Executive Roadmap to Fraud Prevention and Internal Control: Creating a Culture of Compliance, 2nd Edition

CHAPTER 9

External Schemes and Scams

The Rest of the Fraud Story

EXECUTIVE SUMMARY

To be fully protected, companies need to be concerned with more than just internal fraud schemes such as financial statement fraud and asset misappropriation. They can just as easily be victimized by external frauds such as the Ponzi and Bust-Out schemes. Credit card fraud is also a common fraud affecting consumers and companies. The losses from credit card fraud can be substantial. The potential impact from online frauds can damage both a business and its relationship of trust with its customers. Corporate fraud solutions must include proactive measures to be fully protected. The Address Verification Service (AVS) and Card Security Value (CSV), also called the Card Security Number (CSN), Cardholder Verification Value (CVV), or Card Security Code (CSC), are tools to prevent credit card fraud. These and other detection and prevention solutions must be used for a successful online fraud prevention program.

PONZI SCHEME

Charles Ponzi came to America from Italy in the early 20th century to pursue the American dream. By 1920, Ponzi convinced many victims in Boston to invest in his “too good to be true” investment deal. It was a “robbing Peter to pay Paul” scheme. Using the money of new investors to pay high rates of return to the early investors, Ponzi soon got plenty of word-of-mouth. Many of those who received 50 percent returns on their initial investments reinvested them with Ponzi. Soon, Ponzi ...