to be informed of the investigation and how should it be done?
Carefully document all the details and steps taken during the case to make sure your insurance fraud investigation stays on track.
When engaging with CRI Group™, a fraud investigator will be allocated to your case. Read more about their skills and expertise in our article “The role of a FRAUD INVESTIGATOR.”
4. Perform Great Interviews
This is where being an effective communicator comes into play. Most successful investigations include subject and witness interviews as a critical part of the evidence-gathering process:
- You need to ask questions in order to find out the “how” and “why” an insurance fraud has occurred.
- The best interviews are those in which the interviewer is in complete control, yet the subject or witness feels comfortable and undistracted. Have some general questions prepared, but engage the subject in a conversational style, and don’t hesitate to go “off-script” to learn more information.
- Be friendly and establish trust and build rapport with the subject. Small talk is encouraged, plus warming up with some easy questions so that the interviewee feels comfortable talking to you.
- Don’t ask “yes” or “no” questions. Instead, ask open-ended questions, such as “tell me about what you did that morning” or “what happened that day?”
5. Understand Evidence
During an insurance fraud investigation, and when reporting the results, an investigator should take care to separate his opinion from the facts of the case. The investigator should let the hard facts of evidence speak for itself in the case, rather than engaging in speculation or providing opinions on guilt or innocence. This is why proper evidence collecting and examination is so important. Files, documents and other evidence should be kept secure and chain-of-custody should be maintained. Never alter or mark up original documents or files with your own notes, even if they seem relevant. Keep copies for your files and make sure nothing slips through the cracks.
6. Report the Findings
When your investigation has concluded, it’s time to report the results. Prepare a thorough, facts-based report detailing the evidence and your findings. A good investigation report should include the following items:
- Your understanding of the allegation (who, what, where, when, how)
- The steps taken in the investigation
- Copies of documents and other material evidence
- A list of interviewees
- A summary of interviews
- A conclusion as to whether the allegation was substantiated or not
Write your report in objective language, avoiding judgemental or inflammatory adjectives when describing details of the case. Use as many direct quotations as possible from interviewees or documents. Only include facts, not opinions or inferences, in your report.
This three-part series of articles is part of our “The Unseen Enemy: Insurance Fraud” e-book. The e-book contains actionable advise on how to protect your business from insurance fraud and much more. Download the FREE e-book here!
The Unseen Enemy: Insurance Fraud – Part II
This three-part series of articles examines the problem of insurance fraud, including its pervasiveness and general characteristics in the United States, the United Kingdom and the world. Insurance fraud is a widespread problem that requires real solutions and is often difficult to detect and combat.
Part One of the series, “What is Insurance Fraud,” provides an introduction to a topic that is important for any business leader, insurance professional, compliance agent or fraud investigator. Part Two, “How do Companies Detect Insurance Fraud,” details red flags of insurance fraud that help tip off investigators to possible illegal behaviour. Part Three, “Anatomy of an Insurance Fraud Investigation,” provides a look at case studies and reveals key tips for handling a successful investigation. To receive the next series subscribe to our monthly newsletter here!
Taken as a whole, this series is the perfect primer for any insurance fraud professional and companies looking to avoid becoming victims of insurance fraud claims. It provides the tools and knowledge needed to effectively combat insurance fraud.
Part Two: How Do Companies Detect Insurance Fraud?
The insurance fraud epidemic is of serious concern to businesses, insurance providers and consumers worldwide. In Part One of this three-part series, we examined the scope of the problem, and discussed a few cases that illustrate the magnitude of insurance fraud. In Part Two, we answer the question: How can companies detect insurance fraud cases before they do irreversible damage? Working with the right experts, any company can be better protected and detect more insurance fraud.
CRI Group’s expert insurance fraud investigators have the experience and training to help business leaders identify the red flags of insurance fraud, alerting them to
The following are 6 red flags of Insurance Fraud that CRI Group’s investigators are trained to recognise:
1. Suspicious timing
Sometimes a claim is made very shortly after the inception of the policy, such as within months, weeks or even days after the insured has been enrolled. This is an obvious red flag, yet it happens more often than you’d think. Another similar tip-off to potential fraud is when the insured makes a claim soon after an increase or change in the coverage. For example, a motorist increases their auto coverage from liability to collision insurance, and soon after files a claim under their collision policy when their car is “totalled” in a one-vehicle accident. An investigator from CRI Group would certainly look deeper into the circumstances of the claim.
