Tracing Bitcoin: Navigating the Complex Web of Digital Transactions

By Dave Oswald, Forensic Restitution

In the digital age, cryptocurrencies have emerged as revolutionary financial instruments, with Bitcoin being the pioneer. The allure of cryptocurrencies lies in their promise of financial autonomy, offering a level of anonymity and detachment from traditional banking systems. This very feature has made cryptocurrencies a subject of intense scrutiny and debate. Tracing Bitcoin transactions, therefore, is not just about understanding a digital phenomenon; it’s about navigating a complex web of technological innovation, legal frameworks, ethical considerations, and criminal activities.

Understanding the Blockchain: The Foundation of Bitcoin

The blockchain, the technology behind Bitcoin, is a public ledger that records all transactions made with Bitcoin. Each transaction is visible to anyone who accesses the blockchain, but the identities behind these transactions are encrypted. Transactions are stored in blocks, each linked to the previous one, forming a chain. This structure ensures that once a transaction is recorded, it becomes immutable, meaning it cannot be altered or deleted. This immutability makes the blockchain a trustworthy and secure technology for financial transactions.

Example: Imagine a chain of blocks, each representing a transaction or a series of transactions. When John sends 1 Bitcoin to Alice, this transaction is recorded in a block. If Alice then sends 0.5 Bitcoin to Bob, this is recorded in a new block that is linked to the previous one. Anyone can see that 1 Bitcoin was transferred from John to Alice, and then 0.5 was sent from Alice to Bob, but the identities of John, Alice, and Bob remain concealed behind their cryptographic addresses.

The Complexity of Anonymity and Pseudonymity

While transactions are transparent and traceable on the blockchain, the identities of the individuals or entities behind these transactions are not directly visible. Bitcoin operates under a level of pseudonymity where addresses identify users – strings of alphanumeric characters that do not directly reveal the user’s identity.

Example: If John’s Bitcoin address is ‘1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa’, and he sends Bitcoin to Alice’s address ‘3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy’, anyone looking at the blockchain can see the transaction but cannot inherently know that John sent funds to Alice.

The Role of Advanced Analytical Tools in Tracing Bitcoin

Despite the pseudonymity of Bitcoin transactions, various analytical tools and techniques have been developed to trace these digital trails. One such method is cluster analysis, which groups together Bitcoin addresses based on transactional behaviours, potentially linking them to the same owner.

Example of Cluster Analysis: If a group of addresses frequently interact with each other and have similar transaction patterns, they might be controlled by the same entity. For instance, if addresses A, B, and C frequently transact with each other, and one of these addresses is later identified to belong to a particular individual or entity, there’s a possibility that the same individual or entity also controls the other addresses in the cluster.

Forward and Backward tracing

Tracing Bitcoin in the context of a known fraudulent transaction, such as a ransomware attack, exemplifies the power and complexity of blockchain analysis. When a ransom is paid to a hacker’s wallet, investigators begin to trace the funds. A forward trace is conducted from the hacker’s wallet, following the digital breadcrumbs as the ill-gotten gains are moved, possibly through various addresses, in an attempt to obscure their origin. This forward tracing can reveal the network of wallets involved and identify withdrawal points where the funds are converted into fiat currency or other assets. Concurrently, a backward trace from the identified wallets can be just as revealing. It can uncover a pattern of transactions leading back to the hacker’s wallet, potentially unveiling a broader web of victims who might have been exploited in the attack. This dual approach of tracing not only sheds light on the perpetrator’s attempt to launder the ransom but also helps in piecing together the scale of the attack, offering insights into the number of victims and the total sum extorted, thus painting a fuller picture of the cybercriminal’s operation.

The Use of Mixers and Tumblers: Complicating the Trace

To enhance privacy, some users employ services like mixers or tumblers. These services obfuscate the trail of Bitcoin by pooling together funds from multiple addresses and redistributing them, making it more challenging to trace the original source of the funds.

