FALL / WINTER 2018-19, ISSUE 2

LETTER FROM THE PRESIDENT TABLE OF CONTENTS Letter from the President Chelsea Binns, Ph.D., CFE P. 1 Dear Members, About the NYCFE P. 2 I am pleased to welcome you to Expert Views the second issue of our new, Summer Day Camp: Director revived newsletter and share an Knows How to Skim update on our meetings and Adam J. Fox, MS, CPA, CFE P. 3 events this year! Five Questions with... First, I would like to acknowledge Janice L. Tyson, CFE P. 5 the talented individuals who have contributed to our newsletter. We Fraud Snapshot: are pleased to feature their By the Numbers P. 6 original content regarding timely, Arson Investigation fraud-related topics. Chelsea Binns, NYCFE President Bruce Hulme, CFE, BAI P. 7 I encourage all NYCFE members Our meetings this year have been to participate in our newsletter. Member Highlights P. 8 very well attended, including our We welcome information about Event Photos Pp. 9-12 “sold out” spring conference in professional achievements, April, our breakfast meeting in awards, photos of “fraud fighters Book Corner P. 1 3 May, our networking event in July, at work,” along with articles Tech Talk our “sold out” dinner meeting in outlining your expert views on a Approaching Blockchain September, and our “full day” topic pertinent to the CFE Laura Hynes-Keller, CFE P. 1 4 conference in October. community, which will be Submission Guidelines P. 1 6 considered for a future issue. We Some of the topics covered by would love to publish news about speakers and presenters included your accomplishments, and see in-depth discussions of corporate your expertise recognized by our fraud, cybersecurity, investigations,

wide audience! AML, fraud risk management, data analytics, blockchain, cybercrime NYCFE Events and elder fraud, corporate fraud, Our mission at the NYCFE is to and whistleblower matters. provide high quality continuing Through these continuing Photo Courtesy: professional education in fraud education opportunities, we can Dora Gomez prevention, detection and discover and learn more about deterrence, and top line innovative methods used to networking opportunities, at times commit fraud, and ways to and locations convenient to our prevent, detect and deter it from membership. top experts in their respective

fields.

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We really appreciate your Becoming a member of the We are continuing to circulate participation in these events, and NYCFE provides an opportunity information to our membership according to the feedback we increase your anti-fraud about joining the group as the received, you were quite pleased knowledge and make new friends conference date approaches. It’s with our high-quality speakers and and professional contacts across just one of the features of NYCFE venues. an array of industries. To apply, membership! please use this NYCFE member Nearly all NYCFE events offer CPE I welcome your feedback at application link. credits. For more information [email protected]. about our events, and to register, We invite current members to refer Working together, we can please see our home page at a friend; once a friend signs up, continue to make a difference in www.nycfe.org. members will receive a special gift the fight against fraud. as a “thank you” for the referral. If you would like to suggest a topic Please have the new member On behalf of the entire board of or speaker for a future event, provide your name on their directors, I would like to thank you and/or if you would like to serve as application form, and a gift will be for your support. We have a a sponsor, please contact our sent to your designated address. fantastic slate planned for 2019, Training Director, Dora Gomez at and we look forward to seeing you [email protected]. ACFE 2019 Conference at a future meeting. Membership Drive Planning for the 30th Annual ACFE Chelsea Binns Global Fraud Conference to be There is no better time than now held June 23-28, 2019, in Austin, President, NYCFE to become active in the NYCFE TX is underway. and begin enjoying the benefits of  membership! Our membership The NYCFE will provide a discount drive is underway, and if you are code to our members who register not already a member, I invite you through our group. to join our chapter.