2. Frequent insurance claims and losses
We often hear that “some people are just unlucky.” That may be true, but a string of alleged bad luck that results in frequent insurance claims and payouts can signal that there is more than meets the eye. CRI Group is trained to look at the history of every claimant and uncover potential fraudulent actions. Some insurance fraudsters think they can avoid detection by filing their claims in totally different areas, like auto, health and homeowners’ insurance. Expert investigators know how to put those pieces together to look for trouble signs.
3. Sketchy details
Sometimes a claim for theft or fire will be for recently purchased and/or expensive property, without a lot of documentary evidence to back up the claim. That’s a red flag, along with when an insured cannot remember, or does not know, where the claimed property was acquired, or cannot provide adequate descriptions. A proper insurance fraud investigation will seek to corroborate the details of the claim, and require an examination of all supporting documentation to make sure it is complete and legitimate.
4. Details that are “too perfect”
On the other hand, sometimes the details surrounding a claim seem perfect – a little too perfect. CRI Group has investigated cases in which the insured had receipts and other documentation, witnesses, and duplicate photographs for everything. So what’s the problem? Things lining up a little too perfectly can tip off an investigator that things have been planned and orchestrated, and there might be fraud involved. That’s when it’s time double-check the documentation carefully, and interview witnesses to verify the facts.
5. Irregular documentation
We’ve discussed the importance of documentation in the investigation of a claim – whether it might be missing, or seems to be “too perfect.” But sometimes the documentation provided by the insured is irregular or questionable, which is another red flag of insurance fraud. CRI Group’s investigators look for issues with documentation such as:
- Numbered receipts from the same source, but are dated differently or sequentially.
- Altered documents, including receipts or invoices with dates or amounts changed.
- The insured provides only photocopies of documents, instead of originals.
- Similar handwriting or signatures on different documents that are purportedly from different sources.
- Errors, such as miscalculated sales tax, or name and address misspellings, etc.
These are just a few of the issues that experts are trained to look for, and they know how to read the warning signs in the documentation that a layperson might overlook.
6. Financial difficulties
Most of us have run into financial trouble at least once or twice – overextended credit, bad investments, perhaps an ill-advised purchase. The problem is that some individuals, whether out of desperation or greed, will resort to fraud to try to straighten out such financial difficulties. CRI Group’s fraud investigators are careful to look at all aspects of a claim. Did the insured recently take a financial loss? Did they declare bankruptcy, or go through a costly divorce? These red flags become especially important when paired with one (or more) of the other red flags discussed in this article. Investigators must be vigilant, as financial pressure is one of the leading contributors to fraud.
What comes next?
Insurance fraud cases cover a wide range of schemes and crimes, and the red flags described above are just a few of the issues that insurance fraud investigation companies are trained to look for and uncover in the course of an investigation. In part three of this series, we will examine how CRI Group’s insurance fraud investigators proceed when such red flags lead to fraud, and it’s time to launch an investigation. CRI Group’s investigations cover the full range of insurance fraud cases, from health care fraud to disability and even fake death claims, always with the goal of providing the best resolution for our clients.
About CRI Group
Based in London, CRI Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening,
In 2016, CRI Group launched Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems, ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification. ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI Group’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organisations. Contact ABAC® for more on ISO Certification and training.
Sources & Credits
- LexisNexis Legal Newsroom, titled “Insurance Fraud – Red Flags.” https://www.lexisnexis.com/legalnewsroom/insurance/b/insurance-law-blog/archive/2008/05/16/insurance-fraud-_2d002d00_-red-flags.aspx
- Property Casualty 360, titled “10 red flags that could signal a fraudulent Auto claim.” https://www.propertycasualty360.com/2016/03/16/10-red-flags-that-could-signal-a-fraudulent-auto-c/?slreturn=20180306103605
The Role of a Fraud Investigator
Fraud investigators are the front line of establishing the facts of suspected fraud or other unethical business behavior. A fraud investigator’s skillset and wide knowledge of fraud laws, evidence gathering and interviewing make them the go-to expert for investigating insurance fraud, financial fraud, procurement fraud, asset recovery, cyber fraud, healthcare fraud, retail fraud and other areas.