Example of Mixing Services: John sends 1 Bitcoin to a mixing service, Alice sends 2 Bitcoins, and Bob sends 3 Bitcoins. The mixer pools the 6 Bitcoins and then redistributes them such that John receives 2 Bitcoins, Alice receives 3 Bitcoins, and Bob receives 1 Bitcoin, but not from their original inputs. This process obscures the trail of individual Bitcoins, making it difficult to trace the path from sender to receiver.

Legal and Regulatory Frameworks: The Evolving Landscape

The pseudo-anonymous nature of Bitcoin has attracted privacy-conscious individuals and those involved in illicit activities. This has prompted governments and regulatory bodies worldwide to develop legal frameworks to monitor and regulate cryptocurrency transactions.

Example of Regulatory Action: In a bid to combat money laundering, the European Union’s Fifth Anti-Money Laundering Directive (5AMLD) requires cryptocurrency exchanges and wallet providers to implement strict Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. This includes verifying the identity of their users and monitoring transactions for suspicious activities.

Law Enforcement and Blockchain Analytics

Law enforcement agencies and private firms specializing in blockchain analytics use sophisticated software to analyze the blockchain and detect suspicious patterns. These tools can link pseudonymous addresses to real-world entities, aiding in criminal investigations.

Example of Law Enforcement Action: The U.S. Federal Bureau of Investigation (FBI) has successfully traced Bitcoin transactions in various cases. In the infamous Silk Road case, law enforcement shut down the dark web marketplace and traced millions of dollars worth of Bitcoin transactions to the site’s operator, Ross Ulbricht, leading to his conviction.

Privacy Concerns vs. The Need for Regulation

The ability to trace Bitcoin transactions raises significant privacy concerns. Privacy advocates argue that financial privacy is a fundamental right and worry that tracing Bitcoin could infringe upon personal freedoms.

Example of Privacy Concerns: In a hypothetical scenario, if John donates Bitcoin to a controversial cause or organization, the ability to trace his transaction could potentially expose his personal views or affiliations, leading to social or legal repercussions, especially in countries with repressive regimes.

The Future of Bitcoin Tracing

The future of Bitcoin tracing will involve a delicate balance between enhancing privacy measures and developing more sophisticated tracing methodologies. As regulatory frameworks evolve and integrate cryptocurrencies into the traditional financial system, standardized approaches to monitoring and tracing digital assets may emerge.

Example of Future Developments: Innovations in privacy-enhancing technologies, like Confidential Transactions or Mimblewimble, could further obscure transaction details on the blockchain. In response, regulatory agencies might develop more advanced analytical tools or collaborate with cryptocurrency platforms to ensure compliance with AML and KYC regulations, striking a balance between privacy and transparency.

In conclusion, tracing Bitcoin transactions is a complex endeavour that sits at the intersection of technology, law, ethics, and finance. While the blockchain provides a level of transparency, the mechanisms of pseudonymity, privacy-enhancing technologies, and regulatory efforts add layers of complexity to the tracing process. The evolving nature of cryptocurrencies and their regulatory environment suggests that the field of Bitcoin tracing will continue to adapt and evolve, representing a pivotal aspect of the ongoing discourse surrounding digital currencies and their place in the modern financial landscape.



Untying the Deception: The Knot’s Controversial Advertiser Practices Exposed

By Dave Oswald, Forensic Restitution

In the ever-evolving landscape of the wedding industry, The Knot emerged as a pioneering force, leveraging the power of digital technology to reshape how couples plan their big day. However, beneath the surface of its success story lies a web of controversy, allegations, and ethical concerns that have come to define its recent history. From its rise as a wedding industry giant to the accusations of fraudulent practices, The Knot’s journey is one marked by innovation, ambition, and challenges that threaten to tarnish its reputation.

Early Digital Pioneer

Founded in 1996 by David Liu and Carley Roney, The Knot quickly established itself as a trailblazer in the burgeoning digital era. The founders recognized the gap in the market for an online platform that could simplify wedding planning, from inspiration to vendor selection. Their vision was fueled by their own wedding mishaps and a determination to provide couples with a comprehensive resource to navigate the complex world of wedding preparations.

