Organized Insurance Fraud: Unraveling the White-Collar Criminal
Insurance fraud perpetrators are becoming more organized and far-reaching. By connecting with like-minded people and creating complex networks, they can carry out their crimes while making it increasingly more difficult for law enforcement and insurance companies to identify them.
How Our Brains Reframe Unethical Behavior
An excerpt from a Travelers and Constitution State Services Webinar: Unraveling the White-Collar Criminal: A Comprehensive Look at the Forces Driving Organized Insurance Fraud. Professor Nikos Passas, Professor of Criminology and Criminal Justice, Northeastern University and Co-Director, Institute for Security and Public Policy.
A red umbrella logo. Travelers. Logo, Constitution State Services. Text, How our brains reframe unethical behavior. An excerpt from a Travelers and Constitution State Services Webinar: Unraveling the White-Collar Criminal: A Comprehensive Look at the Forces Driving Organized Insurance Fraud. Professor Nikos Passas. Professor of Criminology and Criminal Justice, Northeastern University. Co-Director, Institute for Security and Public Policy.
NIKOS PASSAS: So when it comes to rationalizations, I think it's important to distinguish from the beginning two concepts -- neutralization, which are things that people think subconsciously before the act, and rationalizations that are things that people come up with ex post facto. This distinction is important because rationalizations are excuses, where neutralizations are important to identify because then the company can actually do something to address them and prevent them.
So these neutralizations that make it thinkable or possible for ordinary things or ordinary people to do extraordinary things, that's the main task that we have here. Are things such as, "I will not do it for myself, but for my agency or my company," or "everybody else is doing it. And if I don't do it, someone else will," or "this law that I'm violating is not a good one," or "the company that I'm committing the fraud against, they can afford it.”
"This is going to be a one-off. I'm not doing it forever. This is the special circumstances that I'm facing right now," or, "they had it coming." And this is when thoughts about dishonest or hypocritical companies or the government help them put their conscience essentially to sleep, numb their conscience and sleep well at night while breaking the rule.
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Watch the Full Replay: A Comprehensive Look at the Forces Driving Organized Insurance Fraud
Watch Unraveling the White-Collar Criminal: A Comprehensive Look at the Forces Driving Organized Insurance Fraud, a Travelers and Constitution State Services webinar. Panelists Dr. Nikos Passas, Professor of Criminology and Criminal Justice at Northeastern University, and Nichole Soriano, Director of Investigative Services at Travelers, dove into cases of organized fraud and explained the mindset of the criminals behind it. They also examined insurance fraud schemes trending today and the latest techniques and technologies for recognizing insurance fraud.
Navigate to these timestamps in the full webinar below.
- The white-collar fraudster (3:33)
- Role of corporate culture (8:30)
- White-collar recession (10:20)
- Types of insurance fraud (13:33)
- Typical organized fraud scheme (19:25)
- Using technology to fight fraud (29:18)
- Key red flags (34:08)
- Stressors help justify fraud (35:36)
- Resolution strategies (41:00)
- Steps to take (44:54)
A red umbrella logo. Travelers. Logo, Constitution State Services. Text, Unraveling The White-Collar Criminal: A Comprehensive Look At The Forces Driving Organized Insurance Fraud.
JUSTIN SMULISON: Greetings, and welcome to today's RIMS webinar sponsored by Travelers and Constitution State Services, Unraveling the White-Collar Criminal-- A Comprehensive Look at the Forces Driving Organized Insurance Fraud. I am Justin Smulison-- Business Content Manager here at RIMS, the Risk and Insurance Management Society.
A few notes before we begin. If you have a question for the presenters during today's session, please submit them by writing in the Question box. Feel free to ask at any point in the presentation. We will gather them, and the panelists will reply to you directly if they cannot do so during the session. Following the session, the recording will be available through On-Demand Events page of rims.org. And all downloads and contact information will be accessible to the sponsor.
On with today's presentation. Organizations that become victims of insurance fraud and white-collar crime may lose valuable resources. And recovering lost funds can prove to be a challenging and time-consuming task. This joint presentation from Travelers and Constitution State Services offers an exceptional opportunity for risk and insurance professionals to learn prevention strategies to help safeguard their organizations. RIMS is thrilled to welcome a large global audience. Please, welcome your moderator, Cora Hall of Travelers.
Cora appears in a video call tile over the slide.
CORA HALL: Thank you so much, Justin. And welcome, everyone. On behalf of Travelers and Constitution State Services, thank you for spending some time with us today on this important issue. The National Insurance Crime Bureau rated insurance fraud as the second-most costly white-collar crime in America behind tax evasion. Identifying and preventing fraud is critical for businesses of all sizes.
As we were putting this webinar together, we sought out the expertise of those who could help us best understand the complexity of the issue and most importantly, what we can do about it.
A slide displays the photos of the two panelists and moderator Cora. Text, Our Panel. Panelist, Nikos Passas, Professor of Criminology and Criminal Justice, Northeastern University. Panelist, Nichole Soriano, Director, Investigative Services, Travelers. Moderator, Cora Hall, AVP of Marketing Strategy, National and Commercial Accounts, Travelers.
Joining us today is one of the world's foremost experts on white-collar crime, Professor Nikos Passas from Northeastern University. Professor Passas specializes in the study of corruption, illicit financial trades, white-collar crime, financial regulation, organized crime, and international crime. He is the principal investigator for a planning grant on financial network disruptions and illicit and counterfeit medicines trade, which was funded by the National Science Foundation. In addition to his professorship at Northeastern University, he is also Co-Chair of the Steering Committee for the University of Geneva Anti-Corruption Academy.