A fraud investigator can either be part of a team of experienced investigators, or the leader of such a team. If part of a team, the fraud investigator generally works with the other team members to handle reports of suspicious activity. If in charge of a team, the fraud investigator would typically report to the head of a department, such as corporate security, compliance or audit. A fraud investigations manager at a typical retail business, for example, would be responsible for the day-to-day monitoring, investigation and resolution of fraudulent activity relating to delays in the repayment and refunds processes. They will take the lead on the implementation of strategies to prevent fraud and financial crime, thereby mitigating risk to the business.
Fraud Investigator Key Functions
Fraud investigators provide subject matter expertise on claims and associated fraud risks, helping to ensure effective resolution of investigations. The effective fraud investigator adheres to relevant security standards, internal and external procedures and legislative requirements. Their role often involves developing and maintaining close working relationships with relevant law enforcement agencies, ensuring that cases are developed and prosecuted to a criminal standard.
When working with an organization in a preventative fashion, a fraud investigator will perform fraud risk assessments across the business relating to both external and internal threats; implementing mitigation measures as required. They also build appropriate fraud prevention and detection processes and implement them. Some fraud investigators manage the day-to-day operation of an expanding fraud team, ensuring that KPIs are met and regular reports produced for the management team. In this capacity, they will also work closely with the senior management team to ensure that operational capacity is correctly aligned to combat a variety of fraud types.
Here are some of the other key functions performed by fraud investigators:
- Evaluate potential fraud indicators and the impact of current fraud trends and make recommendations as to appropriate mitigation.
- Conducting investigations into allegations of fraud, waste or abuse committed by clients against our company
- Reviewing and researching evidence/documents to analyze the overall fact pattern of a claim and synthesize data into a professional report with recommendations
- Preparing and coordinating field assignments to obtain relevant evidence and information
- Conduct objective, fair, thorough, unbiased and timely investigations into allegations of fraud, waste or abuse committed by clients against our company
- Review and research evidence/documents to analyze the overall fact pattern of a claim and synthesize data into a professional report with recommendations
- Prepare and coordinate field assignments to obtain relevant evidence and information
- Coordinate with defense attorneys to provide deposition strategies and use law enforcement resources for assistance
- Manage and priorities a large and varied caseload effectively and efficiently to achieve positive results
- Prepare prosecution packages and restitution proposals.
Responsibilities
As a fraud investigator often wears many different hats, they also have many ongoing responsibilities. These include monitoring transaction reports to identify any suspicious transactions and conducting detailed investigations as required. They must also proactively identify financial crime trends through data analysis and share findings with leadership as and when needed. A few other responsibilities of a fraud investigator include:
- Working to a high standard, meeting strict time-frames whilst working under pressure.
- Communicating directly with customers as part of ongoing fraud investigations through in-app messages or via telephony with potential victims of fraud to establish circumstances and additional information, before providing a fair and logical decision, with supporting rationale.
- Work as part of a team and supporting colleagues as and when required to reduce workload(s).
Personality Traits of a Fraud Investigator
There are some common traits among the most successful fraud investigators. This includes being a self-starter who is results-driven with high levels of self-motivation, energy and initiative. An effective fraud investigator has a proven ability to work under pressure to and meet tight deadlines, without compromising the quality of output. One key trait that can’t be overlooked is the ability to be an effective communicator – a fraud investigator must have excellent written and verbal skills. Here are some other key traits among successful fraud investigators:
- An ability to thrive under pressure amidst changing business priorities
- Effective cost management and analytical integrity
- Experience in leading and developing a team
- Keen interest in stopping fraud whilst considering the impact of how an investigation can impact customers
Knowledge and Skills
A successful fraud investigator brings to the table a broad range of security/ fraud detection and prevention experience. A fraud investigator must be a subject matter expert on fraud for their related field, such as insurance fraud, financial fraud, procurement fraud, asset recovery, cyber fraud, healthcare fraud, retail fraud and other areas.