As the internet revolutionized consumer behaviour, The Knot capitalized on this shift by creating an online community that connected brides and grooms with vendors, enabling them to streamline the planning process. With initial funding from AOL, The Knot pioneered features like online gift registries and forums where couples could share ideas and experiences.

Rapid Growth and Allegations

The Knot’s ascent was meteoric. It evolved from a social network for wedding enthusiasts into a comprehensive wedding planning portal, boasting partnerships with industry leaders like Kleinfeld Bridal and JLM Couture. The company’s initial public offering on the NASDAQ marked a significant milestone, highlighting its relevance in the digital era.

However, the journey was not without its challenges. The allegations that have come to define The Knot’s recent history began to surface, casting a shadow over its achievements. Former employees accused the company of defrauding advertisers and investors in the lead-up to its $1 billion sale in 2018. Claims of manipulating contracts and inflating revenue figures to attract investors and drive up stock prices raised serious concerns about the company’s ethical standards.

Controversy Amid Changing Landscape

As the wedding industry evolved and new competitors like Zola and tech giants like TikTok and Instagram entered the scene, The Knot found itself in a battle to remain relevant. The proliferation of platforms offering direct vendor connections threatened to render the middleman role of The Knot obsolete. To stay competitive, the company faced immense pressure to innovate and adapt its business model.

The controversy surrounding The Knot’s alleged unethical practices added another layer of complexity to its challenges. The accusations of fraudulent conduct tarnished the company’s reputation and led to investigations by regulatory bodies like the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC). While The Knot vehemently denied the allegations and emphasized the investigations conducted internally and externally, the controversy persisted, impacting its image and relationships with partners.

From Pioneer to Reckoning

The Knot’s journey mirrors the broader narrative of many tech-driven companies that disrupt industries. It began as an innovative force that reshaped an industry, attracting investors and customers alike. However, the quest for growth and profitability can sometimes lead to ethical lapses, damaging not only the company’s reputation but also the trust of stakeholders who rely on its services.

The allegations of misleading advertisers and investors, altering contracts, and engaging in questionable financial practices raise significant concerns about the company’s commitment to transparency and integrity. While The Knot maintains that it has thoroughly investigated these claims and stands by the accuracy of its financial statements, the allegations continue to cast a shadow over its operations.

Future Prospects and Challenges

As The Knot contemplates a potential initial public offering (IPO), it faces a critical juncture. The controversies of the past have the potential to impact investor sentiment and public perception, making it challenging to regain trust and restore its reputation. The current competitive landscape, characterized by evolving consumer preferences and emerging technologies, adds another layer of complexity to The Knot’s path forward.

To succeed in this dynamic environment, The Knot must not only address the allegations of unethical practices but also demonstrate a renewed commitment to transparency, integrity, and responsible business conduct. Rebuilding relationships with advertisers, investors, and customers will require more than denial; it demands concrete actions that align with ethical standards and stakeholder expectations.

The Knot’s journey from early digital pioneer to a company embroiled in controversy underscores the delicate balance that companies must strike between innovation, profitability, and ethical conduct. Its challenges serve as a cautionary tale for businesses navigating the complexities of the modern business landscape. The Knot’s future hinges on its ability to navigate these challenges, make amends, and regain the trust of stakeholders who once believed in its potential to revolutionize the wedding industry.



Top Fraud Schemes Targeting Seniors in 2022 Included Fake Investments, Romantic Partners, and More

By Dave Oswald, Forensic Restitution

As we celebrate Seniors Month, it is essential to shed light on the alarming increase in scams targeting older Ontarians. The Canadian Anti-Fraud Centre (CAFC) reported a staggering $531 million in fraud cases in 2022, with approximately 26 percent of these funds stolen from seniors. These numbers, however, only represent a fraction of the actual fraud occurrences, as the CAFC estimates that less than 10 percent of victims come forward to report these crimes.

