By Daniel Hunter
Fraud investigators have revealed the most common words used in email conversations among employees engaged in corporate wrongdoing.
Incorporating lessons from corporate investigations and co-developed with the FBI, the Ernst & Young’s Fraud Investigation & Dispute Services Practice has pinpointed the specific language and common phrases used when frauds takes place.
The most common fraud phrases are “cover up”, “write off” “failed investment” “off the books”, “nobody will find out” and “grey area”. Expressions such as “special fees” and “friendly payments” are most common in bribery cases, while fears of getting caught are shown in phrases such as “no inspection” and “do not volunteer information”.
In total, more than 3000 terms have been uncovered through specialist anti-fraud technology, which monitors for conversations within the ‘fraud triangle’, where pressure, rationalisation, and opportunity meet.
The software has revealed that common phrases in email conversations where rogue employees are under pressure include “not comfortable” “want no part of this” “don’t leave a trail’, or “make the number”.
Conversations involving ‘rationalisation’ among employees include “told me to”, “not hurting anyone” “won’t miss it, “or “fix it later”. ‘Opportunity’ language uncovered includes “off the books”, ‘off balance sheet transactions” or “pull earnings forward”.
The software also scans for ‘out of band’ events such as “call my mobile” or “come by my office” suggesting the individual does not want to be overheard. The analytics can also track and evaluate the use of ‘code words’. The searches of data, which initially do not identify employees, also flags uncharacteristic changes in tones and language and has been tailored for specific sectors, particularly traders.
The targeted analysis of suspect email conversations, incorporating expert judgement, is estimated to save companies millions of pounds by proactively raising red flags and suspicious trends before major frauds are perpetrated.
“Emails, sent in their thousands, between employees, officials, and external parties form the major part of what is mostly positive daily interaction in companies," Dr Rashmi Joshi, Director, Ernst & Young Fraud Investigation & Disputes Services, said.
"Despite being the prime means of all conversations, such unstructured data plays almost no role in the compliance efforts of firms. Most often such email traffic is only seized upon by regulators or fraud investigators when the damage has been done. 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.”
The technology has particular application for financial services companies demanding more effective and less costly compliance monitoring. The analysis of language, statistics, and call data alongside professional judgement can help in identifying rogue trader behaviour, breaches of material non-public information, fraud and abuse, and other employee misconduct.
The analytics can also model positive behaviour of successful traders so successful communication is replicated throughout an organisation.
In previous cases Ernst & Young has worked with companies to assess portfolio managers in high risk security products, selected regional and local brokerage managers where concerns have been raised and carried out tests in global divisions at risk from bribery and corruption reviews.
“The language, which is a mix of accounting phrases, personal motivations and attempts to conceal, are very revealing," Joshi continued.
“While most organisations only focus on the numbers when investigating discrepancies, what we are seeing are ways of analysing words — emails, SMS, or instant messaging — to identify and isolate wrongdoing.”
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