Fraud Detection and Deterrence AAMVA Region I Conference Connecticut July 2012

Where is the FRAUD? Internal Fraud (employee) External Fraud (customer) Counterfeits (whomever)

What Can Happen If You Do Not Have Secure Processes?

Former Internal Fraud Working Group Members John Kuo, Maryland (Chair) Shawn Sheekey, New Jersey (Region I) Carmen Alldritt, Kansas (Region III) Tom Edwards, California (Region IV) Doris Bonet, Arkansas (Region II) Sheila Prior, AAMVA Fred Porter, AAMVA

IFWG Goals and Deliverables Review and communicate to AAMVA members the lessons learned from detection of internal fraud cases Develop a Best Practices Guide to assist DMV administrators in considering the implications of internal fraud in their own agencies

Internal Fraud is on the Rise Increasing economic value of identity theft Increasing reliance of DL/ID for proof of identity for employment and financial purposes Increasing street value of fraudulently issued DL/IDs (thousands of dollars) Demand for “washing titles” to dispose of stolen vehicles for better price or for security to obtain fraudulent car loans

Fraud IS a Problem 46 Arrests of Commercial Drivers – Fraudulently Obtained Driver Licenses – New York, 5/9/11 SC woman accused of driver’s license fraud – SC, 7/21/11 Ex-DMV employee, 14 others charged in driver’s license fraud scheme – California, 8/23/11 3 Indicted In Driver’s License Fraud – NM, 8/26/11 Instructor Charged with Driver License Fraud – Hawaii, 11/17/11 Jail for woman convicted of driver’s license fraud – Utah, 2/13/12 Twins Accused of Driver’s License Fraud – Mass, 2/19/12

External Fraud/Fraudulent Documents 8

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Working Group Final Product The Internal Fraud final document is available in the Knowledge Bank on the AAMVA webpage. Member log in is required for access.

Best Practices Contents 1.Introduction 2.Internal Fraud Defined a)Real World Examples of Internal Fraud b)Why People Commit Fraud c)Fraud, the Economy and Event Drive Occasions 3.Fraud Deterrence a)The Fraud Triangle b)Breaking the Fraud Triangle c)The “We’ve Always Done it Approach Won’t Work” 4.Internal Controls 5.Benefits 6.Vulnerabilities and Recommendations Checklist

Some Key Recommendations 1.Constantly evolve your processes to keep up with the bad guys 2.Establish a fraud hotline 3.Implement job rotation 4.Form an Internal Fraud Working Group 5.Get the focused attention of top level managers – initially and on-going 6.Develop partnerships 7.Supervise the supervisor, auditor, investigator 8.Implement controls, audits, investigations and take swift action on findings 9.Emphasize adherence to policies and procedures and let employees know the repercussions for failure to comply

Checks & Balances (More is better) Routine System Generated Reports Random Supervisory Transaction Review Regular Managerial Review of Transactions Employee Transaction Tracking Toll-Free Ethics Hotline Quality Assurance Reviews Internal Audit Reviews ZERO TOLERANCE Message!!!!

New Employee Orientation Let’s Talk About Zero Tolerance!

DL/ID OTC Fraud 19

QUESTIONS ? John T. Kuo Administrator Maryland Motor Vehicle Administration