ABOUT THE NYCFE Our NYCFE chapter is managed by our board of directors on a completely volunteer basis according to guidelines set forth by the global Association of Certified Fraud Examiners, headquartered in Austin, TX. The NYCFE board members maintain the chapter's website; manage chapter correspondence, CPE credits, membership rolls, and fees; develop, organize, and host NYCFE conferences, seminars, and gatherings; facilitate and host ACFE events held in New York City, and assist ACFE International with its local seminars. We welcome the participation of current NYCFE members in our volun teer opportunities. To learn more, please contact: For General Questions: [email protected] For Training, Events, Speaker and Sponsor proposals: [email protected]

ACFE NEW YORK CHAPTER BOARD OF DIRECTORS President: Chelsea Binns, PhD, CFE, LPI

Vice President/Training Director: Dora M. Gomez, CFE, CRMA, GRCP 2nd Vice President/Treasurer: Judy Shalini Juan, CFE, CFCS, CPA Recording Secretary: Ozan Gurel, CFE Corresponding Secretary: Emmah Padilla, CFE Chairman of the Board: Jonathan Newcomb, CFE Chair Emeritus: Michael Richard Powers, Esq., CPA, CFE Director/Legislative Liaison: Bruce Hulme, CFE, BAI Member at Large/Past President: Alan I. Blass, CPA, CFE, PC Member at Large: Laura Hynes-Keller, CFE Past President Directors: Steven R. Levine, CFE Ernesto Castillo, CFE Noel Barreto, CFE President Emeritus: Anthony Luizzo, PhD, CFE, CST, LPI Chapter Counsel: Kenneth C. Citarella, Esq., CFE, CIPP

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Summer Day Camp: Director Knows How to Skim A School District Fraud Case Proven Through Data Analytics By Adam J. Fox, MS, CPA, CFE Fraud is prevalent in who attended a private or parochial Audit assignment and other testing all industries, but it school. In addition, the Program work, we were tasked with a can be especially Director instituted a deadline for the separate investigation into this common in the registration of the program to a matter. education industry. specific day. If a family was still In this article, I will interested in the program after this After substantial meetings and be discussing a registration deadline, a specific late correspondence with various school fraud case in a fee would apply. The amount of this district employees, it was decided school district, specifically related to late fee would depend on whether by the supervisor with whom I a Summer Day Camp program the student attended the public worked that this fraud would best which occurred during the Summer school, or a private or parochial be proven analytically. This would of 2015. In this instance, the fraud school. mean reconciling the dollar amount was proven using data analytics. of registration and late fees Notably, the three elements of After completing the registration collected to the original scholar Donald Cressey’s “Fraud form, the parents then provided a corresponding registration forms Triangle,” – pressure, opportunity, form of payment for their child or completed by the parents of the and rationalization, were present as children. Parents had the option of student participants. key factors of influence. paying by personal check or by cash. However, many of the parents I began this process by creating a This Summer Day Camp program elected to pay via cash. This option Microsoft Excel spreadsheet involved children from Kindergarten turned out to be a mistake made by workbook for each classroom and its through Grade 8 who attended a the school district, as the Program corresponding grade level. I then half-day program which took place Director was the only person went through various file boxes of at two of the Elementary Schools present on the evenings during registration forms, which were within their school district. The which the registration took place. organized by building, grade level, program was run by the Summer and classroom. I reviewed each Playground Program Director, who After the payment was submitted by individual registration form, the was also an English teacher during the parent, the Program Director number of students indicated on the regular school year. The would then pocket the cash. This each form (if there was more than program was open to all students clearly gave her the “opportunity” one child per family), and the dollar who resided within the school to commit the fraudulent act, which amount collected. district, including students who is one part of the well-known “Fraud attended private or parochial Triangle.” This type of fraud is This data was then entered in my schools. Students had the known as skimming, as she stole the spreadsheet accordingly, and each opportunity to participate in a cash which was collected prior to it tab within the spreadsheet was variety of activities, including arts being recorded on the accounting designated for a classroom and and crafts, sports, and movies on system of the school district. grade level of students. Based on days when the weather was the school district’s website and the inclement. There were also various These actions were rumored by registration forms, I was able to field trips offered to the students, observers for several months after obtain the tuition for each student. I depending on their age group. the Summer Day Camp program also indicated whether or not the ended in August of 2015, until the student attended the public, or The fraud began during the allegations finally reached the private or parochial school based on registration process, as there were offices of the District the amount of tuition paid, as well two designated evenings during the Superintendent and other the late fees, if applicable. I month of June during which parents administrative professionals. These continued this process until I had completed the registration. The allegations signaled the need for an reviewed all registration forms from parents would travel to one of the investigation. That was when the each of the respective file boxes. elementary schools within the school district personnel summoned district and complete a registration my CPA firm to examine this After several hours of reviewing form for each child. A slightly higher scenario. Although we were initially these forms, it was found that the price was charged for the students engaged to complete an Internal total number of students multiplied 3