We are, also, joined by Nichole Soriano, who is Director of Major Cases within Travelers Investigative Services. She has been with us for almost a decade and is based in New York. In addition to her work with Travelers, she is, also, chairperson of the New York Anti-Car Theft Fraud Association, as well as the Vice President for the New York Alliance Against Insurance Fraud. Nichole will share some real case studies with us today and has some really interesting stories to share from the front line.
Between both of our speakers, over the next hour, you will gain a better understanding of the mind of the white-collar criminal, and how these crimes play out in real life. We'll have time for Q&A at the end of our program, but let's get started. Nikos, I'm going to start with you. Can you take us inside the mind of the white-collar criminal? What are some of the most common rationalizations that they use to justify their actions?
Text, Inside the mind of a white-collar criminal. In a photo, a man looks to the right, toward an identical man who is looking ahead. The text, Neutralizations vs. rationalizations, is aligned so the word neutralizations falls over the man looking to the side and rationalizations falls over the man looking ahead. Nikos appears in a video call tile in the top right of the slide.
NIKOS PASSAS: Hello, everyone, and thank you so much for having me So the first key question is, makes a white-collar fraudster tick? And that is the pursuit of mostly, legitimate business or professional goals that face challenges or are blocked. And then come a combination of stress and a facilitative condition-- stress and facilitative condition. So a combination of pressures, tough competition, questions of survival, and then things that make it easier, such as legal gaps or asymmetries or opportunities to achieve goals through shortcuts and getting around controls.
Now when it comes to preventing-- so when it comes to rationalizations, I think it's important to distinguish from the beginning, two concepts, neutralization, which are things that people think subconsciously before they act, and rationalizations, that are things that people come up with ex-post factor. This distinction is important because rationalizations are excuses, where neutralizations are important to identify because then the company can actually do something to address them and prevent them.
So these neutralizations that make it thinkable or possible for ordinary things or ordinary people to do extraordinary things-- that's the main task that we have here-- are things such as, I will not do it for myself, but for my agency or my company. Or everybody else is doing it. And if I don't do it, someone else will. Or this law that I'm violating is not a good one. Or the company that I'm committing the fraud against, they can afford it. This is going to be a one-off. I'm not doing it forever. This is the special circumstances that I'm facing right now. Or they had it coming. And this is when thoughts about dishonest or hypocritical companies or the government help them put their conscience, essentially, to sleep-- numb their conscience and sleep well at night while breaking the rule.
Other things that cross one's mind-- again, this is a subconscious, psychological process-- my company's survival is on the line. And things that make such neutralizations more risky and dangerous is that they may have been committed-- the acts may have been committed in the past, but were not either detected or punished. So the impunity of previous fraud by oneself or by others makes it look like this is a low risk, not a big deal, so we can do it. It is not a problem.
CORA HALL: Wow. Nikos, is there anything we can do to prevent these rationalizations from taking hold?
NIKOS PASSAS: So good, old risk analysis and management of first, the risk analysis of the clients, of the suppliers, the competitors and partners, as well as our own employees. And a review of regulatory clarity because areas where the law is not entirely clear or consistent can be taken advantage of. The organizational culture, the ethical values, and the principle of the company are essential, are important, are a condition without which we cannot go anywhere. And this means an organizational culture that is converted into effective practice. So this is not window dressing. This is not for show. We're not playing theater, but we mean what they are saying. And that is enforced by training, awareness raising, and constant reminders, reminders of the cost and the effects of fraud.
A photo of a meeting in a conference room appears. Over the photo, text reads, The Role Corporate Culture Plays. Below the text, the three sides of a triangle icon are labeled, implement, address, and reinforce.
CORA HALL: I know you've written extensively about the role corporate culture plays in creating an environment that is, more or less, conducive to white-collar crime. Can you go deeper on your views on this, and how organizations can really do the opposite and promote that culture of ethical behavior?
NIKOS PASSAS: So the first step is that we need to make sure that everybody appreciates and implements an ethic of compliance and the practice of compliance with the legal framework, with the laws. What rules and procedures are in place? Then we want to make crystal clear, what are the company values, the principles, and what we mean by social responsibility? Engage in proper risk assessment of our environment. Ensure that the management, especially at the top, are committed to translating all these policies into effective practice.
Development and enforcement of codes of conduct. And, at the same time, have regular updates of these, as well as the training that we have for our employees, regular refreshers. And recognition and reward of ethical leadership at the company. All this requires adequate resources, so we got to make sure that these are allocated. And afford, also, ways to discuss and address ethical dilemmas when they arise. Value conflicts when they occur. We sanction misconduct and reinforce emphasis on the company values.
Text, Impacts of the "White Collar Recession." How environmental stressors make deviation thinkable. In photos on the slide, a man holds a phone near his face, and people work at computers in a bright office.
CORA HALL: Understood. Thank you for explaining that for us. The Wall Street Journal and other publications have written about the white-collar recession. So how might this type of recession lead to more white-collar crime, including insurance fraud? And I'd like to talk more about your concept of stressors and really, what you've educated us around going into this webinar, how things like increasing interest rates, which impact mortgages, student loan debt, credit card debt, could all be conditions which could influence someone to go down the wrong path. So can you talk some more about that?
