The Close Relationship Between Technology and Fraud

Technology like anything else in life has its positive and negatives, but unlike anything else, it has continued to evolve and enhance those positive and negatives. Society has a love affair with technology that continues to test every aspect of society’s norms and values along with business practices. Not only has technology made normal interaction obsolete, but it has even made fraud impersonal and easier to complete with no human interaction.

Society continues to make strides and advance within the technological field.

Society has gone from carrier pigeons to pony express physical mail to emailing and communicating with each other in seconds. The internet has become a mobile library thanks to cell phones and laptops and desktops. Why write a letter when you can email, text or chat via Skype and continue to speak to each other in real time. Technology has everyone connected instantly, however disconnected at the same time. Gone are intimate and personal interactions, whether to be cordial or commit fraud.

Information technology refers to the use of computer technology along with other telecommunication equipment for the sole purpose of data processing and information sharing while storing the data and retrieving the same data whenever it is required. One of the most important technologies developed and embraced by the masses. The world has found information technology useful and beneficial for pushing limitless possibilities forward. Due to the ability to get things done efficiently, many companies have adopted the technology and used it to enhance their operations (Aksoy, & Donates 2008, p34).

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In today’s society, many businesses use technology to assist with their advertisements (Scott, 2015). Using technology with advertisement strategies helps with efficiency saves money due to the ability to reach a wide variety of people in a small amount of time. The technology that is mostly used to accomplish this is the internet (Scott, 2015).

One could define information technology fraud as the act of obtaining finance by deceiving another party. Information fraud includes identity theft, website cloning, phishing and malicious software fraud (Reynolds, 2010 p. 45). Cloning refers to imitating other websites so they can then form another website, as a result, gaining the user’s information to commit fraud (Reynolds, 2010 p.45). For example, opening a surplus website so that when people make a purchase, it goes to the person committing the fraud and not the actual website selling the merchandise.

One of the most popular frauds is email scammers who send an email pretending to be a legitimate business or somebody in need of help with the intention of stealing private information that can defraud the victim over and over. The most popular scam is the Nigerian Scam. Most of you have received an email from a member of a Nigerian family with wealth. It is a desperate cry for help in getting a very large sum of money out of the country. A common variant is a woman in Africa who claimed her husband died and that she wanted to leave millions of dollars of his estate to a good church, also known as the Nigerian scam, the ‘4-1-9’ (which refers to the section of the Nigerian Criminal Code that deals with fraud) and the ‘Advance Fee Scam (Gil, 2018).’

In every variation, the scammer is promising large payments for small unskilled tasks. This scam, like most scams, is too good to be true, yet people still fall for this money transfer con game. They will use your emotions and willingness to help against you. They will promise you a large cut of their business or family fortune. All one is asked to do is cover the endless “legal” and other “fees” that must be paid to the people that can release the fictional fortune. The more you pay, the more they will scam out of you. You will never see any of the promised money because there isn’t any. This scam is not even new; its variant dates back to 1920s when it was known as ‘The Spanish Prisoner’ cons (Gil, 2018).

Identity fraud is defined as the identity of another stolen for the purpose of criminal activity for the sole purpose to obtain goods and services by deceit. The fraud consists of opening bank accounts, obtaining credit cards, loans and state benefits among other frauds. Before someone steals any money, identity theft has to occur where the individual gains the pertinent information of another and uses it to fake the victim and other individuals. Security company McAfee estimates that cybercrime costs the global economy 600 billion dollars (Chinner, 2018). In return, Artificial Intelligent software is advancing to where consumer spending habits can protect them from identity theft or fraud. For example, a consumers ATM card is blocked because they made 5 mini purchases in a half an hour. That consumer has to call the bank and verify those purchases due to them, no being “normal” purchases for that consumer. More proactive and rapid security measures are on the horizon and although considered a “pain” to some it can also be a financial savior to others.

Although information and communication through technology, have many advantages it also has disadvantages due to the inherent risk companies or individual users expose themselves to while using technology. Thus, it’s important to have several controls in place that will help with the inherent risks. Some of the risk to name a few are, hacking, along with unauthorized access (breach of privacy), information theft along with others (Draz, 2011).

From my research, there is little to no legislation in place for technology fraud. There are laws and sanctions, but even those are poorly enforced or slow moving. As with most industries, there are companies that abuse the trust of the consumers who purchase their products. One way consumers and legislation have crossed paths are pyramid schemes also called the direct selling industry (Lopez, 2017). The government has gotten stricter with the laws around direct selling due to cases such as Bernie Madoff who operated the largest Ponzi scheme in U.S. History when he defrauded billions from investors that consisted of billionaires all the way down to the working class. The Anti-Pyramid Promotional Scheme Act of 2017, has been introduced in Congress to help eliminate pyramid scheme scams (Lopez, 2018). The legislation seeks to prosecute pyramid schemes and elevate the crimes to the federal level, giving a clear definition of pyramid schemes and how to punish those involved.

With everything being mobile and driven through technology, consumer’s privacy and trust are at an all-time high. The Fraud Act of 2006 makes violations and abuse of those in a position to protect a consumer’s privacy, applicable. For example, credit bureau Equifax saw signs of a problem on its network. A really big problem. Hackers had entered the company’s systems, stealing the personal and financial data of more than 147 million people in the United States, including Social Security numbers, dates of birth, home addresses, and some driver’s license numbers and credit card numbers (Lopez, 2018). Though other breaches have exposed more total records, the Equifax debacle is generally considered the worst corporate data breach ever in the US, because of both the scale and the nature of the information it exposed (Lopez, 2018).

Equifax was also woefully underprepared to handle the fallout, botching both the public disclosure and its effort to make resources available to impacted people. In the months since, the credit bureau has remained fairly quiet amidst class action suits, congressional scrutiny, a Federal Trade Commission probe, and a wave of new state regulations designed to ensure that Equifax substantially improves its security defenses.