In an effort to raise awareness and protect our senior population, we will highlight the top fraud schemes that targeted seniors in 2022:

  1. False Investment Opportunities:
    Nationally, fraudulent investment schemes cost victims $79.1 million, with $36.5 million reported in Ontario alone. Scammers often prey on seniors who seek secure financial stability for retirement. They promise high returns on investments or present opportunities in non-existent or fraudulent companies. It is crucial for seniors to be cautious and conduct thorough research before investing their hard-earned money. Seeking advice from reputable financial advisors or consulting the Ontario Securities Commission can help verify the legitimacy of investment opportunities.

  2. Romance Frauds:
    In 2022, romance scams accounted for $19.5 million nationwide, with $8.8 million reported in Ontario. These scams target vulnerable seniors who are seeking companionship and emotional connections. Perpetrators create fake online personas on dating websites or social media platforms to establish trust. They manipulate their victims into providing money or personal information by playing on their emotions. It is important for seniors to be cautious when interacting with individuals online and to avoid sharing personal or financial information with strangers.

  3. Fake Service Providers:
    Seniors lost $8.5 million across Canada, with $6 million reported in Ontario, due to scams involving fraudulent service providers. These scammers pose as legitimate contractors or professionals offering services such as home repairs, renovations, or medical assistance. They often demand payment upfront and either deliver subpar work or vanish without completing the job. Seniors should always verify the credentials of service providers, seek recommendations from trusted sources, and be cautious when dealing with unfamiliar individuals or companies.

  4. Extortion Schemes:
    Extortion scams cost victims $7.7 million nationally, with $542,000 reported in Ontario in 2022. Fraudsters employ various tactics, such as threatening phone calls or emails, to intimidate seniors into paying large sums of money to prevent alleged consequences. These schemes can include fabricated legal troubles, false debts, or compromising personal information. Seniors should be aware of these tactics and remember that legitimate organizations will not use such aggressive and coercive methods to collect money. It is important to stay calm, not engage with the fraudsters, and report the incidents to the authorities.

  5. Emergency or Grandparent Scams:
    Nationwide, emergency or grandparent scams resulted in losses of $7.1 million, with $4.3 million reported in Ontario. Scammers exploit the love and concern grandparents have for their grandchildren by impersonating them in distressing situations, such as accidents or legal troubles. They manipulate seniors into providing financial aid urgently, playing on their emotions and desire to protect their loved ones. Seniors should always verify the identity of the person in need by contacting other family members or directly reaching out to the grandchild involved before sending any money.

    It is crucial for seniors and their loved ones to remain vigilant and educated about these common scams targeting older Ontarians. By recognizing the red flags and staying informed, we can reduce the risk of falling victim to these fraudulent schemes.

Forensic Restitution urges everyone to take proactive steps to safeguard themselves and their elderly family members:

  1. Stay informed:
    Keep up with the latest fraud trends, techniques, and scams that target seniors by regularly visiting the Canadian Anti-Fraud Centre’s website or subscribing to their updates. Stay informed about the tactics used by scammers and the evolving landscape of fraud to better protect yourself and your loved ones.
  2. Be cautious online:
    Exercise caution when interacting with individuals or organizations online. Seniors should be skeptical of unsolicited requests or offers that seem too good to be true. Avoid sharing personal or financial information with strangers, especially through email or unfamiliar websites. Remember that legitimate organizations will not ask for sensitive information or payment details via email or phone calls.

  3. Maintain strong passwords and security measures:
    Seniors should use strong, unique passwords for their online accounts and avoid using the same password across multiple platforms. Enable two-factor authentication whenever possible to add an extra layer of security. Regularly update security software and keep devices, such as computers and smartphones, protected against malware and viruses.

  4. Stay connected:
    Maintain open lines of communication with elderly family members or friends. Regular check-ins can help detect scams early and prevent financial losses. Encourage them to share any suspicious encounters or requests for money. By fostering a supportive and trusting environment, seniors may feel more comfortable reaching out for help or advice when faced with potential scams.

  5. Report incidents:
    If you or someone you know falls victim to a fraud or scam, report it promptly to the appropriate authorities. Contact local law enforcement, the Canadian Anti-Fraud Centre, and your provincial consumer protection agency. Reporting these incidents not only increases the chances of apprehending the scammers but also helps in raising awareness and preventing others from becoming victims.