NIKOS PASSAS: Certainly. So job-related challenges and environmental stressors make deviation from the standard thinkable. That makes the violation of things that we generally accept as correct, appropriate possible. So what are the new-- so when The Wall Street Journal speaks about a white-collar recession, we're talking about people who are going to lose their jobs or people who are not going to be able to meet the targets set by their managers. All kinds of obstacles at a time of an economic downturn are going to impede this goal attainment.
At the same time, we do have higher interest rates and therefore, a higher cost of debt, lower access to finance. We have a series of troubles with our tremors in our banking system. And so a combination of higher cost of debt and lower access to finance can create all kinds of problems. At the same time, it's important to appreciate unfavorable comparisons that people are going to make with their peers or with their own previous condition. What they used to have and do not have anymore, or what colleagues are enjoying, and they are not able to afford. So relative as opposed to absolute deprivation. A feeling that we're missing something that we think we ought to have. We think we deserve.
And at the same time, smart people-- and that is what white-collar professions that we're talking about-- they have the ability to take their own circumstances and find exceptions, particularities that may justify in the back of their mind, a law violation, a rule violation. And at the same time, because they are smart, they can come up with shortcuts in order to pursue their goals to obtain funds and to save the organization from trouble. All of this is reinforced by successful misconduct. If crime solves the problem and it is not detected or sanctioned, that gives the impression that this is the way of doing business, this is the way you get rewarded, and it becomes normalized, routinized.
Text, Common Types of Insurance Fraud. Below the text, one arrow points left, labeled, soft, and one points right, labeled, hard. In a photo under the soft label, a man with a briefcase peers around a corner in the office. In a photo under the hard label, the glow of a tablet reflects text and charts onto a man.
CORA HALL: Hmm. Thank You. Nichole, I want to bring you into the conversation and give you a chance to respond to some of the things that Nikos has shared because you've seen all types of insurance fraud as an investigator and director here with Travelers and Constitution State Services. Can you please describe for us some of the most common types of insurance fraud that you see in your Work?
NICHOLE SORIANO: Sure. And I want to thank you for the opportunity to speak today to this group. So in the insurance industry, what I've seen typically over the course of my experience here, we typically see two different types of insurance fraud. So we like to call them the opportunistic fraud and then the organized fraud efforts.
So opportunistic fraud is typically what we reference as soft fraud. And it really is stemming from perhaps, a legitimate accident or a legitimate claim where somebody merely just takes advantage of the situation. So perhaps, they really were in an auto accident, and perhaps, they injured their knee. But guess what? They've had a bad back for the last couple of years. So when they go to the medical provider or the hospital right after the accident, they're going to claim injuries to both to try to make sure that their back treatment is, also, covered under the injuries for this auto accident. So they're really taking opportunity of an accident that actually happened.
And much like the professor was saying, they rationalize their behaviors. Perhaps, they have some type of motive or pressure behind them financially or like I said, maybe they do have another injury that they're trying to loop into the claim. And they give it a rationalization, a personal justification that perhaps, they really don't have money to go and have their back surgery so this is how they're going to go about doing it. So we see that where they're just taking advantage of the situations. And that can happen even like on a slip and fall. They hurt one piece of their body and then they're claiming multiple injuries.
But what we focus on more so here at Travelers and for Constitution State Services is organized fraud, and that's really what we consider hard fraud. This is the orchestrated planned, intentional acts where everything seems to be coordinated. It's more than just one claim involved in the fraud. And it could take a very long time for us to of unravel these types of fraud. So that's what we really want to focus on today.
And before I get into some examples, I think this is the most interesting because it's really like putting all the pieces of the puzzle together. So through my experiences, we've traditionally seen medical insurance fraud, and that's what I get most excited about. Because it's not just the injured parties that are in these accidents or even alleged claimants who constitute the medical insurance fraud, but it's, also, the doctors who we hold to a high light in the social world. We hold them up. We look up to doctors. Yet, we find that in certain circumstances, these doctors take advantage, and they proceed in unethical behaviors, such as creating fictitious bills or adding on additional dates of service to an actual bill that's submitted to Travelers, just to increase their financial gain. And we saw this a lot after COVID as well, where medical providers were really trying to recoup funds for some shutdowns that the medical provider offices were having due to COVID. So we saw an uptick in medical insurance fraud.
We also see-- just some more examples-- perhaps in, like, GL-- general liability-- claims where people can trip and fall and then they go on to see medical providers. And their surgeries are exaggerated for their injuries. And in workers' comp, we see a lot of injured workers trying to stay out of work longer. So they coordinate with the unethical provider to make sure that they have scripts where they can be written out of work for a longer period of time. For workers' comp, we also see folks-- companies, I should say-- where they are underwriting the amount of employees that they have so that they don't have to pay as high for premiums.
In the property line of business, we see people-- what we consider-- storm chasers where they are picking upon a particular area where, maybe, there was a catastrophic storm. And they are going to the homeowners and saying you know you have significant roof damage. They get up on the roof, maybe enhance some damage, if they did have some to begin with, or create some fictitious damage to begin with. In the property, we also see what are mitigation companies that if an insured, perhaps, had a leak in their basement, some flooding, and now, all of a sudden, the insured is being told that they have level three bacteria when, in reality, probably everybody has a little bit of bacteria, unfortunately, in their basement, but they're really inflating and exaggerating the loss. Much like the medical professionals that we see.
