Abuse: Taking inappropriate advantage of one's
position for personal gain.
ACFE: Association of Certified Fraud Examiners.
Affiliate Bidding: A situation in which a single
entity tenders multiple bids under multiple names to give the impression of competition.
Back Date: For a fraudulent purpose, to affix
a date to a document earlier than the date of the transaction to which the document
Bid Rigging: A procurement scheme
devised among bidders in which the winning bidder and
the winning bid are decided before the bids are submitted. This allows the
winner to artificially inflate the bid without fear of over
Bid Rotation: A procurement scheme
devised among bidders in which winning bids are
allocated among bidders. This allows participants to artificially inflate bids without the risk of over bidding.
Bid Splitting: Dividing a larger procurement
into a number of smaller procurements so as to avoid some of the controls or oversight
that apply to larger procurements.
Bribery: The offer of money or other goods or
services in exchange for favorable treatment.
Bundling: In medical billing, the act of adding
a number of related services to the principal service rendered. The related services,
though billed, are not actually performed, but because of their relationship to
the principal service are not detected as fraudulent.
Check Kiting: In a kiting scheme, multiple bank
accounts are opened and money is “deposited” from account to account, although the
money never exists. Floating makes this possible. Floating is the additional value
of funds generated in the process of collection and arises because the current holder
of funds has been given credit for the funds before it clears the financial institution
upon which it is drawn.
Code of Conduct: A formal, written set of
ethical and behavioral standards adopted by an organization to which all
employees of the organization are to adhere. In some cases, the code of conduct
is extended to include contractors, suppliers and customers.
Coerce: To force someone to do something against
Collude: To act together to some, often fraudulent,
Conflict of Interest: A conflict of
interest when an employee, i.e., one with a fiduciary responsibility to an
employer, acts in a way that favors himself rather than his employer. The
employee may be motivated by any number of factors,
including personal gain, kinship, friendship, etc.
Conspiracy: Two or more persons acting
together to perpetuate a fraud.
Cooking the Books: Maliciously altering books
of account or accounting records to deceive or obfuscate.
COSO: The Committee of Sponsoring Organizations
CSA: Control Self-Assessment
Defalcation: Another name for employee fraud
Direct Effect Illegal Acts: Violations of laws
or government regulations by the company or its management or employees that produce
direct and material effects on dollar amounts in financial statements.
EBE (Emerging Business Entity): A term used to refer collectively to Minority Business Entities (MBEs) and Women's Business Entities (WBEs). In certain jurisdictions, preferences or set-asides are made in favor of EBEs.
Embezzlement: Theft from an employer by an employee.
Embezzlement is usually covered up by the use of false accounting entries.
Employee Fraud: The use of fraudulent means to
take money or other property from an employer. It consists of three phases: (1)
the fraudulent act, (2) the conversion of the money or property to the fraudster’s
use and (3) the cover up.
ERM: Enterprise Risk Management.
Errors: Unintentional misstatements or omissions
of amounts or disclosures in financial statements.
Ethical: Adhering to a socially accepted set
of morals or behaviors.
False Claims: Claims for expenses not incurred,
for services not rendered or for goods not delivered.
False Credentials: The misrepresentation of one's
education or professional standing in order to secure employment or business.
Fiduciary Duty: An employee's obligation to act,
when such acts are legal, in the interest and for the benefit of his employer.
Firewall: A software program that prohibits unlawful
or unintended access, through the Internet, to a computer or the data it contains.
Forensic: Designed for use in a legal proceeding.
Forensic Accounting/Auditing: Accounting and/or
auditing techniques, often used to discover or illuminate fraud, from which results
become evidentiary material suitable for use in a legal proceeding.
Forgery: The fraudulent creation or alteration
of documents or the authorizations related to such documents.
Fraud The theft of valuables (money, information, time, etc.)
enabled by deceit.
Ghost Employee: A non-existent employee, created
so that his pay can be redirected to a fraudster.
Hotline: A phone service maintained to
collect information about fraud and potential fraud.
Identity Fraud: The use of someone's illegally
acquired personal information to perpetrate a fraud.
Identity Theft: The illegal acquisition and use
of someone's personal information by another; the latter uses this information to
conduct transactions in the victim's name and for which the victim may be liable.
Incentive/Pressure: A motive a person experiences
and believes is non-shareable with friends and confidants.
- Psychotic: “habitual criminal” who steals for the sake of stealing.
- Egocentric: Personal prestige, goal achievement.
- Ideological: Cause is morally superior, justified in making other victims.
- Economic: Desperate need for money, greed, economic achievement.
Influence Peddling: The sale, by a government
official, of his authority or influence, to obtain a favorable outcome for the buyer.
Informant: One who provides information concerning
a fraud. The informant has information concerning, but was not involved in the perpetration
of, a fraud.
Interrogation: An interview conducted to elicit
information concerning a crime.
Interview: A structured question and answer session.
Investigation: Those procedures (assembling documentary evidence, conducting interviews,
etc.) designed to solve a crime.
Irregularity: Misstatements or omissions of amounts
or disclosures in financial statements that are NOT unintentional; something out
of the ordinary that may be the result of fraud.
Journal Entry Fraud: The creation or alteration
of accounting entries to perpetrate or cover up a fraud.
Kickback: Most frequently, a payment made
by a vendor to an employee, at the request of the employee, for his assisting in
getting business or other favorable consideration for vendor.
Kiting: Issuing a check for insufficient funds
in the expectation that the overdraft will be covered by the time the check is negotiated.
Lapping: The act of stealing one customer's remittance
and covering the shortage with another customer's later remittance.
Larceny: Simple theft of an employer’s property
that is not entrusted to an employee’s care, custody or control.