The alarming rise in fraud cases targeting seniors calls for increased awareness and vigilance. By understanding the top fraud schemes, staying informed, and taking proactive measures, we can protect our senior population from falling prey to scams. Together, let us make a concerted effort to safeguard our elderly loved ones and ensure their financial and emotional well-being.




Los Angeles-based fraud ring sentenced for multimillion-dollar COVID-19 relief scheme

By Chetan Sehgal, BDO

To help individuals, businesses, and government organizations cope with pandemic challenges, the U.S. government dedicated trillions of dollars of support through programs under the Coronavirus, Aid, Relief, and Economic Security (CARES) Act—but the speed at which relief programs were rolled out lead to increased opportunities to defraud the system.

Using synthetic identities and forged documents, an eight-person fraud ring committed approximately 150 fraudulent loan applications and sought to steal millions in COVID-19 relief funds.

The eight individuals involved in the fraud ring are Richard Ayvazyan, Marietta Terabelian, Artur Ayvazyan, Manuk Grigoryan, Edvard Paronyan, Vahe Dadyan, Arman Hayrapetyan, and Tamara Dadyan.

Taking advantage of the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL)—two programs under the CARES Act—the fraudsters misappropriated over US$20 million* in COVID-19 relief funds by falsifying a number of legal documents:

To apply for loan programs, the defendants created sham businesses, attached fake payroll documents, and forged tax returns to the applications.

Fake, stolen, or synthetic identities were used to open bank accounts for the businesses.

They created fake employer identification numbers (EINs) that were used in phony payroll reports to enhance their legitimacy.

Fake identification documents and corresponding chequebooks, phony business credit cards, and notary stamps and seals belonging to state and federal courts were found during an FBI raid.

The group submitted fictitious documents to lenders and the U.S. Small Business Administration (SBA), a government agency that provides support to entrepreneurs and small businesses.

They used the embezzled funds to pay for down payments on luxury homes in the California cities of Tarzana, Glendale, and Palm Desert, as well as to purchase gold coins, diamonds, jewelry, luxury goods, imported fine goods, and a Harley-Davidson motorcycle.

Three main factors created opportunities for the fraud to take place:

  1. Disaster recovery funds are often put together quickly and are focused on short-term solutions. They are also very vast in scope, with many eligible claimants. To reach those in need quickly, the system relies (at least in part) on the honour system. These factors create the perfect storm for fraudsters to exploit the relief programs.
  2. There was poor investigative due diligence over the identifications used in the loan application process.
  3. Unlike several other U.S. states, California’s loan application system did not have a cross-matching function to verify the identities of individuals. This allowed for the exploitation of fake, stolen, or synthetic identities, as well as the use of fictitious supporting documents such as fake identification, tax documents, and payroll records.

What was the outcome…, check out the details on the BDO site – Covid-19 Relief Scheme Fraud 





Staying Safe and Secure Online: Understanding the Latest Cyber Fraud Trends and Techniques

By Dave Oswald, Forensic Restitution

The rise of the internet and digital devices has transformed the way we live and work, bringing unprecedented levels of convenience and efficiency. However, with these benefits come new risks, and cyber fraud has emerged as a major concern for individuals and businesses alike.

Cyber fraud is a type of crime that exploits digital systems and technology to steal sensitive information, money or property. It can take many forms, including phishing scams, identity theft, ransomware attacks, and more. Cyber criminals use a variety of techniques to carry out their schemes, including social engineering, malware, and hacking.

One of the most common types of cyber fraud is phishing. Phishing attacks involve sending fake emails, texts or social media messages that appear to be from a trusted source, such as a bank or government agency. The message typically contains a link or attachment that, when clicked or downloaded, installs malware on the victim’s device or directs them to a fake login page to steal their credentials.

Another growing threat is ransomware, which involves encrypting a victim’s files or locking them out of their device, and demanding payment in exchange for the decryption key. Ransomware attacks have become more sophisticated in recent years, with some attackers even threatening to release stolen data unless a ransom is paid.