In other areas, just like auto, we see auto body shops enhancing damages. Creating damages when there was none or very minimal. Also, auto body shops, something as simple as hiding a deductible within insured. Some people don't even realize that, that is fraud, but it is. So things like that are the typical types of fraud schemes that we see. And again, we try to focus on those more organized efforts where it's not just happening on one claim, but pattern and practice shows that it's happening on multiple claims. So that's where that whole orchestration comes in.
CORA HALL: So let's talk a little bit more about that. So what are-- you've been with us for a decade. What are some ways that you're seeing it become more organized and some of the types of insurance frauds that would be more prone to that?
NICHOLE SORIANO: Yeah, so we're seeing definitely a lot more organization I could tell you when I started in the business, it used to be very easy to uncover some of the true-- I want to call them-- lay people behind-the-scenes of these organized schemes that were, so to speak, the ringleaders. It was very easy to unravel that because everything was paper trails. You would have a CEO listed of a business corporation, and they would simply put the lay person on there rather than the medical doctor who supposed to be the real owner. So it was really easy to detect.
Now, as technology has advanced-- artificial intelligence, for example-- it's becoming harder and harder for the claim professionals and the investigators to unravel what's actually true, what's fake. And we're just trying to make sure that we're paying what we truly owe on these claims. So we have to find other methods to validate the truth. And that's the ultimate goal of the investigation is to get to the truth, make sure that we protect our insureds, and that we're truly paying what we owe. So as technology advances, so do their schemes. They get more sophisticated. We have to rely upon more exploration of data technology tools. We have to utilize social media to try to draw the connections amongst key players.
So some of the more types of organized schemes that we do see affect those like, what we consider kickback schemes. So perhaps, you have an auto scheme where you may have a medical provider, an attorney, the injured party, and they're all kind of in on the whole plan to defraud the insurance company. Perhaps, the accident may or may not have actually occurred, but regardless, they're all in it together for the ultimate financial gain. We also see it with workers' comp rings, kickback schemes, where the doctor-- like I said earlier-- is trying to keep the injured worker out of work because that's what the injured worker wants. And they're working together on how they're going to coordinate with independent medical examinations that the company may set up. It's just really, a plan to orchestrate this whole scheme for ultimate financial gain.
Text, The Organization of an Organized Fraud Scheme. A flowchart on the slide begins with a photo of one man, labeled, Ringleader, on the bottom. Then arrows connect the ringleader to three other tiers of people above, first a tier of two people, then a tier of three, then four.
CORA HALL: Wow, that's fascinating. So how do these people typically organize themselves? And what tactics do they use to carry out these schemes?
NICHOLE SORIANO: So typically, there's multiple players involved in the organized fraud rings. So usually, there's somebody up at the top. And typically, this person is a layperson, meaning it's not truly, the medical professional or the attorney, so to speak. It's a layperson, and that person is really bringing all the other fraud participants together. So you may have, what we call, a runner or a caper. That's the individual that, so to speak, goes out and seeks the injured party.
So they go out and tell individuals, hey, if you're involved in this fake accident, if you're willing to say that you were involved in this accident, I'm going to give you $1,500 right here and now. And so they go out seek these individuals, which will be the alleged injured parties, and then they encourage them to go seek medical attention with one of these scrupulous medical providers. And then, also, they are told to go and meet with one of these attorneys. And so they're starting to coordinate and get their stories straight about what injuries they may have, how long they're going to pursue their treatment, what they're going to tell the insurance company. And that's how we get involved, really, because for every accident, guess what? They need-- if it's an auto accident, they need a vehicle to be involved in. They need the policy. So there's the injured parties.
There's, also, multiple ancillary providers that get involved in these schemes too that you wouldn't even think about. But examples are like durable medical equipment companies, pharmacies. And the key to it all that I've seen is the MRI facility. Because if you get a positive MRI showing perhaps, a herniation or a tear, guess what? Now, you've just enabled yourself to move forward with a surgery. It's like the gatekeeper and the ultimate financial gain because if you have surgery, you're getting a lot more money for your claim builds up. So those are some of the types of players involved in these schemes that I've seen.
Text, Slip, Trip, Fall, Collect. A General Liability Slip Trip and Fall Fraud Ring. A photo on the slide displays a yellow caution sign with an icon of a person slipping.
CORA HALL: Thank you. That really helps illuminate it for us. I'd like to go into a real life story. And a lot of us can relate to the category of slip, trip, and fall. So I'm going to turn it over to you. Can you share a real life story with our audience?
NICHOLE SORIANO: Sure So I have an interesting case that we were involved in, and this started back in about 2015. It really came through from the claim center out of New York. They were coming to us. And a couple of the claim professionals were telling us over and over again that they were seeing facts of loss for an accident where individuals were tripping at a gas station in a very metro area. And the same attorneys were assigned, the same medical providers were assigned to these injured parties, and they started kind of putting a pattern together just from speaking to one another. Because in the claim center, they were sitting next to each other, and they'd be like, hey, Steve, I just got this trip and fall accident, and it seems like the one you had last week.
So they were kind of just communicating with one another. And fortunately enough, we have a really good relationship with the claim center so they were starting to make the referrals over to the Investigative Service Group. And we started looking into these claims and working very closely with the claim center folks, kind of talking through different scenarios that we were seeing and who the players were.
We started building this case out, and we found that a lot of these injured parties shared common characteristics, and that was criminal-- they all had prior criminal histories. A lot of them were unemployed. They were coming from homeless shelters, believe it or not. A lot of them did not have jobs. Did not have residences. Some of them had psychological disorders in the past. And a lot of extensive prior loss history. So we're able to see, if you're involved in an accident today, we could see OK, how many accidents have you had prior? So we're really trying to build out that pattern that, hey, this isn't the first time this has happened to this individual.
