Beware: Growth of new investor scams

Originally posted on USA Today Money:

State securities administrators listed four new types of fraud among their
annual list of investor threats.

•Crowd funding and Internet offers. The 2012 Jobs Act loosens some of the rules for small businesses to raise money via stock offerings. Already, NASAA has noted 1,600 to 1,700 new Internet domain names relating to crowd funding, and the regulations permitting crowd funding have yet to be written.

•Bad advice from investment advisers. Thousands of midsize investment advisory firms have shifted from federal oversight to state supervision. Many firms that haven’t been examined in a long time are being found wanting. State actions against investment adviser firms nearly doubled in 2011, NASAA says.

•Self-directed IRAs. You don’t have to invest your IRA in stocks or bonds: You can use your IRA money to invest in real estate or even a small business. But you can also open yourself up to fraud. A scam artist can create a phony business for a self-directed IRA and bleed the account dry.

•Investment-for-visa scams. Foreign investors who put at least $500,000 into a new business can get a U.S. visa under the 20-year-old Immigrant Investor Program. Scamsters will tout the potential of big foreign investors to lure U.S. investors into a fraud, NASAA says.

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Mike Rosten Guest Hosts Financial Fridays

Mike Rosten, a Principal with the Litigation Support Department at Piercy Bowler Taylor & Kern, guest hosted this week’s Financial Fridays while Scott Taylor finished up tax returns due on September 17. This week’s show featured Carol Harter, President Emeritus of UNLV and a current executive with Black Mountain Institute; John Restrepo, Nevada’s leading ecnoomist discussing the Silver State; and Dan Cooley, CEO of MorrisAnderson (Chicago), an accomplished operational and financial specialist.

PBTK Shareholder Scott Taylor, Jason Thomas, CPA, and Leonard Wright, the AICPA Money Doctor, are the regular hosts of Financial Fridays at 3 pm on KLAV 1230 AM.

What is Your Fraud IQ?

From Accounting Today:

Fraud is not an accounting problem or an internal control problem; it is a human problem. Not even the strongest system of controls can eliminate all risk of organizations’ being defrauded by employees who are sufficiently motivated to find loopholes, ways to override controls, or opportunities for collusion. While most accountants are familiar with methods for identifying manipulated accounting data, effectively fighting fraud involves going further and understanding the human elements involved. Such knowledge can help CPAs design or assess internal control initiatives, recognize fraud red flags during professional engagements, and identify where organizations are most at risk. Take this quiz to see whether your knowledge of fraudsters’ mindsets, characteristics, and behaviors is sufficiently honed to help you recognize the warning signs of fraud.

1. Research has shown that the most common reason that CFOs commit financial statement fraud is:

a. To cover up embezzlement or other fraud schemes.

b. Pressure from CEOs.

c. To increase the value of their own investments in company stock.

d. To hide their own errors or poor judgments that led to weak financial performance.

To read the full article, click here.

Learn From the Way Thieves Think

From the Journal of Accountancy:

“This is more than a story about six men, all of them admitted white-collar criminals. It is more than a story about their fraud schemes, which resulted in total combined losses of nearly $4 billion.

“This is the story of what CPAs can learn from these men—from their motives and methods, from how they were caught and how they could have been stopped earlier. This is a story of fraud’s impact and the role CPAs can play in spotting and preventing it.

“The AICPA Fraud Task Force, a group sponsored and supervised by the Institute’s Forensic and Litigation Services (FLS) Committee, provides fraud detection, investigation, and prevention information to AICPA members. As part of this mission, the task force located and interviewed a half-dozen perpetrators of significant accounting fraud. The task force summarizes the interview responses in a new report designed to help CPAs implement controls or other measures to prevent similar fraud.

“The six individuals who agreed to talk to the task force did so with the understanding that their names would not be revealed. The information they provided paints a broad picture of who they were at the time each fraud took place—and how they have changed since then.”

Click here to read the full article from The Journal of Accountancy.