Question

Read the following scenario:

Webmasters was an Internet start-up company founded in 2016. One of the largest problems for Webmasters was developing the technological systems necessary to support its rapidly expanding user base. Furthermore, due to the rapid expansion in recent years, many of its systems had been added hastily, resulting in poor integration and questionable data integrity. As a result, the CEO of Webmasters announced an initiative to integrate all systems and increase the quality of internal data. In compliance with this initiative, Webmasters purchased an expensive and complex billing system called BillPro, which would automate the billing for thousands of Internet accounts via credit cards.

During the integration, BillPro, in collaboration with Visa, created a phony credit card number that could be used by developers and programmers to test the functionality and integration of the BillPro system. Moreover, this credit card number was fully functional in “live” environments, so testers and developers could ensure functionality without being required to use actual personal or company credit card numbers. The activity on this card was not monitored. The integration went smoothly; however, it created thousands of corrupt accounts that required fixing.

Tyler, the manager of the Operations Department, was responsible for the resolution of all data integrity issues. His team was tasked with fixing all corrupt accounts created by the launch and integration of the BillPro system. As a result, Tyler was given the phony credit card number, which was kept on a Post-it Note in his drawer.

One of the top performers on the Operations team was a 29-year-old male named Ethan. Ethan had worked in Operations for more than a year and was making $15 per hour, the same salary as when he was hired. He was an introvert working to support a family and put himself through school. Ethan was the most technologically savvy individual on the team, and his overall systems knowledge exceeded that of his manager, Tyler. Ethan was brilliant in creating more efficient tools and methods to repair corrupted accounts. Therefore, Ethan was tasked with conducting training for new employees and updating team members on new processes and tools that he had created. As a result, he quickly became a trusted and valuable team member. Tyler gave him, and the other team members, the phony credit card number to increase the productivity of the team.

However, after six months of working at Webmasters, Ethan received an official reprimand from the company for using the company system to access websites containing pirated software and music. The FBI attended the investigation and determined that Ethan had not been a major player in the piracy. Therefore, Ethan was quietly warned and placed on a short-term probation. Tyler was asked to write a warning letter for the action; however, after a brief conversation with Ethan, Tyler determined that Ethan’s intentions were good and Tyler never officially submitted the letter because Ethan was a trusted employee and elevated the overall performance of the team.

A few months after the piracy incident, Tyler noticed some changes in Ethan’s behavior:

• Ethan’s computer monitor was repositioned so that his screen was not visible to coworkers.
• Ethan had the latest technological innovations including a new smartphone, an MP3 player, a Play Station, a new laptop, a tablet and a new car stereo system.
• Ethan was going out to lunch more frequently.
• Ethan frequently used multiple fake usernames and passwords for testing purposes.

Prepare a detailed analysis of the scenario by incorporating your responses to the following in well-developed paragraphs (do not use a question-answer format):

• Analyze the case using the three elements of the fraud triangle.
• Discuss some of the red flags that might indicate that fraud exists in the scenario.
• Discuss some things that Tyler could have done to eliminate some, or all, of the opportunities for fraud.

Answer 1

Design of above Problem – While going trough the above problem , we noticed following incident :

1. Present system is not supportive in Webmaster .Due to the rapid expansion in recent years , many of system had been added hastily which resulting in POOR integration and questionable about data Integrity .
2. To avoid above situation, Company introduced system called “ BillPro” . This system will do automatic the billing for thousands of Internet accounts Via credit card
3. To implement the same , BillPro in collaboration with VISA , created a “ Phony credit card number” that could be used by developer and programmer to test the functionality and integration of the Bill pro system
4. After implementation successfully , the activity of the card was not monitored . Unfortunately it was created thousands of corrupt accounts that require fixing .
5. Important function to complete data integrity and responsible given to Operation Manager and his team .
6. Unfortunately Operation manager kept “ Phony credit card number “ in his drawer as “ post it “ form . – This is very dangerous . Operation manager should not keep important document in most available place and not in private place.
7. One of the top performer on the operation , Mr Ethan who worked in this company more than a year no such increment in salary with other family commitment
8. Ethan was more brilliant in creating more efficient tools and methods to repair corrupted accounts . Apart from that operation Manager liked Ethan to much and dependent on him . Ethan used to provide training to new employee and updating knowledge among team member.
9. Tyler on faith provide The phony credit card number to him and others to increase the productivity .
10. Ethan during the period of 6 months time , used company software and started making pirated software and music . He stared earning money out of this and change his lifestyle , which one noticed by operation Manager.

Fraud Triangle mainly cover three elements –

Incentive pressure – such is financial need. In this scenario , we noticed that Ethan needs financial improvement because he was with same salary for more than Year with other commitments .

Financial need is “ Motive “ to do fraud .

Rationalization – The person committing the fraud frequently rationalize the fraud . present lifestyle of Ethan has been changed . To maintain this lifestyle , he keep on doing fraud

Opportunity – The person committing the fraud sees an internal control weakness and believing no one will notice if fund are taken , In this scenario, Ethan as most trusted and dedicated employee of the organization , he has a in depth knowledge on System and Operation manager mostly depend on Him . he gained knowledge and support other new person. He opted this advantage and stated making fraud through system which he was sure no one can catch easily

Ethan started using Computer system to making money and he started making fraud . he was involved in financial Fraud .Normally Computer fraud take place in following manner:

1. Altering in an unauthorised way – This require technical expertise and is a common form of theft by employee altering the data before entering false data or by way of unauthorised processes
2. Conceal unauthorised transactions
3. Altering or deleting stored data

Computer as a Target – Crimes that primarily target computer network or devices include :

Computer viruses

Denial of service attacks ( DOS )

Malware

      Computer as a Tool – Crime that use computer network or devices to advance other include :

1. Fraud and identify theft
2. Information warfare
3. Phishing scam
4. Spam

Taylor as operation Manager should take more “ preventive “ measurement when Ethan already suspected by FBI . He should not be so dependent on One person .

Most important step to prevention of fraud –

1. Know your employees . fraud penetrator often display behavioural traits that can indicate the intention to commit fraud
2. Awareness affects all employees
3. Implementation of Internal control system
4. If require Hire Certified Fraud Examiners who can help company to established antifraud polices and procedures
5. Continuously monitored and update frsud detection strategy to ensure effectiveness