To stay safe and secure online, there are several steps individuals and businesses can take. First, it is important to use strong, unique passwords and two-factor authentication whenever possible to prevent unauthorized access. Regularly updating software and using antivirus and anti-malware software can also help protect against attacks.

Additionally, it is important to be vigilant and skeptical of any unsolicited messages or requests for personal information. Always verify the authenticity of a message or website before entering sensitive information, and never click on suspicious links or attachments.

In summary, the rise of the internet and digital devices has brought many benefits, but also new risks, especially in the form of cyber fraud. By understanding the latest trends and techniques used by cyber criminals and taking appropriate precautions, individuals and businesses can stay safe and secure online.

For more articles from Forensic Restitution, check out their blog Forensic Insights





Fraud Schemes to Watch Out for in 2023: A Guide for Businesses

By Dave Oswald, Forensic Restitution

With the ever-evolving landscape of the business world, accounting and financial professionals must stay vigilant in their efforts to detect and prevent fraud. The COVID-19 pandemic has further accelerated this trend, with remote work, digital transformation, and economic uncertainty all presenting new risks for companies. In this blog post, we’ll explore five of the most common and pressing fraud schemes that organizations need to be aware of in 2023.

Cyber Fraud:
Cyber fraud has been on the rise for several years, and it’s only becoming more prevalent with the increasing dependence on technology and remote work. From malware and ransomware to password cracking and phishing scams, cyber criminals have a range of tools and techniques at their disposal. This year, companies must be particularly vigilant in their cybersecurity efforts, as fraudsters are likely to take advantage of the ongoing pandemic to target businesses and individuals alike.

Vendor and Seller Fraud:
Fraud by vendors and sellers is another common type of financial crime. From fictitious billing to duplicate invoice payments and check tampering schemes, it’s essential that organizations remain aware of these schemes and have processes in place to detect them. This year, it’s more important than ever to work closely with suppliers and ensure that they are adhering to best practices and established protocols.

Payment Fraud:
Payment fraud continues to be a major concern, with false transactions, lost or stolen merchandise, and false requests for refunds all falling under this umbrella. Companies must be proactive in their efforts to detect and prevent payment fraud, using data analytics, fraud investigation techniques, and computer-aided auditing methods to uncover any irregularities.

Healthcare Fraud:
Healthcare fraud is a significant issue, with schemes ranging from billing for services not rendered to misrepresenting the provider of service. In this year, it’s essential to have robust internal controls and a well-trained staff to identify and prevent healthcare fraud. Certified Professional Accountants (CPAs) can play a critical role in detecting and preventing healthcare fraud, leveraging their expertise in financial analysis and investigation to uncover any fraudulent activity.

Identity Theft:
Identity theft is a growing concern, with two main types: traditional identity theft and synthetic identity theft. Traditional identity theft involves a criminal stealing an individual’s personal information, while synthetic identity theft involves a fraudster using a combination of real and fabricated information to create a new identity. This year, organizations must remain vigilant in their efforts to protect sensitive personal information and ensure that their cybersecurity measures are up to date.

Combating fraud requires a multi-disciplinary approach, leveraging the expertise of accounting, financial, and legal professionals, along with the use of advanced data analytics techniques. With these tools and techniques, organizations can better detect and prevent fraud, reducing their exposure to financial crime and other risks. To stay ahead of the curve, companies should invest in the training and development of their staff, ensuring that they have the skills and knowledge necessary to detect and prevent fraud in the business world of 2023.