And then the accidents had very similar characteristics, as well. So we call them blind accidents, meaning that there was no police report, no witnesses at the scene, and oftentimes, these losses were reported very late to the insured company and to the insurance carrier. There was no medical attention at the scene. So granted, if you tripped and fell and you were severely injured, you would think that an ambulance would have came to the scene, or you would have told somebody that you needed help immediately. Oftentimes, people didn't go for medical treatment for weeks after.
And then the questionable medical treatment that did come in for these claims, it was the same suspect providers that we were looking at over and over again. So what we did was we build out our case, and then we present our cases to the National Insurance Crime Bureau. So we have a right to report questionable losses to the National Insurance Crime Bureau, as we are a member of the MICB. Well, the National Insurance Crime Bureau then, in turn, presented these findings of Travelers, as well as other companies, to the FBI, and the US Attorney's Office decided to take this case.
Well, in 2018, one of the chiropractors that was involved in the scheme was indicted, and he admitted to the whole scheme. And in his plea allocution, he admits that yes, he worked with the attorneys. The attorneys would come up with the injuries for these folks to claim, even before they even went to the medical provider and even was reviewed by the medical doctor for any types of injuries. And then, also, he did say that the MRI facility was vital in these claims because they would enable the individual to pursue the surgery. Now, granted, these surgeries were completely unnecessary. They weren't even injured, these individuals. And he said that everybody in this orchestrated scheme-- he called it the business-- he said that everybody in this business knew that the injuries were fake, and that these surgeries were unnecessary.
So these investigations take a very long time, typically. We try to be very proactive and get to the pattern of fraud very quickly, but it, often, takes a long time to put the facts together and get everybody on board. This case, believe it or not, just wrapped up about two weeks ago. We had one of the attorneys involved and one of the doctors. A press release came out and the US Attorney's Office sentenced both of them for eight and a half years in prison. So it just goes to show that I think justice was served in that instance. And I'm sure there's-- it got a lot of attention, I think, and hopefully, a deterrence for other bad actors in the business.
CORA HALL: Absolutely. And as we were preparing for this webinar, you were sharing with us that this was the case that really inspired a lot of the pretty amazing technology innovations that we've made here for Travelers and Constitution State Services customers to spot organized fraud at scale in the organized way that you're describing. So can you share a little bit about what we're doing?
NICHOLE SORIANO: Sure, yeah. I think this case really put in perspective for us that we have a good working system with the claim professionals and the claim centers, where our Investigative Service Groups really integrate themselves with the claim folks. And it's all about sharing information, sharing intelligence. Speaking up. If something doesn't sound right, it probably isn't. And that's what happened in this case. So really, just trying to be on point with one another and have those open discussions, not working in silos.
And what we're trying to do more and more is be proactive. Like, how can we identify these fraud patterns up front before the money goes out the door? So we're trying to look and explore different tools and working with our analytics folks to really say, OK, is there a way for us to highlight these patterns of fraud so we could investigate them and help the claim professionals be a bit more aggressive when we see fraud happening quicker? So I think this really highlighted all of our efforts. And as we proceed into 2023, 2024, we're continuing to expand upon those opportunities here at Travelers and Constitution State Services.
Text, Workers Compensation and Auto Fraud. Examples of "Hard" Organized Rings. In a photo on the slide, a white doctor's coat sits on the back of a chair, in front of a desk with a stethoscope and tablet.
CORA HALL: Thank you. We'd like to hear one more story, if you will. This one, please share a workers' comp and auto fraud example.
NICHOLE SORIANO: Sure. So for workers' comp, we've seen a kickback scheme, as well. So very similar to the GL fraud scheme that we saw. We started looking into a translation services company, believe it or not. Even though it's a workers' comp, a lot of the injured workers were going to the medical clinic. And they were saying that they could not speak English and that they needed to have a translator present.
Well, we started getting invoices in. And the claim professionals, in turn, found out that, guess what, these individuals do speak English, and they don't need the translation services because they're having conversations with them regularly on the phone. And we started looking at these invoices, and we found out that they weren't matching to the dates of services that we were getting bills from the providers. And then further research showed that these translation services, they weren't even registered. So they were unlicensed.
In looking at that, it kind of spiraled into a larger investigation into all of the ancillary service providers billing from this location-- from this medical clinic. And then kind of looking into the injured workers. Were their services not rendered? Were folks trying to stay out of work a bit longer than they were supposed to? And looking at the attorneys involved. So what started out as a small kind of focus area for us from an investigative standpoint really spiraled into a large case. And we were very successful in the end through litigation.
Another example in auto, this is something that I felt kind of close to. I worked very closely with the team that investigated it. And we started looking at one of these pain management doctors. And this individual, he had over 10 medical clinics in a very metro area. And we started going out into the field and just kind of showed up at the medical clinics. And we were looking for the doctor.
We started getting some insights from the claim professional that there seems to be an excessive amount of bills coming in from the provider. So in our minds, we were kind of like OK, is this doctor really at all these locations on a given day? Is he really billing for all these patients in a given day? So we started looking more and more. Not seeing the doctor at any of the medical professional practices that he was supposed to be at.
We started doing some background. Taking statements from individuals. Wound up finding that he was not rendering all the services that were being billed. We had statements to confirm that. And then more importantly, kind of ironically enough, he was arrested by the NYPD on a flight out of the country. And he was arrested for having pain pills on him and for selling the pain pills without proper prescriptions to patients. So very interesting. And, once again, if something doesn't seem right, it probably isn't. And we were on to that doctor.
