A Look Ahead: The Year in Fraud For 2014

December 2013

IN THIS ISSUE

— Emerging Trends in Fraud Detection – and Perpetration
— New Regulatory Regimes May Cause Old Headaches in 2014

GREETINGS!

Welcome to the December 2013 edition of our newsletter! In this issue, we’ll look ahead to what 2014 is likely to bring in terms of new regulations and fraud trends, and explain what it might mean for you and your clients.

EMERGING TRENDS IN FRAUD DETECTION – AND PERPETRATION

As several new rules concerning financial markets take shape in 2014 — such as the crowdfunding proposal we discussed in a previous newsletter — new opportunities arise for the detection of fraud. Yet opportunities also exist — as in the nascent use of Bitcoin as a currency — to exploit existing systems even further as part of various fraud schemes. While tried and true methods will continue to garner headlines — such as insider trading, bribery of foreign officials, and procurement fraud — advances in technology and an ever-increasingly globalized marketplace will continue to create new frontiers in fraud.

One of the new technological arenas for fraud will be in mobile devices, as more users embrace smartphones, tablets and laptops. Security defenses against phishing and other identity theft scams (not to mention “skimming” of physical credit card data) cannot evolve as quickly as the ingenuity to create new and more impressive schemes, and as a result individual vigilance may be as important than technological sophistication, if not more so, in the years to come.

NEW REGULATORY REGIMES MAY CAUSE OLD HEADACHES IN 2014

Given that much of its implementation was stalled by political infighting in Washington, D.C., 2014 may be a year in which the U.S. Consumer Finance Protection Bureau (“CFPB”) comes into its own as a regulatory entity. This may mean increased scrutiny, and corresponding compliance pressures, for banks, mortgage underwriters and other lenders. While data analytics can help large firms identify troubling trends in the early stages, seasoned fraud examiners are needed to determine the culpability of individuals involved and to ensure that internal investigations, meant to promote cooperation with authorities and project competent oversight, are performed at the highest possible standard.

Threats exist everywhere, at all time, and in this respect 2014 will be no different from prior years. As law enforcement and regulatory officials gain new tools in their fight against fraud, you and your clients should also remain vigilant to emerging trends and be prepared to act when the need arises, if not sooner.