Many fraud investigators have specialized skills such as:
- Experience of interviewing in accordance with the Police and Criminal Evidence Act following the PACE framework.
- Strong knowledge of cyber risk and common fraud typologies, along with the emerging trends affecting fraud and financial crime.
- Familiarity with key AML, TF, Financial Crime and Sanctions legislation and associated Regulatory Guidance.
- Demonstrated experience working with customers on fraud prevention and detection strategies.
- Sound understanding of the customer impact of a transaction monitoring system; able to balance fraud prevention with the need to provide an excellent customer experience.
As previously mentioned, an effective fraud investigator must have strong interpersonal and communication skills, including the ability to interact with clients, upper management and law enforcement. They also need to have an ingenuity and persistence to obtain case information not readily available with an eye for detail. Dealing with various different cases and different types of evidence requires strong organizational skills. For insurance fraud, investigators must be proficient with the insurance procedures, regulations and investigation methods
Perhaps most important, fraud investigators must set a positive example for their colleagues. They need to be honest and ethical, with high levels of integrity and confidentiality.
A fraud investigator has many different responsibilities, and the role requires an individual with some specific traits. CRI Group’s fraud investigators are experts at uncovering the facts and evidence of a case, but they also implement proactive anti-fraud measures to help an organisation be better protected against future incidence of fraud. Fraud investigators specialise in insurance fraud, financial fraud, procurement fraud, asset recovery, cyber fraud, healthcare fraud, retail fraud and other areas. It’s important that organisations hire trained, qualified fraud investigators who understand the laws, are effective at evidence collection and fact-finding, and are good communicators (since interviewing is one of the key processes of fraud investigation). A fraud investigator might work with a team, or they might lead their team and report to another division. Being able to work under pressure and meet deadlines is critically important. Properly evaluating and securing evidence is of equal importance. CRI Group has only the best expert fraud investigators to meet these challenges.
Are you a fraud investigator? Tell us about your day-to-day job, we would love to hear it.
Who is CRI Group?
Based in London, CRI Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening,
In 2016, CRI Group launched Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems, ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification. ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI Group’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organizations. Contact ABAC® for more on ISO Certification and training.
The Unseen Enemy: Insurance Fraud – Part I
This three-part series of articles examines the problem of insurance fraud, including its pervasiveness and general characteristics in the United States, the United Kingdom and the world. Insurance fraud is a widespread problem that requires real solutions and is often difficult to detect and combat.
Part One of the series, “What is Insurance Fraud,” provides an introduction to a topic that is important for any business leader, insurance professional, compliance agent or fraud investigator. Part Two, “How do Companies Detect Insurance Fraud,” details red flags of insurance fraud that help tip off investigators to possible illegal behaviour. Part Three, “Anatomy of an Insurance Fraud Investigation,” provides a look at case studies and reveals key tips for handling a successful investigation. To receive the next series subscribe to our monthly newsletter subscribe now!
Taken as a whole, this series is the perfect primer for any insurance fraud professional and companies looking to avoid becoming victims of insurance fraudulent claims. It provides the tools and knowledge needed to effectively combat insurance fraud.
Insurance Fraud Consequences Around the World
Fraudulent claims costs an estimated $40 to $80 billion per year in the U.S. alone. According to Cifas, the UK’s leading fraud prevention service, members report a 27% rise in false insurance claims across the UK in the past year, with spikes in household and motor insurance. Cifas members also reported the following:
- Household insurance fraudulent claims have increased by 52%, with claimants aged 31-40 the biggest culprits
- motor insurance fraudulent claims have increased by 45%, with 21-30 year-olds making up the largest group
- Fronting insurance is on the decline overall, however the share of millennials (21-30 year-olds) committing the offence increased by 18% in 2018.