Text, Key Warning Signs to Watch For. In a photo on the slide, red flags sit at points along a jagged chart line. Under the line, miniature human figures walk around in the white space.
CORA HALL: Wow, those are great examples. Thank you. I know we have a division that does preventative work with risk managers, so what are the key red flags that suggest organized fraud may be occurring? And how can we help those risk managers know what those flags are?
NICHOLE SORIANO: Yeah, I would say focus on the late reporting. So if somebody reports some type of incident, check to see when it actually occurred, as opposed to when they first brought it to someone's attention. Because in my mind, I always kind think if I slipped and fell at my employer's location, I'm going to tell somebody, or somebody's going to see it. A lot of times, these were reported very late. And also, that there was no witnesses at all. No surveillance-- no surveillance video. Nothing like that. So that's a key red flag for us.
Also, are there similar facts of loss? Are there similar incidents where maybe this individual's friends had the same thing happen to them? Typically, these types of folks like to do the same scheme over and over in their different friend groups. That's why social media is very important nowadays to look into that from that aspect, as well.
And then just kind of tying it back to what the professor was saying, these folks really like to rationalize when they have these types of fraudulent claims. So was there some types of stressors on them? Were there expected layoffs at one of the companies? Just things like that to really put your mind around to see what you could think about as far as red flags go.
CORA HALL: Thank you. So Nikos, I'd like to bring you back in because we brought up-- we're bringing up stressors, again. So I'd like you to build upon some of the red flags that Nichole just shared with us. And what are some of the warning signs that you train people to look for in your work?
NIKOS PASSAS: So one big red flag we already talked about is an economic downturn or recession. So that's something where increased attention is warranted. But also, growing competition in a particular sector or industry. That can create trouble. And any trouble, in fact, at the company or individual business is something to watch out for. Any restrictive lending or high debt conditions linked to the claimant, that can provide, obviously, motivation for someone to file fraudulently. The frequency of the type of claim. In general crooks like to hide in the crowds. So when you have a lot of people filing similar type of claims, a fraudulent one can appear plausible.
That takes us to emergency responses where large provisions are made in anticipation or in the aftermath of events like weather events, such as flooding and storms, fires, earthquakes, pandemic, terrorism, conflict, and so on. So there, we have large pools of funds, and these attract a lot of fraud, as we have seen historically.
Then we have areas of regulatory uncertainty to watch out for. In many areas, for example, technology is way ahead of the law. There are no clear standards. People are making it up as they go. And people may take advantage of existing gaps. Also, the contested legality or legitimacy of particular rules or regimes, such as sanctions regimes. Or areas such as abortion or transgender health care.
Another red flag is that a possible relationship between the claimant and an assessor. And then you have to look for environments where faith and confidence in insurance companies is challenged. For example, in the aftermath of a scandal or a big case that hits the news. Also, where law enforcement capacity or priorities are known or perceived to lie elsewhere. Or they set, for example, thresholds-- an amount of threshold for engagement in particular type of frauds. So those are the kinds of things that I would add to those Nichole was mentioning.
CORA HALL: I want to build upon that. We talked in the beginning about creating an ethical culture. How do we make sure that people feel OK to speak up and say something if they see something?
NIKOS PASSAS: So the enhanced due diligence and the knowledge about enhanced due diligence provides additional motivation. A cluster analysis of big data for pattern detection and red flagging are also important for the company. This is work that we are doing in different-- we have done that with respect to bank compliance and risk management. We're doing a similar kind of cluster analysis for big data in fraudulent online medical sales and things like this. So there are ways of dealing with this.
Scenario analysis done within the company, again for identifying and anticipating type of situations and methods of operation that would red flag people, incentives for integrity are important within the company to create and maintain a culture of integrity. You recognize people have done their job well. You recognize and award people who speak up. So when they see something, they know that you actually mean it. That you expect them to say something.
And also, the use of new technologies to detect assets. Sometimes, by the time a ruling is made about a fraudulent claim, the funds have traveled too fast elsewhere. So there are technologies to detect where the assets are, such as linking someone's email with banks around the world. So if you know that this email has a lot of activity in a particular part of the world where you know that there is bank secrecy, for example, then that helps you deal with acting on the red flags that you have.
CORA HALL: Thank you. That's super helpful. And I think, we want people to act, but then we, also, want to think through some of those resolution strategies. So Nichole, I'm going to bring you back in. What are your thoughts there?
Text, Resolution Strategies. Referral to NICB. Settlement agreements, No future billing. Claim work flow implementations. Affirmative Litigation. Stop the bleeding. In a photo, a woman behind a desk speaks and gestures to an unseen person.
NICHOLE SORIANO: Yeah, so typically, we have multiple different resolution paths that we could go down when we're investigating these organized schemes or even the opportunistic claims at times. So first of all, much like the GL scheme that I spoke about earlier, we presented our findings to the National Insurance Crime Bureau. Typically, that's what will happen. Like I said, we have a duty to comply and report our questionable claims over to them. So that's one path that we could go on if we feel strongly about the pattern and-- the pattern of fraud that we've uncovered.
Another thing that we can consider is entering into settlement agreements with some of these providers or entities. So sometimes, it doesn't make sense to go down the path towards law enforcement. Maybe we don't have enough evidence, or perhaps, maybe we don't have enough to support moving forward with any kind of proactive litigation, which would be our affirmative litigation efforts. That's when Travelers or Constitution State Services may proactively put together a summons and complaint with all the allegations of fraud that we've unraveled and proactively pursue litigation.
