As economic hardship falls upon our great nation and the unemployment rate rises. Many families are left to endure these trying times while having to make do with less. When pressured to feed one’s family, some people may turn to criminal activities to supplement their ever dwindling income. The Association of Certified Fraud Examiners (ACFE) has stated that during economic hardships the rate of committed fraud also rises. (ACFE, 2009) The ACFE also believes that the rate of fraud will continue to rise until the turmoil of our economy returns to favorable conditions. No one can foresee when the economy will bounce back; companies must be prepared for the increase of fraud and incorporate the proper risk management steps into their risk appetite.
One such criminal activity that’s stealing headlines around the nation is ATM skimming schemes. ADT.com, a leader in security systems, defines ATM skimming as, “ATM skimming is when criminals electronically steal or “skim” a cardholder’s personal financial information during ATM transactions. By fitting an unseen portable electronic card reader and mini camera onto an ATM, they can potentially “cash out” debit card accounts, clone new debit/credit cards or sell cardholder personal information to crime syndicates.” (ADT, 2009) Why do ATM skimming schemes attract so much publicity these days and how can companies deter fraudsters from defrauding company is a hot subject matter.
To get a better look at why ATM fraud is growing we need to take a closer look at how skimming schemes in general are committed. According to Joseph T. Wells CFE, “when it comes to skimming used in fraud schemes, it’s important to remember the “Three R’s”: revenues, receivables, and refunds. (Wells, Skimming: The Achilles’ Heel of the Audit?, 2007) Both skimming of receivables and refunds require the fraudster to alter the accounting books in order to cover up their theft, thus making the skimming of receivables and refunds more difficult to cover up. However, skimming of revenues takes place prior to entering the books making the skimming of revenues the most difficult to detect in an audit. Recent news reports of ATM skimming schemes are not in short order. Recent ATM skimming schemes have cropped up in Tennessee, Maryland, Illinois and Georgia and that’s just the tip of the iceberg. The ATM skimming scheme to hit Nashville has been reported by police to have over 600 individuals being victimized; a total of 60 people had fraudulent withdrawals from their accounts for anywhere between $100 to $5,000 dollars. (McGlasson, 2009) The recent ATM skimming operations in Maryland, Illinois and Georgia has amassed over $120,000 dollars according to law enforcement agencies investigating the crimes. (McGlasson, ATM Fraud: New Skimming Scheme Spreads, 2009)
Once an ATM skimming fraud occurs, what can fraud examiners do to investigate an incident. In Joseph T. Wells’ book, Principles of Fraud Examination, Wells go on to say that, “essentially three tools are available regardless of the nature of the fraud examination.” (Wells, 2008) These three tools are: skills in the examination of financial statements, conducting interviews, and observation. Using these three techniques can help us determine if fraud has occurred and maybe to the perpetrators involved.
A fraud case generally begins with predication. Predication is the totality of circumstances that would lead a reasonable, professionally trained, and prudent individual to believe a fraud has occurred, is occurring, and/or will occur. (Wells, Principles of Fraud Examination, 2008) Using the Fraud Theory Approach as a guideline in our fraud examination we can get a better understanding of the fraud. At the onset of a fraud examination the fraud examiner might be called by a concerned customer that may have discovered a device used for ATM skimming or receive a customer complaint involving missing funds from their bank account. In either case both would give the fraud examiner predication to launch the investigation. First, I would analyze all current data from the contact, such as the what, when, where, and how the alleged fraud occurred using the conducting interviews tool to investigate. If an ATM device was discovered, I would go to the site, using the observation tool, to determine if the device was operational or a hoax. Next, if the device was operational I would look at the surveillance tapes if they were available to determine the time the fraud device became active. Once the time became available a record check of all card activity should be reviewed to determine whose card might have been compromised, thus using the third tool of skills in the examination of financial statements. At this time a decision will need to be made on how to stop the removal of the cash and a call to the FBI might be in order to help find the fraudster before they move forward with the scheme.
To help deter this type of fraud from happening there are a few things a company can do to protect themselves. First, a general understanding of how and why fraud occurs can be helpful. Donald R. Cressey’s fraud triangle can give us a better understanding of what is needed to stop fraud. Cressey’s fraud triangle has three elements to it, they are: Opportunity, Pressure, and Rationalization. According to Cressey all three elements need to be present for fraud to occur. (Kardell, 2007) Of the three elements opportunity, in ATM skimming, may be the element to eliminate to stop the fraud from happening again as the other two elements are out of your control since to fraudster do not work at your company. Banks will need to protect the ATM using Anti-Skimming devices to help stop the use of the fraud devices and protect their customers. As a customer there is a few ways to protect ourselves from becoming a victim of ATM fraud, like be alert to jammed ATMs, protect your PIN number by covering up the number pad when you enter your number, try to use ATMs during daylight hours, and periodically check your bank account for unauthorized transactions. (LGCU.ORG)
ATM skimming fraud costs banks an ample amount of money each year. As a fraud examiner precaution must be taken to prevent ongoing frauds. ATM skimming schemes may be on the rise, we don’t have to be a victim. The banks need to secure the ATMs from skimming fraud but the banks are not the only ones that have a part in making sure ATM cards are not skimmed. As card holders we have an obligation to insure we do our part and secure our cards from fraudsters.
References
ACFE. (2009). Occupational-Fraud.pdf. Retrieved Jan 8, 2010, from ACFE.com: http://www.acfe.com/documents/occupational-fraud.pdf
ADT. (2009). ATM Machine Security. Retrieved January 8, 2010, from ADT.com: http://www.adt.com/medium_large_business/security_solutions/solutions_by_industry?wgc=financial_institutions/anti-skim
Kardell, R. L. (2007, March). Three Steps to Fraud Prevention in the Workplace. Retrieved January 8, 2010, from bkd.com: http://www.bkd.com/docs/news/WorkplaceFraud-NebLawyer.pdf
LGCU.ORG. (n.d.). Spot skimming scams. Retrieved January 8, 2010, from lgcu.org: http://www.lgcu.org/about/pages/skimming_scams.php
McGlasson, L. (2009, November 16). ATM Fraud: New Skimming Scheme Hits Banks. Retrieved January 8, 2010, from Bankinfosecurity.com: http://www.bankinfosecurity.com/articles.php?art_id=1939
McGlasson, L. (2009, December 7). ATM Fraud: New Skimming Scheme Spreads. Retrieved January 8, 2009, from Bankinforsecurity.com: http://www.bankinfosecurity.com/articles.php?art_id=1985
Wells, J. T. (2008). Principles of Fraud Examination. In J. T. Wells, Principles of Fraud Examination (p. 5). New Jersey: John Wiley & Sons Inc.
Wells, J. T. (2008). Principles of Fraud Examination 2nd edition. In J. T. Wells, Principles of Fraud Examination 2nd edition (pp. 6-8). New Jersey: John Wiley & Sons, Inc.
Wells, J. T. (2007, June). Skimming: The Achilles’ Heel of the Audit? Retrieved January 8, 2010, from The CPA Journal: http://nysscpa.org/printversions/cpaj/2007/607/p60.htm
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