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Secrets, Conspiracies and Hidden Patterns:
The World of Forensic Data Mining
Shauna Woody-Coussens,
Director, Forensic & Valuation Services
AVA, CFE
Agenda




Forensic data mining defined
When it is used
Common areas of use
Benefits associated with using forensic data mining
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Forensic Data Mining
Use of sophisticated procedures and technologies to
identify concealed patterns in financial, non-financial
and textual data that would not otherwise be detectable
due to the size and complexity of the data.
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Benefits of Data Mining
 Don’t necessarily need to know exactly what you are looking
for, initially
 Allows analysis of 100% of data rather than sampling
 Search and analysis of massive, complex data sets
 Identifies patterns and anomalies
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Patterns Identified with Data Mining
 Numeric – fictitious invoice numbers, fictitiously-generated
transaction amounts…
 Date – Transactions occurring too regularly, activity at
unusual times or dates…
 Name – Similar and altered names and addresses…
 Geographic – Proximity relationships between apparently
unrelated entities…
 Textual – Detection of “tone” rather than words…
 Time – Changes in behavior / activity over time…
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Common Areas of Use
 Shell companies and “phoenix operators”
 Embezzlement and financial statement fraud
 Procurement / Payables fraud
 Corporate espionage / Theft of intellectual property
 Loan fraud and other banking schemes
 Public corruption and conflicts of interest
 Due Diligence/Mergers and Acquisitions
 Foreign Corrupt Practices Act (FCPA) investigations
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Dissecting Data – Shell Company Example
Automated web crawlers do not detect
“presence” of name against outside
data sources.
Cross Reference Against:
 Postal contractors database
 Correctional facilities database
 High-risk ZIP codes
 Unexpected / unusual addresses
The UPS Store
1221 East Kearney
Springfield, MO
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Address Geocoding
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Straight From the Headlines…
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Address Geocoding
“Vinny’s
Salvage
Yard”
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Address Geocoding
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Classic Loan Example
(1) Name similarity
(3) Customer phone matches CEO cell
phone
(2) Customer address matches CEO address
(4) Customer TIN matches other customer
TIN
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Time Series Patterns
Vendor: JLM Plumbing
Processor: Janice McPhearson
1600
1400
“Break Out”
Getting Greedy
1200
1000
800
Acceleration as Confidence
Builds
600
400
Testing the Waters
200
0
1/21/2006
2/21/2006
3/21/2006
4/21/2006
5/21/2006
6/21/2006
7/21/2006
8/21/2006
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Classic Real Duplicates
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FCPA Applications
 Email, text and chat communications
 Unusual timing, coding and treatment of transactions
 Identification of shell entities
 Identification of conflict of interest relationships
 Blend of computer forensics and data mining for maximum
benefit
 Prime candidate for “Exploratory Data Mining”
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Exploratory Data Mining
Non-Obvious Relationship Association
Linking items that are related but removed by several
degrees of separation to mask their relationship.
Latent Semantic Analysis
Concept searching based on tone, recurring themes and
communication nuances
Neural Networks and Artificial Intelligence
Machine can learn and help discover deeply hidden patterns
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Non-Obvious Relationship Association
Items related by degrees of separation
Credit: Coleen McCue
Carrie Fischer was in Star Wars
with
Harrison Ford who was in The Fugitive
with
Tommy Lee Jones who was in Batman
Forever with
Val Kilmer who was in Heat
with
Robert Dinero who was in Sleepers
with
KEVIN BACON!
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Actual NORA Example
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Artificial Intelligence and Clustering
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Textual Data Mining
 Corporate email
 Board minutes
 Company document collections
 Employee reviews and performance appraisals
 Corporate telephone records, cell phones
 Public records information and personnel files
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Text Data Mining and Fraud Triangle
Opportunity
Pressure/Incentive
O Score
Key Words
• Meet the deadline
• Make sales quota
• Under the gun
Key Words
• Override
• Write-off
• Recognize revenue
Rationalization
Key Words
• I think it’s OK
• Sounds reasonable
• I deserve
Fraud
Score
P Score
R Score
Source: “Detecting Fraud by Integrating E-mail Analytics with the Fraud Triangle,” Fraud Magazine, May/June 2009
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Contact Information
Shauna Woody-Coussens
[email protected]
816.701.0250
www.bkd.com/service/forensics/institute
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