Fraud Prevention and Investigation - Assignment Example

Name: Date: Student registration number: Institution: Case study 1 Mr. John is a self-employed plumber. Last year on January, his home was robbed and since he was a home insurance policy holder he made a claim to the firm, however in his claim, he exaggerated the amount of properties stolen, in his validation of the property loss he forged a number of documents so that the insurance firm would approve his claim the firm did not discover the forged documents and therefore, it paid the property stolen accordingly. Four months later, his personal vehicle was broken into and the thieves made away with a number of his personal possessions; this included his working tools. He made another entitlement to the firm under personal possessions unit of his home insurance policy. Mr. John was requested to validate all the losses he incurred with original purchase receipts by the firm’s loss adjuster. However, he was not in a position to find all the receipts. In his attempt to recover his loss, he asked one of his allies to fake some receipts for him. The policy was canceled when the loss adjuster discovered that there were a number of forged receipts. The firm refused to pay for the stolen properties from his personal vehicle. Not only that, the firm now wanted to recover back the money it had paid to Mr. John during the last claim. Mr. John complained to the firm for a number of days claiming that his last claim was genuine; however, his grievances were unsuccessful. He decided to go for a ruling in the court of law. The firm accepted that there was a genuine theft from MR. John’s vehicle. However, Mr. John foolishly forged his receipts, however; he Mr. John in his second claim was not dishonestly in an attempt to acquire what he was not entitled to (Albrecht et al. 2011). The loan adjuster had been overenthusiastic, in the insistence of strict proof of procurement of the stolen property. By applying the rationale of “The Mercandian Continent” a rationale that lays its concern on the “utmost good faith” principle, held that the firm should pay to Mr. John. The rationale states that the insurer can only be in a position to “avoid” a fraud policy only when the insurer’s liability was affected. Following the rationale, it was found reasonable and fair to reinstate the policy. Mr. John working tools were not included in his home policy. This is because home policy will not include or cover for a business tool or business based contents; only covers possessions for personal use. The firm was instructed that, even if Mr. John was guilty of scam, it would only be eligible to ‘forfeit’ the policy from the date of present claim. The past claim was to be held intact. Case study 2 A consumer complaining that the bank did not refund the payment he did without his authority. Mr. K realized that there were some transactions in his October’s credit card statement that he did not recognize. The beneficiary of the transactions according to the statement was one of the games companies Mr. K had an account with. According to Mr. K, he had created an account with the company when he purchased a game console for his son during the Easter holiday. Mr. K had not authorized for any other payment to the company thereafter. Looking back to his previous credit statement he realized that the company has been making those transactions on monthly basis. The transaction amounted to $1,000 over the last six months. Mr. K had to call the bank to make his complaints. He argued that his credit card was used fraudulently by the games company and felt the there was a need for the company to refund his money. The bank accepted that it would investigate the matter. In the process of investigation, the bank contacted the company so that they could explain what had happened. The company denied Mr. K’s claim saying that the transactions were not fraudulent and was related to the purchasing of points that one needed in order to play the games (Cheng, & Ma, 2009). The company also explained that Mr. K agreed to the terms and conditions of the company when he signed in. Following the advice from the company’s advice, the bank told Mr. K that they were no willing to refund the money to the account. Mr. K complained but there was no a consensus since the company and the bank were not willing to refund. Mr. K went to seek assistance from the court. He explained to the court that he rarely used his credit card. He was paid the full monthly balance at the end of each month since he had set up a direct debit. The court was interested in determining how the small transactions had accumulated without his awareness, also want to understand why he never learned these transactions earlier and finally to establish whether it was truly fraudulent as he suspected. Mr. K was asked how he signed up an account with this company initially. In his explanation, he said that during the Easter holiday, they sat together with his son Joe in front of the game console. They followed some online procedure to sign up for a game. He said that at the final stage, he read his credit card details to his son who entered them into the game console thus creating an account with the company. According to him, this was the first and last time that the credit card details were entered and that it was the only time that he should have paid for the gaming service. From then his son Joe has never come into contact with his credit card. He also explained that the account created was not in his name but that of his son. Just as the bank investigated the issue with the company, the court wanted to have a direct contact with the company. The company said that they always keep their customer’s subscription details from the time they sign up an account till the time subscription will expire. The there company produced the terms and conditions that every member must read understand and comply with them. By agreeing to these terms and conditions the customer has authorized that the payment detail provided are to be used in the purchase of the points. Basing the argument on