by their respective registration fees being recognized by the school present in the mail room to open did not match the total amount of district for the hard work which she each envelope, and log the revenue indicated by the Program had done, not only as the Summer payments received. This will prevent Director and the school district. It Playground Program Director, but the checks from being stolen, and was then proven that something was also as a teacher. She believed that all registration data will be logged clearly attempted to be hidden, and she was therefore not compensated in an organized manner. that the Program Director was being fairly (the “pressure” leg of the dishonest about the registration Fraud Triangle). She also felt that Even though this fraud was process for this program. she could enhance the program by obviously not as severe as the well- providing additional supplies and known frauds of WorldCom and My immediate supervisor and I snacks using the cash which she had Enron, it is important to realize that discussed my findings. He felt as if I stolen (the “rationalization” leg of an act of fraud can grow in its dollar had clearly found an anomaly, and the Fraud Triangle). For example, amount over time. As the dollar that a fraud was prevalent. He then she would use the stolen cash to amount of the fraud grows, the continued the investigation process purchase art materials for projects, more significant is its overall by first interviewing the District and ice cream bars for the children. financial impact. By uncovering this Superintendent to discuss my She also utilized some of her own fraud, I was able to ensure that no findings with her. She expressed her personal money for these additional money would be lost, as profound dissatisfaction regarding purchases. It was also rumored that stronger controls were implemented the incident, and the material she provided the counselors (high for this program going forward. This amount of money which had been school students who resided within gave me a strong sense of misappropriated by the Program the district) with additional satisfaction. Director. She promised that this compensation which was not part of person would not only not be their contract. Management and those charged allowed to run this program again, with governance must show high but she would also be demoted to a As a result of our investigation, this levels of integrity in order to prevent lower-level teaching position within program was offered in subsequent such frauds from occurring. Weak the school district. years, but was of course no longer controls and poor governance can run by the same individual. In set the tone for fraudulent activity to Next, the Program Director herself addition, there is no longer a occur. A strong system of separation was interviewed. Several questions “registration night” held, and cash of duties and strong controls over were asked of her regarding the is not accepted as a form of cash collections is an important situation. The Program Director was payment. Instead, parents of the element of any internal control in denial regarding many of the student participants are required to system. However, when these questions, as she naturally submit a registration form for their controls are overridden, and fraud attempted to cover up her actions, children via U.S. mail, and must pay does occur, diving into the specific and would continue to lie when the registration fees using a details and data analytics can be a specific issues were posed to her. personal check. helpful tool to uncover acts of However, it was clear that the dishonesty. ♦ registration funds were This was clearly a good move made misappropriated, and the Program by the school district, as there is no Adam J. Fox, MS, CPA, CFE is a Director had used the money for her longer a risk of cash being stolen. Senior Auditor/Accountant for a own personal gain. The Program Once the registration forms and regional accounting firm. E: Director had a motive for her payments are received in the mail, [email protected]. actions. She felt as if she was not two individuals are assigned to be

