Computer Chip Credit Cards – What it Means for Credit Card Security

Have you ever received a call from Visa, American Express, or another credit card company telling you that your credit card information was hacked and your card is being cancelled while new replacement cards are sent? I have, and it can be a hassle resolving the fraudulent charges and waiting for a new card. And it’s an even bigger hassle for the credit card company who has to track down where the card was used to try to get the money back to minimize their losses. However, due to new technology, the amount of fraudulent charges will be drastically decreasing. By the end of 2015, US financial institutions will have distributed more than 600 million chip cards—a credit card with a computer chip embedded into the card that will increase its security and decrease consumer fraud. A recent article in The Deseret News highlights why the new cards are becoming more popular and what it means for consumers.

The Hospital Room Incident: Did Lance Armstrong Pay Off Doctors to Remain Silent?

While it has been several months since we posted about the Lance Armstrong investigation (see this link for previous posts), the case against Armstrong continues to grow. A recent article in the Daily Camera discusses what is known as “The Hospital Room Incident.” This article discusses why the U.S. Government subpoenaed his medical records from the Indiana University School of Medicine. Allegations are that Armstrong paid off his doctor to remain silent through a donation to his medical school.

Detecting Fraud in Academic Research

The scientific community is often considered to be less filled with fraud than other disciplines. Typically when we think of fraud, we think of it occurring in businesses and think of someone walking away with a lot of money. However, fraud can also easily happen in academic research (see these previous posts for examples) where someone walks away with a lot of published papers. Discover Magazine recently posted an article titled The Perfect Scientific Crime. The article outlines several ways that someone could commit fraud without being detected by creating and using fictitious data. The purpose of the article, however, is not to help fraudsters, but rather to point out a few things that others should be aware of to help deter fraud in the academic community.

Business Email Fraud

According to the FBI, companies worldwide have lost more than $1 billion from October 2013 through June 2015 due to business email fraud, an increasingly popular fraud tactic used by criminals to infiltrate a company’s email system and request large sums of money via wire transfer. A recent article in The Wall Street Journal discusses business email fraud in further detail. For this type of fraud, emails typically come from a vendor that the company does business with regularly, or sometimes they even come from the CEO of the company with instructions of how and where to wire the money. While it is sometimes possible to find errors in the email and identify the fraud, other times it can be impossible to detect without additional investigation. Because the fraud can be nearly impossible to detect, it is necessary to use extra precautions and sound security procedures whenever companies wire money.

Vegetable Gardens and Rationalizing

I recently spoke with a friend who used to pick vegetables at a vegetable garden when he was younger. At the vegetable garden, workers were paid by the pound for some types of vegetables and by the bucket for other types. He told me that many people would “accidentally” add a few rocks to their buckets for the vegetables that were paid by the pound. He also said that workers would stack the vegetables in the bottom of the bucket in a log cabin style so as to use up as much space with the fewest amount of vegetables for the vegetables that were paid by the bucket. My friend is an honest person, and if he did participate in this behavior in the past, I doubt he would do so now. The story got me thinking about fraud in the business world and some of the similarities we see in this type of rationalization.

What Has the Red Cross Done with Almost Half a Billion Dollars of Donations?

After the 2011 earthquake in Haiti, the American Red Cross raised half a billion dollars and announced plans to build hundreds of permanent homes in Haiti. However, according to an article by Pro Publica, co-published with NPR, to this day the Red Cross has completed only six homes. Where has the half a billion dollars in donations gone?

Even Cancer Research Lacks Integrity

An article in Discover Magazine details some of the practices that occurred for 50 years in cancer research that both slowed and misled cancer research for decades. In cancer research, scientists use cancer cell lines (cells that contain a particular type of cancer) taken from tumors infected with the cancer in order to test possible treatments. The problem is that it is very easy for these cell lines to become contaminated, thereby changing the characteristics of the cell line. For years scientists used contaminated cell lines for their research, with numerous publications occurring based on false lines. 

How Chocolate Was Used to Fool Millions

You may have seen headlines in the news a couple months ago proclaiming things such as “Dieting? Don’t forget the Chocolate,” or “Chocolate Accelerates Weight Loss: Research Claims it Lowers Cholesterol and Aids Sleep.” These articles referenced a study which supposedly showed that chocolate can help you lose weight. What you may not have seen is the recent article by John Bohannon, the real author of the study. In the article, Bohannon explains exactly how he ran the study and how he was able to fool millions of people around the world into actually believing that chocolate is a healthy food that can help reduce weight and increase quality of life.