That's when we-- we find that alternative when we really feel very comfortable in our evidence, and we have uncovered a true hard pattern of fraud. But sometimes with those abusive behaviors that we might see, maybe more of the opportunistic soft fraud, so to speak, perhaps it's those times when we might say to the medical provider, for example, come to the table. We want to agree upon a standard for how you're going to bill us going forward, and this is the agreement that we want to pursue with you. And we really have to weigh our benefits and what's against us in these types of situations here. So we have entered into memorandums of understanding on how to proceed going forward.
And also, just the ultimate resolution strategy that I always am a big fan, of course, our main goal is to truly stop the bleeding. Like, we don't want to have to pay out thousands of dollars before we catch on to one of these schemes. So that's why we're really focused and dedicated on our proactive efforts from an investigative standpoint to make sure that, hey, we're going to the claim professional, and we're telling them if this provider starts billing us, we need to stop this bleeding. We need to incorporate a workflow immediately if we see billing from this entity. Because that's the ultimate win for us, don't let the money out the door to begin with.
So that's a little bit about the different resolution paths that we could take with these. And I want to say affirmative litigation is a good option, but it's very expensive. So that's why, again, we try to prevent the money going out the door in the first place by working with the claim centers, working and having a very strong data technology team to help us and really pursue the hard and bad actors that way, from stopping the bleeding out the door.
CORA HALL: I think that's well said. And as we were preparing for this webinar, one of the things you both taught us is that it's not always the big story that makes the headlines. It can be that day-to-day fraud. And it's everybody's role to help fight it. I think knowing what motivates someone to actually take these kinds of actions in the first place is a good first step.
Text, Final Thoughts. On the slide, a man at a desk sits behind a laptop in a photo.
So Nikos, I want to come back to you. As we have about 15 minutes here, we want to take some questions. What steps do you think individuals, organizations, and society as a whole can do to prevent white-collar crime and really hold those perpetrators accountable for their actions?
NIKOS PASSAS: So the first and most important target is to make common interests and stakes clear. For example, doing the right thing and sleeping well at night is an important objective. How compliance lowers premiums for everyone. How competition becomes fairer. How that strengthens faith and confidence in institutions. So the codes of conduct training refreshers and enforcement are important for the culture of integrity we spoke of.
Make sure we have a confidential channel to discuss and resolve ethical dilemmas and combat neutralizations. Prevent this kind of neutralizing of social controls. One way of doing that is, also, by adequately sanctioning legal and physical persons that are caught cheating, so proportionate and dissuasive sanctions. Smart use of technology, effective communication and values, and the social responsibility of the insurance company.
And conversion of values to rules. See culture of integrity as an investment. Incentives for long-term goal attainment as opposed to quarterly results. Keeping, also, an eye on, what I have called in other work I'm doing, criminogenic asymmetries that create incentive and opportunities for fraud, as well weak controls. And a crime analytics unit that some companies have help with the analysis of patterns for easier anticipation, prediction, and detection.
Fight for clear standards and introduce performance indicators. Seek synergies and collaborations, which means, also, sharing where possible, data, information, and experience where that is possible and advantageous. So emphasize the benefits of consolidated risk analysis as an overall objective. That helps with developing patterns for recognition, identification of irregularities, the mapping of criminal networks, the generation of typologies, updating of red flags, guidance for policy to the regulators, as well. And the production of evidence-based investigative clues so then you can have a better partnership, more effective collaboration between law enforcement, regulators, and companies. And all this, essentially, significantly enhances risk management and decreases its cost, so it's a win-win scenario.
CORA HALL: Thank you. And Nichole, I'm going to pull in one of the questions here from the chat about there's certainly, a lot of honest people, and you want to make sure you're being fair and pay the claim. So how should the risk managers really take the right steps to make sure they're protecting their organization from harm, and, as you said, making sure we, also, pay what we owe?
NICHOLE SORIANO: Yeah, so I would say building the culture that the professor just outlined for us, where people feel comfortable speaking up. But I think the most important thing is really raising awareness around what truly fraud is. So I'm sure, we all know somebody that's been in an accident. and I feel like that's really what drives me is making sure that people know that when people are in an accident, it's a traumatic event. So we need to recognize what is truly, an injured party, and then truly, what is somebody that's committing a fraud. And some people don't even really know what a fraud is so I think raising awareness and defining, what is a fraud, and what's not?
One example I always come back to is the hiding deductible thing. A lot of people don't know that that's a fraud. So really just raising awareness within the companies. Educating people on emerging issues of fraud in this industry. And training individuals, having a good development program for your employees to raise awareness, that comfort level of somebody cares for me, which would create a higher morale within the company. I feel like all those factors combined really set the stage for entities to be a harder target of fraud-- to put it that way-- and be more proactive in their risk management efforts.
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CORA HALL: Well said. Well, thank you so much for all of that amazing information. We do have some questions coming in from the chat. So Nikos, I'm going to start with you. Many of us were at the RIMS Conference last week and heard the CEO of SHRM, Johnny Taylor, talk about employee retaliation trends in his keynote address. From your perspective, what are some of the critical differences between the pre- and post-COVID work environment? We're hearing a lot about quiet quitting and those types of trends. But listening to the conversation today, do you think we're doing enough to educate leadership that the current risks are bigger than productivity issues? And I think this kind of comes back to some of the things you said in the beginning about the stressors. So I'll let you respond to that.