FIVE TAKEAWAYS

1. There must be a strong overall system of internal controls in place which management does not have the ability to override. 2. There must a strong “tone at the top” attitude among members of management. 3. There must be background checks performed on all employees hired. 4. There must be a clear separation of duties among staff members, particularly when it involves the handling of cash. 5. A fraud prevention system should be implemented within the education industry, as well as within other industries. This process will educate its employees and prevent fraud from occurring. This will strengthen management, as well as those charged with governance. 4

NINE QUESTIONS WITH... JANICE L. TYSON, CFE

anice L. Tyson is a quarterly review of the death. I made it my priority to Compliance Officer Investigation function. complete the required tasks but focused on Investigations did not allow myself to get J Janice believes an ethical at Marsh & McLennan caught up in the hysteria. workplace creates the best Companies (MMC). She has environment to increase There were many opportunities been with MMC for 17 years. creativity and productivity. afforded to me in government Janice has a bachelor’s degree service and corporate because I in Political Science from How did you become Q: was interested in the work and Hampton University, a Master of interested in becoming a worked hard. My initial position Science degree in Business Certified Fraud Examiner? in Compliance at MMC was Ethics and Compliance from the made possible because of my New England School of Business My interest in becoming a A: work in the Police Department and became a Certified Fraud CFE began while I was studying and D.A.N.Y. Examiner in 2017. She worked for my Master of Science degree in law enforcement for 12 years; in Business Ethics and The Company wanted to get a eight years with the New York Compliance. The fraud Compliance Department up and City Police Department and four examination courses referred to running with individuals they years with the New York County work done by the CFE founders. could rely upon. I was honored Attorney’s Office. to be selected and have worked In addition, resource materials I hard to improve my skill set. Janice is part of a three-person used for my papers on ethics Becoming a CFE was an global team that leads and and fraud referred to work done important part of demonstrating provides investigative support to by CFEs. I also thought it was my intent and commitment to various corporate functions and important to obtain a do my best. business practices globally certification for the investigation within the MMC family of work I was doing. Q: What skills or education Companies, including best prepared you for the Tell us about your transition subsidiaries. The team Q: transition to corporate life? investigates fraud, policy from government services to violations, and activities by corporate work. Can you please A: My parents raised me and employees which may cause share some insights about your my siblings to have a strong financial and/or reputational transition? Challenges? work ethic. We were expected harm to the Company. Opportunities? to study, do well at school and work hard. The training I In addition to her investigation The transition from A: received at the Police Academy role, Janice manages the Ethics government services to classes stressed the importance & Compliance Line administered corporate work was not too of dealing with the public and I by a third-party vendor. She difficult. I faced one challenge believe it shaped my ability to provides Investigation and when I transitioned from assess difficult situations and Ethics & Compliance Line government service to come up with resolutions. statistical information to senior corporate: (1) Coping with freak management and assists outs by individuals over matters external auditors with their that did not involve life and 5

Q: Did you have any mentors? Q: What would you tell a young my favorite television shows are If so, what kind of mentoring professional just starting their “Death in Paradise” and experience did you find useful? career as a CFE? “Hinterland.” The police teams have individuals who are A: Not in the true sense of A: Work on improving your proficient in investigative and mentoring. I am fortunate to observation and listening skills forensic accounting skills. work for and with individuals because both are important to Q: What do you find most who answer my questions and improve your interview skills. meaningful in your membership encourage me. Q: What do you do for fun or in the NYCFE? Q: Do you have favorite tools, relaxation? techniques or insights to share A: I enjoy meeting the with other CFE’s? A: I enjoy doing Bikram Yoga members. Everyone has an and listening to classical music interesting background and A: Use the resources available and jazz. willingness to share their at ACFE.com. There is wealth experiences. ♦ Q: Do you have a favorite information on various topics. It author, television show, movie or  is the first place I go to research hero of fiction that has to do new issues. Our Investigations with investigations/CFE work? team uses the I-Sight case management system which A: My favorite author is enables us to better coordinate Elizabeth George. She writes the our investigations with our Inspector Lynley mysteries and Compliance colleagues globally.