For more articles from Forensic Restitution, check out their blog Forensic Insights





How to get the Opportunist Fraudster to Confess

By David Debenham

In our paper last month, we found that the difference between those who committed opportunistic fraudsters were more likely to be overconfident to pull off a fraud than those who might actually have the ability to do so, but who feared all of the “unknown-unknowns” that could catch them out.   These overconfident people falsely transfer their brilliance in one field into their abilities in fields they know nothing about such as fraud.  Their body language, vocal tone, and rates of participation suggest confidence because of this false transference. This means that these overconfident individuals speak more often, speak with a confident vocal tone, provided more information and answers, and acted calmly and relaxed as they work with their peers in the midst of perpetrating a fraud. In fact, overconfident individuals were more convincing in their displays of ability than individuals who were actually highly competent in their tasks, who, when questioned, become nervous when their conduct is called into question.  The over-confident do not say “I’m really good at this.” Because for them they are past that stage: Instead, they led their “ability” speak for itself as they explain in great detail what they do, and how they do it, in a calm and relaxed way.’  These status seekers who believe their competence at coding transfers into their ability to play poker, chess, or commit fraud, will want to demonstrate this by simply participating more and exhibiting more comfort with any task you put to them, and that is the key to catching them out.  [1]

The key is to enlist the fraudster’s advice in solving the various issues in your case, much as Columbo does in virtually every episode.   So long as you don’t appear to be as capable as the suspect (and how could you be considering their status and yours?) you can simply pose a serious of problems and let the fraudster solve them for you, all the while incriminating himself. Consider Columbo’s “Bye-bye Sky High IQ Murder case”. Genius accountant Oliver Brandt has been embezzling funds in order to keep his high-maintenance wife in fine frocks and tropical getaways. His business partner Bertie Hastings has just found out – and he must be killed.  Oliver shoots him and rigs an umbrella to take the murder weapon up a chimney. He puts a heavy dictionary on the arm of a chair, balancing precariously.  Oliver then starts a record player playing by pushing the start button, which eventually leads to the sound of two shots fired sometime later when Oliver is safely ensconced in a room full of witnesses who have just entered the adjoining room.  The sound of a body falling between the two shots alarms the witnesses.   The group runs into the room to see Bertie shot. In the confusion Bertie pockets the Dictaphone. Later Oliver recovers the umbrella and disposes of the murder weapon.  Columbo asks if the record had the shots. Of course not.  There were caps in the umbrella that were exploded as soon as the arm of the record player moved.  So too the dictionary was pushed off the arm of the chair by the movement of the arm of the record player, so in sequence it was cap explosion, dictionary fall (“the body”), and second cap explosion. At each stage Columbo suggests a hypothesis and the overconfident “high IQ” Oliver sets him straight, until at the end there is no more mystery to resolve.  Interview technique has outwitted the overconfident murder.   So too, for you.  Enlist the overconfident fraudster to incriminate himself.




The Parable of the Boiling Frog

By David Debenham

The premise of this parable is that if a frog is put suddenly into boiling water, it will jump out, but if the frog is put in tepid water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability or unwillingness of people to react to or be aware of sinister threats that arise gradually, step by step, over time rather than immediate obvious dangers. I see it differently. I see it as an example of the chasm of comfortable complacency.  One author calls it “The peculiar longevity of things ‘not so bad’.[1] The idea is that people stay in these zones of complacency, or “not so bad”, called “beta regions” because things are not so bad as to motivate them to leave, and also the alternative is not so good as to motivate them to leave.  They are stuck in a beta region of inertia or complacency.  Society pushes conformity, mediocrity and normality because it is both safe, and “not that bad”.  Over time grooves become ruts, and patterns become habits. One day we waking up with a bucket list of things we wished we had done, when at one point or another they were achievable with a little effort and imagination.

 Ironically, a nagging injury, a mild cold, or a less than ideal relationship – if they were slightly worse, we might get the injury checked out, take cold medicine, or break up with that person. Once it is severe enough, we take it seriously and are able to resolve it faster.

Why is this important to the field of fraud investigation?   Too often fraud victims are in the beta zone, where they are not so bad off that they have no “felt need for change”— no desire to go to the police or recover the monies wrongfully taken from them.  Those victims need to see (1) the discrepancy between where they are and where they could be by taking action, (2) assurance that the desired state is achievable, (3) that the desired state is more in keeping with their core values, (4) a path to getting to the desired state, and (5) a support team to accompany them to the desired state.  While you may not be the person to lead the transition team from where the victim is and where they could be, you may want to advise and support that leader.