In the year since the breach, the company has invested $200 million in data security infrastructure (Newman, 2018). Reports stated Equifax was very lackadaisical in their approach to security. Going as far as only meeting once a quarter in reference patches and alerted weaknesses in the security info structure. Before the breach occurred there was a patch available, but the company failed to apply it, and once the hackers were inside the system, Equifax poor controls allowed the hackers premium access (Newman, 2018).

The internal controls to help combat this is various step verification, which requires a strict authentication process requiring specific details from the user to access the website. The second internal control is routine audits to check the data storage software, safeguarding the personal information of consumers from unauthorized users (Tomei, 2008).

Society as a whole has become too dependent on technology and ignored personal responsibility in protecting themselves from fraud. For example, how many people still throw away mail with sensitive information in the trash? How many people still log onto websites with viruses or warnings of a possible virus? The safety net of virus software, firewalls, life lock, etc. Has given people a false sense of security and allowance to ignore simple protections of their own privacy. Now granted if you do business with a bank or Equifax, you expect them to protect your information and make sure they stay up to date of any breaches. There is a certain level of expectation and culpability a consumer would expect from those responsible for your pertinent information. The consumer can still strengthen the level of security by not sharing their information with unknown or shady websites or people they cannot verify their level of security.

Even employment opportunities are impersonal and based on technological advances and the ability to screen potential employees without meeting them for an interview. Follow me for a moment. The old way a person would walk their resume and application into the HR office and that would be their first unofficial interview. How that person interacts with the HR person could go a long way. Fast forward now a program full of algorithms looks for certain words and flags certain applicants not considering human interaction. The same applicant could be the person who has “fraud or early signs of troubling” behavior that can’t be caught by a computer.

Human emotions and error always play a part in either committing fraud or becoming a victim of fraud. Technology gets a bad reputation for helping facilitate fraud, however, it also has its positives. According to the Financial Fraud Research Center at Stanford University, humans are losing 50 billion dollars a year to con artist around the world (Konnikova, 2018). Computers are told to be cold and void of emotions, and that’s exactly why they also work well in protecting people from fraud.

Leading fraud researchers, neuroscientist, psychiatrist, and computer scientist think technology can be a driving force in fighting fraud, whether in person, online or over the phone (Konnikova, 2018).

In most instances, spam filters block e-mail scams from ever reaching us, but criminals have learned to circumvent them by personalizing their notes with information gleaned from the Internet and by grooming victims. In response, a company called ZapFraud is turning to natural-language analytics: Instead of flagging keywords, it looks for narrative patterns symptomatic of fraud. For instance, a message could contain a statement of surprise, the mention of a sum of money, and a call to action. “Those are the hallmark expressions of one particular fraud e-mail,” Markus Jakobsson, the company’s founder, told me. “There’s a tremendous number of [spam] e-mails, but a small number of storylines (Konnikova, 2018).”

Another approach comes from Big Data—combing statistics to find patterns that should tip us off to fraud. By analyzing all the companies that sell a certain product, for instance, you could flag anything anomalous—one firm’s sudden spike in canceled contracts, for example—that might show sketchy activity. The method is like the one used for credit-card fraud alerts—if one rarely travels abroad and suddenly buy groceries in Panama, the transaction is flagged—but on a much bigger scale. A company called Sift Science is attempting something along these lines; it uses proprietary algorithms to analyze data trends and discern patterns of fraud (Konnikova, 2018).

Perhaps one day we’ll be able to identify and block not just scams, but the scammers themselves—before they even target their first victim. Each year, the Association of Certified Fraud Examiners conducts a study of known scammers. It looks at demographic information, distinguishing characteristics, and patterns of approach to gain insights on the types of people most likely to commit fraud in the future. In 50 years, Bruce Dorris, the organization’s vice president, and program director stated, “I wouldn’t be surprised if you could isolate who those individuals are.”

As our understanding of fraud evolves, we might one day be able to develop predictive algorithms that could identify con artists based on patterns of behavior. Or perhaps we’ll use brain scans. Some scientists claim brain scans can reveal psychopathic tendencies. What if we could identify characteristics of likely con artists, and then intervene before they cause trouble?

“It’s possible that 50 years out,” Emigh told me, “authorities will figure out the plausibility of fraud and identify potential bad actors. There’s also a possibility that we decide that’s not the world we want to live in (Konnikova).”

Information gleaned from patterns in fraud can also be funneled directly to potential victims. AARP has been reviewing recordings of hundreds of fraudulent phone calls obtained by the FBI to analyze the persuasive tactics used by con artists and then teaching its members about those tactics. For instance, fraudsters use something known as “phantom fixation”—encouraging you to focus on a huge future gain that far outweighs any investment you might need to make in the present. Studies show that telling people about such techniques can help them recognize a hoax.

No method of fraud prevention will be perfect. “You can put seven locks on your door, fingerprint technology, a retina display. And you forget to close the window,” Moran Cerf, a professor of business and neuroscience at Northwestern University and a former hacker, told me. “The only way to prevent fraud completely is to eliminate humans from the process. They are the weakest link (Konnikova, 2018).”

In conclusion for all the evil places on technology, human error and interaction still play a huge part in the implementation and maintenance of the technology? Humans still click on emails from humans, they do not recognize, humans still visit websites at work that are against policy, humans still give their routing numbers to strangers who claim to be wealthy in another country. Technology can do a lot of things, but have emotions and make decisions based on those emotions are still the reason humans make pertinent decisions for medical and social services. The disconnect of technology and fraud still correlates but whether the gap widens or closes ultimately depends on humans still making the ultimate decisions even after the technology has already decided.