FRAUD SNAPSHOT: By the Numbers Top Ten Reported Data Breaches, Exposures and Hacks to Date: 1. Yahoo: 3 billion 2. Marriott: 500 million 3. Adult Friend Finder: 412.2 million+ 4. Exactis: 340 million 5. Adobe Systems: 152 million 6. UnderArmour MyFitness App: 150 million 7. Equifax: 147.9 million* 8. EBay: 145 million 9. Heartland Payment Systems: 134 million 10. Linkedin: 117 million *Often considered the worst data breach because of sensitivity of the information stolen.

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Arson Investigation By Bruce Hulme, CFE, BAI

This arson as having actually set the fire, and he was given immunity to investigation my assignment was to identify testify against the factory owner assignment the arsonist and ascertain if the plaintiff who he stated hired dealt primarily factory owner had hired same. him. with my The insured sued the carrier for Prior to the trial I recall having identifying and payment on the fire loss after the following conversation with locating a the carrier, suspecting arson and the New York lawyer who had professional retention of an arsonist by the retained me. I asked him, in light arsonist believed to have been insured factory owner, denied of the fact that no one had died paid to burn down a carpet the claim. There was to in this fire, and that a New York factory in Dalton, Georgia, in eventually be two federal court City law firm and private order that the business owner trials of this claim. investigator were representing a might collect from the insurance Yankee insurance company company. I was retained by a New York being sued by a "Northern City law firm hired by the Dalton, and its surrounding area, Georgia Good Ole Boy," how he insurance company. The insured is referred to as the "Carpet expected to win this case? retained a flamboyant northern Capital of the World." The New Georgia trial attorney He replied: "You will be England-based insurance experienced in defending high accompanying the arsonist up company specialized in profile plaintiffs in civil matters the courthouse steps where the providing fire insurance to and criminal cases, as well as insured factory owner will be commercial entities, particularly arsonists. waiting at the front door. factories. Their staff included experienced arson investigators The trials took place in the U.S. When the insured sees the and claims adjusters who District Court for the Northern arsonist, he will pull out his gun combed the fire scene for District of Georgia in Rome. My and shoot and kill the arsonist. evidence, including business services in connection with That is what it will take for us to papers and telephone records locating the actual arsonist who win this case." That didn't occur, that had not been destroyed by set the fire took me to Dalton nor did we win. The jury was just the conflagration and were to and Rome, Georgia, not going to find that someone contain important leads for me Chattanooga, Tennessee and colluded with an admitted to develop. Newark, New Jersey. A Rome, arsonist in an insurance case Georgia law firm was also when nobody died. ♦ After determining that the retained as local counsel for sprinkler system had been Bruce H. Hulme, CFE, BAI is a what was to be the second and turned-off before the fire Certified Fraud Investigator, final trial. started, finding traces of Board Certified Investigator and a former New York State accelerants and the factory I was to eventually locate the Licensed Private Investigator. professional arsonist in New owner with an air-tight alibi Email: having been at a private club in Jersey. Arrangements were [email protected] the adjoining state of made for his arrest by the  Tennessee, thus ruling him out Georgia Bureau of Investigation

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MEMBER HIGHLIGHTS

NYCFE President Chelsea Binns with daughter Samantha 8lbs, 4oz, 21 inches

BEST WISHES, CHELSEA & FAMILY!

CONGRATS, BRUCE!

Bruce Hulme, CFE Receives IASIR Life Member Award On October 26, Bruce Hulme, CFE, BAI, a long-standing board member of the Association of Certified Fraud Examiners New York Chapter #14, received the prestigious International Association of Security and Investigative Regulators Life Member Award in Scottsdale, AZ at its annual conference. IASIR is an association of governmental, state, and provincial regulators in the , Canada. and France. The award was given in appreciation and gratitude for his contribution to the advancement of the association during its 25-year history and for his 14 years as the association's sole elected representative of the private investigation industry. He is the eighth member to be awarded this honor. IASIR is concerned with licensing, regulation, enforcement and training in the private investigative, private sector security, alarm, and armored car industries. For more than four decades, Hulme has served as a legislative advocate, officer, or board member on behalf of professional associations including the National Council of Investigation & Security Services and the Associated Licensed Detectives of New York, also serving as president of both, and more than two decades each with IASIR, NY ACFE Chapter, International Intelligence Network, and the Society of Professional Investigators.