Lifestyle Changes: New cars, new clothes, new
possessions and new habits that indicate that an employee's financial circumstances
have improved beyond explanation. Lifestyle changes are frequently an indicator
Lowballing: The act of submitting an intentionally
low bid with the intent of more than making up for it with contract amendments or
other ways of inflating the contract price.
Management Fraud: Intentional misstatements or
omissions of amounts or disclosures in financial statements.
MBE (Minority Business Entity): A business owned wholly or primarily by persons classified as minorities. In certain jurisdictions, preferences or set-asides are made in favor of MBEs.
NASACT: National Association of State Auditors,
Comptrollers and Treasurers.
NASC: National Association of State Comptrollers.
Negative Invoicing: The use of an invoice of
a negative amount (in the form of a credit or adjustment) to reduce a customer's
receivable balance. This is done to cover up the theft of the customer's payment.
OMB: Office of Management and Budget.
Opportunity: An open door for solving the non-shareable
problem in secret by violating a trust.
- Weak internal controls
- Circumvention of internal controls
- The greater the position, the greater the trust and exposure to unprotected assets
Overbilling Scheme: Charging for more time, more
materials or at a higher rate or for substandard materials than were originally
contracted for or were necessary to do the job.
Padding: Adding fraudulent expenses to an invoice.
Phishing: The act of sending an e-mail to a user
falsely claiming to be an established legitimate enterprise in an attempt to scam
the user into surrendering private information that will be used for identity theft.
Pilfering: The theft of physical goods such as
office supplies or inventory.
Pingponging: Referring patients to other doctors
in the same clinic in order to claim reimbursement for "consultations" rather than
for actual treatments.
Predication: Any information that gives a fraud
examiner (or another person who informs the fraud examiner) a reason to believe
a fraud occurred, may have occurred, or may be presently occurring. The information
may come from an anonymous tip, from an employee noticing something wrong, or from
an auditor noticing something suspiciously wrong.
Plan Sponsor: An entity that provides health
care coverage to those enrolled in a health care plan. The plan sponsor designs
the plan, i.e., determines what procedures are covered, the schedule of copayments,
etc., and takes care of filing plan documents with various government oversight
bodies. It may take over some or all of the plan’s administration, e.g., claim payments,
provider negotiations, etc., or contract with a third party administrator to manage
Prevailing Wage: Trade and public work
wages paid to the majority of workers in a specific area. The prevailing wage is
usually an hourly wage and determines overtime pay as well as benefits for
laborers in that field. The Davis-Bacon and Related Acts (DBRA) are administered
by the Wage and Hour Division of the U.S. Department of Labor (DOL) USDOL's Wage and Hour Division.
These acts require that all contractors and subcontractors performing on
federally-financed or assisted construction in excess of $2,000 pay their
laborers and mechanics no less than the prevailing wage rates and fringe
benefits. In addition, some states have their own prevailing wage laws. There
are federal and state laws that mandate prevailing wages in areas other than
Pretexting: The act of creating and using an
"invented scenario" to persuade victims to release information or perform
an action, typically over the phone. Often uses pieces of known information (birthday,
social security number, etc.) to establish legitimacy.
Razoring: Removing a pre-numbered
instrument (receipt, check, invoice, etc.) from a pad of similar documents in such a way that the
removal is obscured. The stolen instrument is used to falsely document illegal
Reconciliation: The act of comparing and agreeing
account balances using different sources of information. For example, one might
reconcile the total all of one's unpaid invoices with the accounts receivable balance
in one's general ledger.
Red Flag: Something that is often an indicator
of fraudulent activity.
Request for Quote: A solicitation for vendors
to provide a quotation on the delivery of services or goods.
RFP: See Request for Proposal.
RFQ: See Request for Quote.
Short Shipping: To ship less physical product
than is listed on the invoice or manifest in hopes that the shortage will not be
Shorting: Delivering less medication that than
which was authorized or billed.
Social Engineering: The art of manipulating people
into performing actions or divulging confidential information.
Tax Fraud: Intentionally underreporting one's
taxable income so as to pay less tax than is actually due.
Theft: An unlawful taking that does not involve
physical confrontation, threat or injury.
Third Party Administrator (TPA): A contractor
hired by a health care plan sponsor to deal with some or all of the day-to-day operations,
such as claim payments, provider negotiations, etc., required to operate a health
Tone at the Top: How management conducts itself
and its apparent concern for ethical behavior and honesty.
Unbundling: In medical billing, the
practice of billing separately a set of related services that would normally
be billed as a single procedure. This is done when the
practice results in a higher claim.
Unethical: A practice not consistent with the
practices held by society to be moral, proper, honest, fair or just.
Unimpeachable Integrity: Unimpeachable integrity
is the ability to act in accordance with the highest moral and ethical values all
the time. This is practically impossible, so fraudsters will rationalize:
- I need it more than the other person
- I’m borrowing and will pay it back later
- Everybody does it
- The company is big enough that it won’t miss it
- Nobody will get hurt
- I deserve it
- It’s for the greater good
Upcoding: In medical billing, charging for a
more expensive procedure than was actual performed.
Void: To deface some instrument that was not
Waste: In governments, not fulfilling one's fiduciary
duty to assure public monies are spent as effectively as possible.
WBE (Women's Business Entity): A business owned wholly or primarily by a woman or women. In certain jurisdictions, preferences or set-asides are made in favor of WBEs.
Whistle Blowing: The act of reporting to the
appropriate authorities information about illegal acts.
White Collar Crime: Fraud perpetrated by people
who work in offices and steal with a pencil or a computer terminal. The contrast
is violent street crime.