NIKOS PASSAS: There is, indeed, a much, much higher reported employee retaliation. And these rates reflect higher awareness of what is retaliation and how unacceptable it is. The quality of the organizational culture and lack of effective anti-retaliation policies. And COVID had an effect, too. More remote work. Virtual teams. Health and safety measures. New skill development to cope with the changing nature of work and to cope with the uncertainty and distress of the pandemic with anxiety, mental, and emotional challenges for workers. So leaders must be aware of the risks involved here and that includes, also, quiet quitting. Losing talent, losing valuable skills, knowledge, and experience, as well as increasing recruitment and training costs.
So when that happens and you have employee retaliation and quiet quitting with less motivated, engaged, and committed people, as well as higher stress and absenteeism and conflict, you have worse performance. And then you have reputational damage. You risk damaging the image of the organization among customers, investors, partners, and potential employees. So leaders must take proactive actions to prevent and address both employee retaliation and quiet quitting.
Providing fair and respectful treatment. Company-wide training. Setting the tone and leading by example from the top. Establishing internal complaint processes. These must be open. People must have access. This must be timely, impartial, and confidential. Companies ought to evaluate existing organizational policies and culture to see if they actually work according to expectations. And importantly, provide remedies for workers who have experienced retaliation to make them whole. So that means back pay, compensatory damages, attorney fees, and injunctive relief.
CORA HALL: Thank you. Nichole, question for you. In your role, we imagine you've had to work with risk managers who have to share with their leadership that they have been a victim of insurance fraud. That can't be an easy conversation. So help us understand what some of those moments are like, and really, some advice for working more collaboratively with functions like HR, and really educating around some of the red flags that you guys have both shared.
NICHOLE SORIANO: Yeah, so those conversations are typically, filled with mixed emotions, basically, on behalf of the company. So it does give them an opportunity, though-- the insured companies-- to look internally and say, OK, what is our current state? Where are there areas of opportunity to prevent this from happening again? So it kind of brings into light some of the rules and regulations that they've been following and where they need to make adjustments.
And then just really working with HR. So for a good example of this is if the company knows that there's going to be layoffs, maybe that's where you really uptick the fraud awareness piece within the organization. Because perfect example is you have layoffs coming up and then, all of a sudden, you have a bunch of folks that are going out on disability because they kind of just want to hang on to some financial aspect of the job. So things like that. Really working with HR together to make those announcements and having a higher development program working with HR. And making them the company a harder target for fraud. So a lot of proactive risk management reminders. And Travelers has a proactive services where we would go to the accounts and basically, apprise them of different risk benefits that they might enforce throughout their company.
CORA HALL: So excellent answer. Thank you. So I'm going to close it out with one last question again, kind of pulling into the chat. And one of the questions is, do we see abuse allegations falling into the, quote unquote, white-collar crime? And I think, I'll let you each give a closing thought around it's not always about what you see in the headlines. And so I'd like to each have you weigh in on that before we close out.
NIKOS PASSAS: So I think that sometimes it does, if it violates criminal statutes. But sometimes may fall into the category, that I have called in some of my work, lawful, but awful. Things that the law allows, but they are terrible and the consequences can be costly and damaging, in general. So this is part of what I was referring to when I said that we need to make standards clear and development where they do not exist or where they require some change.
And something that another attendee mentioned is whether a vendor that committed a fraud against one company, that information is shared with others. This is one of the advantages that I had in mind when I said that when we have consolidated, shared, kind of collective responses to these problems, there are synergies. There are economies of scale. So instead of having everybody getting victimized in sequence, a red flag or a modus operandi that has been identified in one company, everyone can watch out for and be prepared against down the road. So those are some of the advantages of this kind of systematic response.
NICHOLE SORIANO: Yeah, and I would just add, what really keeps me up at night is that these types of white-collar crimes and the organized fraud really, it affects people. So like the general liability slip and fall ring, these people were preyed upon from the homeless shelters to get involved in these accidents. And they were paid through, believe it or not, some instances, we found out they were paid with food just to participate in this scheme. They were given-- $1,000 to them felt like all the money in the world. So they were really being preyed upon by these rings and fraudsters. So that's really what keeps me up at night. Making sure that the true people that are truly injured, truly involved, the good doctors and all that, that folks are really seeking appropriate care and really treated the way they should be when they have such a traumatic event, like an accident.
CORA HALL: Thank you. Thank you so much, Nichole and Nikos. And thank you to our audience. On behalf of Travelers and Constitution State Services, we are so grateful you joined us today. And now back to Justin at RIMS.
JUSTIN SMULISON: All right. Thank you so much, Cora. That was great. I would like to, also, thank Nikos Passas of Northeastern University, Nichole Soriano from Travelers and Constitution State Services, and our wonderful moderator Cora Hall of Travelers and Constitution State Services for their time and expertise. The links are on the screen right now if you want to follow-up a little bit more. And the Travelers and CSS teams have your questions and may reach out directly if they weren't addressed today. Today's session will be available through On-Demand Events page of rims.org within a few business days.
Quick note, the RIMS Canada Conference will be held in Ottawa, September 11 through the 14th. To submit an educational session or inquire about sponsorship, visit rimscanadaconference.ca. And finally, RIMS is global, and we'd love for you to build your network with us. Visit rims.org/membership to apply for RIMS membership. This was a fantastic session. Thank you all. Stay safe.
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