Dora Gomez earned a Master of Science, Business and Information Systems from the College of Computing Science at NJIT in December 2018

CONGRATS, DORA!

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NYCFE EVENT PHOTOS

NYCFE Breakfast Event/Speaker Lacey Keller, Gryphon Strategies/Topic: Data Analysis

NYCFE Dinner Event/Speaker Ondrej Krehel, CEO, LIFARS/Topic: Cyberextortion Legal Implications

The NYCFE would like to thank our 2018 event sponsors: To learn more about how to  Gryphon Strategies for its support of our sponsor or become a speaker May 22 breakfast at an event, please contact meeting held at [email protected] Slattery’s Midtown Training Event Photos: Pub Courtesy Dora Gomez

 LIFARS for its support of our September 12 dinner event held at Battery Park Gardens 9

NYCFE FALL CONFERENCE

Snapshots of some of the speakers at the October 12 full day conference held at Fordham Univ.

Keynote Speaker Greg Coleman Coleman Worldwide Advisors "Wolf of Wall Street" retired FBI Investigator

Roger Hockenberry, Partner, Cognito/ Topic: Fraud Detection and Block Chain Technologies

Kirby Plessas, President/CEO, Plessas Experts Network, Inc.

Keynote Speaker Tom Hardin, “Tipper X”

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NYCFE HOLIDAY PARTY 2018

Held in conjunction with the HTCIA and Infragard

Fordham University, Dec. 13, 2018

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Holiday Event Photos: Courtesy LHK

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BOOK CORNER Editor’s Picks for Suggesting Readings

Bad Blood

Secrets and Lies in a Silicon Valley Startup

By

John Carreyrou is a two-time Pulitzer Prize-winning investigative reporter at . For his extensive coverage of Theranos, Inc., Carreyrou was awarded the George Polk Award for Financial Reporting, the Gerald Loeb Award for Distinguished Business and Financial and the Barlett & Steele Award for in 2016.

“You will not want to put this riveting, masterfully reported book down. No matter how bad you think the Theranos story was, you’ll learn that the reality was actually far worse.”—Bethany McLean, bestselling coauthor of The Smartest Guys in the Room and All the Devils Are Here

Policing Fraud My Journey from Street Cop to Anti-Fraud Leader James D. Ratley, CFE

In Policing Fraud, Association of Certified Fraud Examiners (ACFE) President James D. Ratley, CFE, shares detailed accounts of his life, from his time on the Dallas police force to his role in helping to create a profession and establishing the largest anti-fraud organization in the world.

Behind the Murder Curtain Special Agent Bruce Sackman Hunts Doctors and Nurses Who Kill Our Veterans By Sackman, Michael Vecchione and Jerry Schmetterer

When Veterans Hospital patients on the road to recovery suddenly die in increasing numbers, it’s up to VA Special Agent in Charge Bruce Sackman to find out why. His shocking discovery rips open the hidden world of what goes on behind the bedside curtains when a killer doctor or nurse decides a patient must die. 13