Fraudulent claims are deliberately undetectable, therefore it’s hard to place an exact value on the money stolen. According to Alfred Manes’ “Insurance Crimes” in the Journal of Law and Criminology, the official number of cases does not correlate with the reality. The Coalition Against Insurance Fraud Annual Report estimates that a total of about $80 billion was lost in the US in 2006.
- Insurance Information Institute estimates that the insurance fraud accounts for about 10% of the property insurance industry’s incurred losses and loss adjustment expenses.
- The National Health Care Anti-Fraud Association’s “The Problem of Health Care Fraud” estimates that 3% of the health care industry’s expenditures in the U.S. are due to fraudulent activities, amounting to a cost of about $51 billion.
- David A. Hyman writes in “Health Care Fraud and Abuse” estimates that 10% of the total healthcare spending in the US to fraud—about $115 billion annually.
Consider these statistics:
- According to Federal Bureau of Investigation’s “FBI — Insurance Fraud,” non-health insurance fraud costs an estimated $40 billion per year – consequently this increases the premiums for the average U.S. family between $400 and $700 annually.
- J.E. Smith’s book “The Trillion Dollar Insurance Crook” puts the true cost fraud committed in the US at 33% to 38% of the total cash flow through the system
- In the UK, the Insurance Fraud Bureau estimates that the loss due to insurance fraud is about £1.5 billion ($3.08 billion), causing a 5% increase in insurance premiums
- Insurance Bureau of Canada “Cost of Personal Injury Fraud” estimates that personal injury fraud costs about C$500 million annually.
- “Indiaforensic Study on quantification of fraud losses to Indian Insurance Sector” estimates that Insurance frauds in India costs about $6.25 billion annually.
Part One: What is Insurance Fraud?
It’s been called an epidemic and is a scourge of insurance providers, private companies and consumers alike. But what is it, how do companies detect it, and how does an insurance fraud investigator unravel it? In this part one of a three-part series, we will address the first question: What is insurance fraud?
Most of us deal with insurance in various forms throughout our lives. It’s a necessity in some cases through which we pay regular premiums in order to be protected from damages or liability from an unknown future event, such as an accident or illness. For large corporations, insurance can be worth millions, covering things like product liability, workers’ compensation, business interruption and other serious risks. It’s also rife for fraudsters, who often live by the well-known maxim, “follow the money.”
Don’t have time to read the rest?
Taken as a whole, this ebook is the perfect primer for any insurance fraud professional and companies looking to avoid becoming victims of insurance fraud claims. It provides the tools and knowledge needed to effectively combat insurance fraud.
Download your Insurance Fraud Investigations FREE ebook here!
Every type of insurance is vulnerable to insurance fraud. This type of cases can be committed by opportunists – consider claim fraud, where perpetrators invent or exaggerate a claim; or application fraud, where they deliberately or recklessly provide false information when applying for insurance. There are well-known fraudulent insurance claim cases of highly organised criminal gangs with money-making enterprises based on motor-vehicle fraud or health care fraud, for example. But fraud can happen at any point along the process of an insurance claim, by insurance applicants, members/policyholders, third-party claimants or others (including professionals who specialise in pursuing claims for policyholders).
Fraudulent claim cases also cover a wide range of schemes and crimes. The following are some of the most common types of fraud involving the insurance industry, according to the ACFE’s “Insurance Fraud Handbook”:
- Agent and broker schemes
- Underwriting irregularities
- Vehicle insurance schemes
- Property schemes
- Life insurance schemes
- Liability schemes
- Health insurance schemes
- Worker’s compensation schemes
Fraudsters find new ways to pull off their scams, from simply falsifying claims to engaging in mail fraud, identity theft, and forgery, they will make it happen. For example, when looking at just motor vehicle-related fraudulent claims, the types of schemes include the following:
- Vehicle dumping or destroying
- False registration
- Exaggerated repair costs after a car accident
- Faulty airbag replacement
- Faulty windshield replacement
All of the above is intended to enrich the fraudsters at the expense of insurance providers, and, in some cases, other innocent victims. People have even been injured in schemes that involved faked traffic accidents for the purpose of insurance fraud.
Who is Involved?
