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Top 10 Phrases that Might Indicate a Corporate Fraud is Occurring

Internal email messages can reveal red flags for fraud

Posted by Dawn Lomer on January 15th, 2013

Prevention is so much better than detection when it comes to corporate fraud. Don’t get me wrong, I think detection is great, and sometimes detection can prevent a much bigger fraud from occurring. But you can’t argue with the fact that detecting a fraud means that it’s already in progress, and you may have already lost money.

Don't assume that fraud only happens to other people.
Unfortunately, we’re much better at detecting than preventing fraud. And there are many theories as to why this is so. Sometimes it’s just that we don’t want to acknowledge that trusted employees could do such a thing, or that something bad could happen to us. Fraud happens to other people.

Optimism Bias

“There’s a base level of optimism that we all have that gets us out of the house in the morning,” says Pat Huddleston, a professional speaker, author and CEO of Investor’s Watchdog LLC, a due diligence company that conducts investor fraud prevention investigations. “And it is this: that we don’t believe that anything particularly disastrous is going to happen to us. Disasters happen to other people.”

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Huddleston calls this the optimism bias, and cites it as one of the main reasons people fall for scams and don’t see the fraud that’s right in front of them.

Because of this optimism bias, it’s important for employers to take steps to prevent fraud, using the latest and most sophisticated methods available, such as the new software developed by the FBI and Ernst & Young that scans for the most common words used in email conversations among employees engaged in corporate fraud.

Words and Tone that Indicate Fraud

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Ernst & Young’s fraud investigation team has created software that pinpoints the exact language used in email conversations when fraud is occurring. It can also identify unusual changes in tone that suggest an underlying problem and can be targeted to specific sectors, particularly traders, according to a press release announcing the software.

And while some of the most common phrases the development team has targeted seem pretty obvious, such as “cover up”, “nobody will find out”, “off the books”, “grey area” and “failed investment”, it certainly can’t hurt to be watching for such phrases.

The software targets some 3,000 keywords and also looks for phrases that indicate an employee is nervous of eavesdropping, such as “call my mobile” and “come by office”.

Common Fraud Phrases Revealed

The creators have identified the top 10 words and phrases that indicate internal fraud. They are:

  1. Cover up
  2. Write off
  3. Illegal
  4. Failed investment
  5. Nobody will find out
  6. Grey area
  7. They owe it to me
  8. Do not volunteer information
  9. Not ethical
  10. Off the books

Dr Rashmi Joshi, director of Ernst & Young’s Fraud Investigation & Disputes Services, said in the press release: “Email traffic is only seized upon by regulators or fraud investigators when the damage has been done. Firms are increasingly seeking to proactively search for specific trends and red flags – initially anonymously – but with the potential for investigation where a consistent pattern of potential fraud is flagged.”

Detecting a fraud in its early stages can save a company from huge losses. Software solutions such as this one can be another weapon in any company’s anti-fraud arsenal.

Dawn Lomer
Dawn Lomer

Manager of Communications

Dawn Lomer is the Manager of Communications at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.

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