An Approach to Blockchain By Laura Hynes-Keller, CFE

Blockchain. 2027.1 According to a recent a blockchain to designated Bitcoin. International Data participants, 2) Permission Digital Corporation guide, blockchain less, which allows anyone to Disruption. spending is expected to grow write to the blockchain, and 3) The Fourth at a robust pace throughout A consortium, or hybrid Industrial the 2017-2022 forecast period blockchain, which allows both. Revolution. with a five-year compound As a distributed ledger, a annual growth rate (CAGR) of Shared “Distributed Ledger blockchain is managed by a 73.2 percent. Worldwide Technology,” or “blockchain,” peer-to-peer network blockchain spending is still in its infancy, offers the complying to a specified expected to be $1.5 billion in promise of streamlining protocol for inter-node 2018, double the amount business operations in myriad communication and validating spent in 2017, with worldwide industries. Blockchain is about new blocks. To make a change spending on blockchain the exchange of value, such or addition requires an update solutions forecast to reach as bitcoin, allowing to the entire blockchain. $11.7 billion in 2022. participants to exchange Anyone can set up a assets without relying on a Yet, while libraries discarded blockchain, and any third party to manage the card catalogs in favor of transaction in that specific transactions. digitizing collections, creating distributed ledger ecosystem vast and valuable efficiencies, Like an accounting ledger must be validated by all the the Dewey Decimal System where financial transactions participating members to for classification wasn't are recorded, the blockchain, create a “consensus,” thereby discarded. What business a digital “ecosystem” making the transactions processes, procedures and database, allows transactions “immutable,” which is systems will transcend and their details to be entered beneficial in an audit setting. distributed ledger technology in multiple places at the same Proponents of blockchain disruption? Is there a path time, but without a central often cite this aspect as the forward for your company to database or administrator. As reason “trust” among parties position itself for a blockchain such, blockchain has the and counterparties is not future? potential to redefine and necessary. transform long standing Blockchain Basics Instead of manual paper business value chain As a technology infrastructure, processes, or documentation processes and procedures, distributed ledger held on a computer server or both within--and between-- technologies are linked by in the “cloud,” with access companies and organizations cryptography and powered by and oversight determined by of all types. inexpensive computer a central administrator, every capacity running on “nodes” The World Economic Forum designated user of every on individual computers named blockchain as core to computer has access to the around the world. the Fourth Industrial designated blockchain. Revolution; its Deep Shift There are three primary One of blockchain’s features survey suggested that 10 distributed ledger technology is anonymity. For example, an percent of global GDP will be categories, 1) Permissioned, anonymous user can create an stored on blockchain by which restricts participation on

1 Deep shift: Technology tipping points and societal impact, World Economic Forum, September 2015, weforum.org. 14

account on a blockchain, then are users of the chain Will costs associated with load the assets using an verifiable? What controls are transitioning to and existing email account. The in place? In what ways will maintaining the blockchain user transacts based on those companies, industries and ecosystem--including hiring assets, and their growth. regulators resolve humans with the necessary Blockchain can store info, authentication problems? technical talent--cost less than events, ownership and What entities will provide the maintaining the status quo? activities of various types. standardization and Will the current lack of clear oversight? standards and regulations in Describing blockchain, your industry curtail adoption William Mougayar, author of While there have been and implementation, causing The Business Blockchain, ongoing discussions in your business to possibly lose wrote “Imagine two entities blockchain circles about market share to digital (e.g., banks) that need to developing a global disruptors? update their own user account blockchain for authentication balances when there is a purposes, it would require Sectors leading the way in request to transfer money massive public/private blockchain experimentation from one customer to partnership coordination and implementation include another...With the blockchain, efforts between governments financial services, health care, a single ledger of transaction and the largest, most insurance, technology, media, entries that both parties have influential tech organizations energy and shipping, with access to can simplify the in the world. Is that a realistic various experts, trade coordination and validation possibility? associations and regulatory efforts, because there is bodies launching task forces Positioning for the Future always a single version of to study use cases. Distributed ledger records, and not two technologies offer new According to a 2016 Deloitte disparate databases.” analytical frameworks. Where survey entitled Blockchain Challenges does your business stand Adoption Varies by Industry, Humans write the code for the today in the tidal wave of “Thirty-nine percent of the “smart contracts,” the digital transformation? Is senior executives at large U.S. “computerized transaction there a business case to be companies initially surveyed protocol” visible to all users. made for the implementation indicate they have little or no Smart contracts execute of blockchain at your knowledge about Blockchain processes once certain company? If so, what is the technology. Many deemed it criteria, such as terms of a business rationale? to be crucial for their contract, are met on the companies and industries. How could a new blockchain blockchain. Human error is a Forty-two percent believe it “ecosystem” drive vulnerability in any ecosystem, will disrupt their industries.” operational efficiencies that and coding loopholes that both create competitive Decision Trees as a cause bugs and security issues advantage and result in Roadmap are not necessarily quickly or significant cost savings for How can executives approach easily fixed.2 Speed and scale your business? How will data decision-making about are also challenges to architecture, management whether to implement widespread adoption. and governance, and artificial blockchain initiatives? For a Certified Fraud intelligence and machine A “decision tree” approach Examiner, questions arise: learning (AI/ML) fit together can be a useful way to How safe is blockchain? How with blockchain? determine whether a business