Often committed by someone directly connected to the insurance policy. This includes the policyholder, applicant and their beneficiaries. However, insurance insiders – i.e. brokers and agents- as well as gatekeepers – i.e. lawyers and accountants, could be behind the scheme. They collude with the policyholder in exchange for a portion of the profits or victimize the policyholder for their own gain. Examples include:
- A doctor submitting improper medical coding to receive a higher payment than they are entitled to.
- A mechanic fabricating a bill for more repairs than the car required after an accident.
- A private investigator not really doing the investigation on fraudulent behaviour.
- An attorney was helping a claimant fabricate a story about how they hurt themselves on the job so they can receive worker’s compensation.
When times are tough for them financially, people are more likely to commit insurance fraud. You can sometimes discover opportunistic fraud by interviewing the alleged fraudster’s friends or neighbours about their financial situation.
Case Study: The ‘Phantom Collision’ Ring
In 2014 in Los Angeles, a ring of over a dozen insurance fraudsters was busted for fraudulent collision claims. The perpetrators of the frauds recruited family members and friends to help orchestrate fake accidents, ultimately stealing more than $300,000 from auto insurance companies before they were caught.
In some cases, the collisions didn’t even happen at all. All it took were willing participants to make claims in coordination with repair and auto body shops to make the fraudulent claims. In the end, fraud investigators were able to detect a pattern to their claims, helping them unravel the scheme.
The case is reminiscent of a similar instance that made shocking headlines in 1996 when an organised crime ring (also in L.A.) made up of six perpetrators netted a jaw-dropping $20 million in phoney claims. When they were caught, it was discovered that they had staged more than 100 fake accidents, filing $10,000 to $20,000 in claims per incident. For many people who read about the case in the newspapers, it was their first exposure to something of this magnitude, whereas they had previously thought of insurance fraud cases as “one-off” crimes of opportunity.
Case Study: Doctors, Clinics Get in on Insurance Fraud in New York
Healthcare fraud is another area that is susceptible to major fraud conspiracies. Last year in New York City, more than 20 people and more than a dozen corporations were charged in a massive scheme to defraud Medicaid, Medicare and other insurance providers. The operation was so sophisticated; it allegedly involved “office staff, recruiters, managers, billers and money launderers.”
As is common with such cases, the fraudsters targeted poor and vulnerable people to help them execute the fraud. They went into low-income areas and in some cases approached homeless people, offering them cash ($30 to $40) in exchange for them going into clinics that were in on the scheme and ordering unnecessary tests. In many cases, the tests weren’t even performed, and the “patients” didn’t even have a consultation with a doctor.
The massive fraud included doctors and utilised shell companies to help launder the millions of dollars that were processed by the perpetrators. The case, with 878 indictments, is still in the court system.
The Ten Most Common Types of Insurance Fraud
In case you think that fraud is limited to automobiles and healthcare, consider all of the types of insurance that are available – and know that all of them are susceptible to fraud. In fact, investigators from Business Insurance have provided a list titled “10 Most Common Types of Insurance Fraud.” These cases even include staged home fires and faked deaths:
- Stolen car
- Car accident
- Car damage
- Health insurance billing fraud
- Unnecessary medical procedures
- Staged home fires
- Storm fraud
- Abandoned house fire
- Faked death
- Renter’s insurance
Investigating Insurance Fraudulent Claims are Best Left to the Experts
With the enormous liability presented by insurance fraud, every organisation should address the risk in their due diligence and fraud prevention programs. The best way to do that is to bring in the experts at CRI Group to help implement this as part of a risk management plan.
When fraud is detected, CRI Group’s investigations cover the full range of fraudulent claim cases, from health care fraud to disability and even fake death claims. CRI Group’s thoroughly trained experts are trained, for example, to look for the tell-tale signs of fraud carefully reviewing claims, medical and hospital records, conducting interviews, examining statements and documents and performing on-site inspections.
In Part Two, we will examine some of the tell-tale signs and red flags of fraudulent claims, and how insurance fraud investigation companies can have a better chance of detecting it before it causes irreparable damage. Like many criminal schemes, this type of cases are often well-hidden – the key is knowing what to look for.
