How to Fail at Corporate Fraud (and cults)

“Cover up the write-off from your failed off-the-books investement, because nobody will find out about that grey area.”

Ernst & Young joined with the FBI to produce fraud-detection software that uses linguistic analysis to spot language in email commonly used by employees doing things they shouldn’t. The software even detects moments where things go offline, when people start replying with that terse two-line uh-oh phrase “Call me.”

(The software doesn’t appear to spot screwing over the customer or the environment, probably due to the unmanageably large number of positives that would generate.)

Speaking of organizations behaving badly, I was amused to read ESR’s post on a cult that tried to recruit him ( ).

Worth quoting is an excellent insight into these sorts of things that I’ve seen very few others have, at least in public:

“What makes outfits like this truly dangerous is that they aren’t entirely wrong. That is, their theory of how human beings tick (a jigger of Neuro-Linguistic Programing, a dash of cognitive behavior therapy, a few skooches of transactional analysis, and generally a substratum of Zen-by-any-other-name) actually works well enough that if you do the process you are in fact likely to clean up a bunch of the shit in your life. Even Scientology, the biggest and nastiest of the cult groups traveling as “therapy”, teaches some useful things – Hubbard’s model of the “reactive mind” is pretty shrewd psychology.

The trouble with cults is that they aren’t actually about the parts that are true. They’re about using the true parts to hook you, to condition you into an becoming an eager little propagator of their memetic infection. For that to happen, your ability to think critically about the doctrine has to be pretty much entirely shut down. Fortunately the behavioral signs of this degeneration are quite easy to spot – I would have learned to recognize them back at the dawn of the New Age movement around 1970 even if I hadn’t gone to Catholic schools before that.”

“The most common fraud phrases, according to an E&Y press release, are “cover up,” ”write off,” “failed investment,” “off the books,” “nobody will find out,” and “grey area.” E&Y and the FBI produced these common fraud phrases by monitoring email conversations that take place within what they call the “fraud triangle,” which is apparently that dubious place where “pressure, rationalization, and opportunity meet.”

The software revealed that rogue employees under pressure to commit various wrongdoings often sent emails containing the phrases “not comfortable,” “want to be part of this,” “don’t leave a trail,” and “make the number.” The technology also found that such employees rationalize their behavior via email with phrases like “told me to,” “not hurting anyone,” “won’t miss it,“ and “fix it later.” The report highlighted other phrases like “off the books,” “off balance sheet transactions,” and “pull earnings forward” as common indicators of employees with the opportunity to commit fraud.

The software will also scan for emails in which it appears that employees are attempting to avoid the possibility of being overheard by others, for example the words “call my mobile” or “come by my office” raise flags in the detection system. In addition, the software also tracks and evaluates code words and notes obvious and uncharacteristic changes in tone.

E&Y claims that targeted analyses in concert with human judgment could save companies’ millions by rooting out fraud preemptively instead of reactively.

“Most often such email traffic is only seized upon by regulators or fraud investigators when the damage has been done,” said Ernst & Young Fraud Investigation & Disputes Services director, Dr. Rashmi Joshi. “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.””

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