2 A June 2016 attack on the decentralized Ethereum blockchain using an “open blockchain worked on a solution that would autonomous organization (DAO), which source” framework, drained $70 million in gain consensus. was built as a smart contract on the Ether tokens while developers on the 15

need can be met by and money into examining systems, and ongoing security implementing blockchain. different distributed ledger challenges in automation and Start with eight to ten simple technologies, such as managing data remain. questions about the specified “Blockchain as a Service” Participation by all parties in line of business. The initial (BaaS) offerings. the designated ecosystem, decision tree planning does such as buyers and sellers, While the promise of not necessarily require financial institutions, and legal distributed ledger statistical modeling with and government regulators technologies is enormous, probabilities; instead, it can are further barriers to beware of "vaporware," that be designed as a navigational acceptance and is, software or hardware that is “if/then” and “yes/no” implementation. Plus, announced and promoted by roadmap. intermediary businesses who a vendor, even though it does have served as trusted third Multiple teams across various not yet exist. parties may do what they can company divisions can It’s easy to find examples of to slow adoption in their develop decision tree blockchain hype online, with respective industries. roadmaps. The assorted comments such as “You don’t departmental decision trees With the technology need to know how the can be combined into an landscape continually blockchain works to use it.” overlay. Then evaluate evolving at a rapid pace, The internet is bloated with whether corresponding pain implementing a quarterly or examples of false claims points across the enterprise semi-annual “decision tree” regarding the capabilities of offer signals as to whether strategy to refresh your an array of technologies. A further development and navigational roadmap and recent top example of implementation of a examine where your company vaporware is medical-testing blockchain ecosystem could stands on the blockchain front startup Theranos Inc., which resolve the bottleneck or can position you, and your raised $700 million from problem. company, for future success.♦ investors by misrepresenting In addition to offering a its capabilities. Laura Hynes-Keller, CFE, CDS, simple way to collaborate is a speaker and principal of However, sometimes it’s not internally and move the LHK Communications, LLC, a false claims, instead, a overall discussion about strategic advisory, market technology was relegated to blockchain forward, an initial research and media relations the vast digital graveyard by “roadmap" strategy is an consultancy. E: the introduction of a “better efficient way to determine [email protected] mousetrap.” whether there is a "match" for your use case, without a Investment costs to build out lengthy investment of time distributed ledger technology  SUBMISSION GUIDELINES: We welcome submissions from current NYCFE members including professional achievements and milestones, photos of CFE’s at work or signifying accomplishments, original bylined articles, opinion pieces, case studies, links to pertinent research papers with an executive summary, along with additional tips, book recommendations, resources or suggestions in fraud prevention, detection and deterrence. Word count limit 1500. Photos and illustrations can accompany submissions. Please contact newsletter editor Laura Hynes-Keller at [email protected] with submissions, questions or comments. Thank You.

Things gained through unjust fraud are never secure. Sophocles

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