Do you want to read the next series now? Not a problem, this three-part series of articles is part of our “The Unseen Enemy: Insurance Fraud” ebook with actionable advise on how to protect your business and much more. Download the FREE ebook here!
5 Tips for Preventing & Detecting Expense Fraud
It’s one of the most common forms of occupational fraud: employees fudging on their expense accounts. In June, 2020, Lookers (London-listed company) warned investors they might be unable to buy and sell its shares from the beginning of July because of potential fraud on its books – confirming £19m charge to correct books after fraud inquiry. Whether through fictitious charges, fake receipts or invoices, or other improper use of expense funds, an expense account is sometimes seen as a low-risk, high-reward area for committing fraud. It shouldn’t be. If your company takes the proper steps to review expense activity and protect itself from fraud, expense accounts will no longer be a vulnerable area of your finances.
The experts at CRI® Group offer the following tips for bolstering your protection against expense account fraud:
1. Provide strict guidelines for credit card use
Often, expense account fraud is committed with the use of a credit card, with the employee seeking illegitimate reimbursement for various expenses. Detail how personal cards are allowed to be used, and require and review all receipts for claimed expenses. Also require supporting documentation (such as an airline boarding pass, for example) to ensure the purchase was used as intended.
2. Check company credit card statements carefully
In some cases, employees will use a company credit card to make a purchase, but then claim similar or duplicate expenses for reimbursement on their expense report. This is easy to catch if you carefully review company card statements and check them against reimbursements.
3. Ask questions
If a purchase seems odd or unrelated to business use, catching it early is the best way to resolve the issue. After too much time has passed, an employee might claim to have a difficult time remembering exactly what the questionable expense was for. If in doubt about a claim, ask for supporting documentation and a clear explanation of how the expense was used for a business purpose.
4. Implement a Code of Ethics for all employees
By including anti-fraud language in your Code of Ethics, which should communicate a strong anti-fraud stance and be signed by all employees, it will be clear that expense account fraud is not tolerated. Reinforce this with regular communications to employees reminding them that the company does not tolerate fraud in any form and offenders will be prosecuted.
5. Set a Tone at the Top
If the company has rules in place but senior staff aren’t following them, lower-level employees will follow by example and flout the rules, as well. All staff should follow the rules to the letter. Especially while on business trips with lower level employees, senior staff should set a positive example and make a point to follow the rules for business expenses.
Expense account fraud is a persistent problem in business, but it doesn’t have to be a crisis at your company. By using a common sense approach and some key prevention strategies, you can help ensure that your employees know the rules and are less likely to try to take advantage of company expense funds. For assistance in developing and implementing a fraud prevention strategy, contact us today or get a FREE QUOTE now!
Let’s Talk!
Based in London, CRI® Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening,
In 2016, CRI® Group launched the Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems, ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification. ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI® Group’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organizations. Contact ABAC® for more on ISO Certification and training.
MEET THE CEO
Zafar I. Anjum is Group Chief Executive Officer of CRI® Group (www.crigroup.com), a global supplier of investigative, forensic accounting, business due to diligence and employee background screening services for some of the world’s leading business organizations. Headquartered in London (with a significant presence throughout the region) and licensed by the Dubai International Financial Centre-DIFC, the Qatar Financial Center – QFC, and the Abu Dhabi Global Market-ADGM, CRI® Group safeguard businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI® Group maintains offices in UAE, Pakistan, Qatar, Singapore, Malaysia, Brazil, China, the USA, and the United Kingdom.
Contact CRI® Group to learn more about its 3PRM-Certified™ third-party risk management strategy program and discover an effective and proactive approach to mitigating the risks associated with corruption, bribery, financial crimes and other dangerous risks posed by third-party partnerships.
CONTACT INFORMATION
Zafar Anjum, MSc, MS, CFE, CII, MICA, Int. Dip. (Fin. Crime) | CRI® Group Chief Executive Officer
37th Floor, 1 Canada Square, Canary Wharf, London, E14 5AA United Kingdom
t: +44 207 8681415 | m: +44 7588 454959 | e: zanjum@crigroup.com
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