Fake Diplomas: Too Good to Be True

An example of a fake diploma issued by one of Axact's
fictitious schools, Grant Town University.

Earning a diploma for high school, college, and especially for a doctoral program requires a lot of work and a lot of time. You can’t just buy a diploma—or can you? A recent New York Times article discusses some allegations made against Axact, a Pakistani software company. Former employees of Axact and complaints from victims throughout the world accuse Axact of operating a massive diploma mill scheme by secretly operating websites for over 370 fictitious high schools, colleges, and universities which lure people in by promising them a good education and diplomas from accredited schools. The websites all look professional and appear to be from a real university. There are even phone numbers to call and people waiting to answer questions through online chat sessions. Several of the fictitious universities even have similar names to respected universities (i.e., Barkley, Columbiana, Grant Town), and the bank accounts for all of these schools funnel back to Axact, according to The New York Times.

Industries that Rely on the Illusion of Causality

I've been intrigued (and somewhat disgusted) by industries that sell worthless products to people who desperately want to find a cure for some condition in their life. These types of products are rampant in the multi-level-marketing industry (see our other posts on MLMs) but also can be found in the nutritional supplement industry. Often, amazing, too-good-to-be-true claims are made because the government doesn't regulate these industries or they make their outrageous claims off the record in private conversations, etc. Well, psychologists have a name for the illusion that these industries rely on. Read on to see what I'm talking about...

It’s the Most Wonderful Time of the Year… For Scammers Too

During the holiday season, many people choose to give and help others around them, but sometimes due to the spirit of giving that abounds, we tend to let our guard down. The Pittsburgh Post-Gazette recently published an article which outlines five popular scams to be sure to avoid this holiday season.

Fighting Fraud with Mathematical Weapons

According to a Wall Street Journal article, forensic accountants recently uncovered a several hundred thousand dollar fraud committed by employees at a national call center simply by “wielding mathematical weapons.” Using data analysis, they were able to identify a number of fraudulent refunds that call center employees were issuing. The find was critical to the company as it helped them discover where they were losing a lot of money.

Benford's Law

The forensic accountants who detected the fraud at the call center used a mathematical test known as Benford’s Law. Contrary to popular belief that there should be an even distribution in the starting digits of numbers, Benford’s Law says that “more numbers start with one than any other digit, followed by those that begin with two, then three, and so on,” and that “ones should account for 30% of leading digits, and each successive number should represent a progressively smaller proportion, with nines coming last, at under 5%.” In the case of the call center, the forensic team noticed an exceptionally large percentage of refund amounts where the starting digit was a four. It also happened to be that employees could issue refunds to customers up to $50 without needing additional supervision. By using Benford’s Law and investigating the transactions where the leading digit was a four, forensic accountants discovered a small number of operators at the call center “who had issued fraudulent refunds to themselves, friends and family totaling several hundred thousand dollars.”

Individuals Causing the 2008 Housing Crisis Receive No More Than a Slap on the Wrist

Following the 2008 housing crisis, several of the banks involved paid large settlement fines. JPMorgan Chase was one of those banks. The Justice Department used evidence from an anonymous whistleblower in the prosecution, but until recently the whistleblower remained anonymous. Matt Taibbi recently released an article in Rolling Stone describing why the whistleblower, Alayne Fleischmann, has gone public with what she knows. Ironically, the Justice Department wasn’t committed to bringing “justice” to those individuals who contributed to the fall of the economy through fraudulent activities. In fact, Attorney General Eric Holder said the following:

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy, and I think that is a function of the fact that some of these institutions have become too large.”

What is the Justice Department doing if they aren’t bringing justice to those responsible for major crimes? When Fleischmann realized that much of what she reported to the SEC and the Justice Department was not being fully pursued, she decided she had to go public with what she knew.

Research Study Suggests That the Culture in the Banking Industry Leads to Dishonesty

Financial Times recently printed an article about a study done by researchers at the University of Zurich which suggested that bankers have a tendency to lie for financial gain. The study used a control group and treatment group of bankers. The bankers in the control group were asked questions about their everyday life (for example, “How many hours of television do you watch per week?”). The bankers in the treatment group were asked questions relating to what they did at work as a banker. They then gave each group a coin, had them toss it ten times, and then had them self-report their results. The participants were told beforehand whether heads or tails would count as a success. If no cheating took place, the average amount of heads compared to tails should have been very close to 50/50 for each group. In the control group this was the case, but the group who had been primed with thinking about their profession as bankers reported 58.2% winning tosses. From these results, the researchers estimate that 26% of the bankers in the treatment group cheated.