the information given by the company it was found that, the transactions were not fraudulent. In fact, in the view of the court is that Joe was in a position to buy gaming point without Mr. K’s knowledge since all the credit card details were stored in the console. According to consumer’s act 1974, it states that; any individual can be held responsible for any form of transaction done using their credit card by people they have authorized. This is the exact situation that Mr. K and his son are in. It was unfair then for the bank to refund the money to him. Case study 3 A consumer complaining that a bank denied stopping a repayment of a payday lender. Joel was broke; he made a decision to take a payday loan. His application was not delayed. The lender asked for the debit card details for repayment by the end of the month from his account. As the end of the month approached, Joel comes to realize that he had not reached the target amount of money. He went to the bank requesting that they should block any repayment from his account. The bank arguing that since the loan was not a recurrent loan, and then they would not be in a position to help. The bank also advised him that only the lender was in a position to assist him. Joel was still running short of money, he decided to go and get another loan from the same lender after the first repayment was done. He secured some loan, once again and went to the bank and requested them to stop the repayment at the end of the month. However, the bank denied his request. Joel kept taking the loans and repaying it by the end of the month though he had less credit creation and therefore he did not have enough money. This caused a lot of distress to him and he even became more desperate and decided to sue the bank. The court was interested in determining whether the repayment was authorized or not. By issuing his debit card detail to the lender, the lender becomes authorized to take the repayment of the agreed period of time. However, when Joel decides to request the bank from blocking any repayment from his account he was denying the lender, authority for the repayment. The bank’s argument was that; As Joel was applying for consequent loans, he was approving for repayments again. The bank argued that they there was no evidence showing the approval of the loan by the lender. They argued that Joel gave a standing authority during the first loan application as a means of repayment of future loans (Ayres, & Ayres, 2012). When he asked the bank to stop the repayment, then it would have meant that standing authority had ended. In cases of unauthorized payments, the banks are ordered to refund the customers. For the case of Joel, the money was not his but for the lender. Stopping the repayment did not mean that Joel would not owe the company some money; he would still owe them the cash. For this reason, Joel was not broke because of the actions by the bank. However, the bank’s action caused a lot of distress to Joel while he was seeking for their support. The bank was to pay $ 350 for compensation. Case study 4 A consumer complaining of the bank’s failure to investigate unauthorized transaction done one and a half years ago. Jude was managing her small business. She had opened a business account with her bank. Her accountant realized some transactions that happened 18 months ago without her knowledge. This payment amounted to $4,000 and were all made to the same company. Jude said she was unaware of such transaction when the accountant asked for her accountability. Jude said that she was not even familiar with the company and she had not authorized such a transaction. Jude decided to seek for some support from the bank so that the bank could give her a clue on these transactions. The bank responded that their customers are only able to seek redress within the first thirteen months of transaction and after that, the bank will not be in a position to investigate any transaction. The bank, therefore, could not engage in the investigation since thirteen months were already over. The bank also said it had no transaction records. Jude felt that was so unfair for her. According to her, the bank was supposed to give support to her and be in a position to trace and monitor her transaction records. She could also not imagine losing all that amount of money bearing in mind she was running a small business. The bank could not listen to her complaints and failed to reconsider her request. Jude went to seek for legal advice. The court demanded the terms and conditions signed between the bank and the account holders. The following was the terms and condition “Any payment from your account will be done if at all you authorize the in such a way that there is an agreement between you and us. According to the court’s view, the bank was supposed to refund the money since Jude had not authorized the transactions as per the terms and conditions by the bank to its customers. The court also considered the regulations that the bank was relying on so that they fail to consider Jude’s request but they disagreed with the regulations (Brennan, & McGrath, 2007). The court also argued that there was no need for an investigation; the bank should have contacted Jude to report of the transactions that were happening without her authority. The bank was asked to give clear evidence that the transaction was authorized; however, the bank had no evidence. It was authorized to refund the money to Jude plus the interest. The bank was also to pay $200 as a compensation to refuse to consider her complaints. References Albrecht, W. S., Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2011). Fraud examination. Cengage Learning. Ayres, I., & Ayres, I. (2012). Studies in Contract Law. Foundation Press. Brennan, N. M., & McGrath, M. (2007). Financial statement fraud: Some lessons from US and European case studies. Australian Accounting Review, 17(42), 49-61. Cheng, H., & Ma, L. (2009). White collar crime and the criminal justice system: Government response to bank fraud and corruption in China. Journal of Financial Crime, 16(2), 166-179. Read More