Fraud expert shares concerning trends to watch

By Jessica Salerno-Shumaker, OSCPA senior content manager  

Fraud is as relevant and concerning as ever, said one CPA and fraud expert.  

“Fraud is not going away,” said James Rumph, enterprise anti-fraud leader at Columbus-based insurance and financial services company Nationwide. “But at the same time, the methods people use to commit fraud will continue to evolve.”  

A popular fraud trend is business email compromise, Rumph said, which is when someone takes over someone else's email and interjects themselves into a transaction or uses that to help further fraud. 

“We’ve seen CPA firms being targets for this type of scheme because they have access to a lot of client-sensitive information and often store that information within cloud email accounts. For example, a tax preparer may have a 1099 tax form stored in their email showing where a cash value account may exist and the account number,” he said. “And sometimes they don't have sufficient cybersecurity controls, such as multi-factor authentication. If a scammer can get in and learn of information through a third party, like a law firm or a CPA firm, then they can use that information elsewhere to attempt to steal money from the CPA firm’s client.”  

Rumph will present on fraud psychology at the Dec. 20 Fraud & Forensic Conference. He said fraud psychology is “really about how we can use behavioral science around fraud to better understand and enhance all phases of fraud risk management.”  

An area that he said shouldn’t go unnoticed is opportunistic fraud, which is when people might exaggerate the truth or omit parts of the truth as opposed to going into a situation with the full intent to commit fraud from the beginning.  

“This can have a big impact on fraud for an organization,” he said.  

Accountants who work on tax returns can be targets for fraudsters, and Rumph said this is a relevant risk for the whole accounting profession.  

The fraud triangle, which Rumph said is well-known in the accounting profession, is made up of pressure, rationalization and opportunity. He said most organizations focus on opportunity, which means they miss some areas to improve in pressure and rationalization.   

“Even though we can't prevent someone's pressure or rationalization completely, there are ways that we can impact it,” he said. “So if you're talking about an employee who is feeling pressure in an organization, offering confidential, no-cost counseling is one way to help with that. It's not going to necessarily stop everything, but it's at least contributing to reduced fraud risk.”  

It's International Fraud Awareness Week! Register for the Fraud and Forensic Conference.