Social Networking Becomes a Tool to Detect Fraud 

Be careful what you tweet about or post on you Facebook because those social media sites and others are increasing being used by investigators to detect fraud. Internet detection includes a variety of frauds such as credit card fraud, health care fraud, Medicare fraud, consumer fraud, bank fraud, social security fraud, stolen personal fraud, and the most common fraud -insurance fraud.

Nathalie Blanchard found out the hard way. In an article in the L.A. Times, Shan Li  reports Blanchard's story and how she got caught committing insurance fraud because of the posting of photos on Facebook. She had struggled with depression and took a medical leave early in 2008 from her job as an IBM technician. Soon after, she began receiving monthly disability benefits from her insurer, Manulife Financial Corp. A year later and without warning, the payments stopped. A representative of the Toronto insurance company told Blanchard that Manulife used photos of her on Facebook — showing her frolicking at a beach and hanging out at a pub — to determine she was depression-free and able to work, said Tom Lavin, Blanchard's attorney. "They just assumed from the pictures that she was a fraud," Lavin said, "without investigating further before terminating Nathalie's benefits." Blanchard went to court to ask for a temporary reinstatement of her benefits until a final decision is made. The judge who heard her request refused. Blanchard sued Manulife, accusing Manulife of failing to talk to her doctor and neglecting to inform her before cutting off payments. Manulife said in a statement: "We would not deny or terminate a valid claim solely based on information published on websites such as Facebook."

Social-networking websites such as Facebook and MySpace have become the go-to places where employers, college admissions officers and divorce lawyers can do background checks. Armed with the information, police have caught fugitives, lawyers have discredited witnesses (just think about the Casey Anthony case) and companies have discovered perfect-on-paper applicants engaged in illegal or simply embarrassing behavior. Such sites have become the latest tools in detecting fraud, which the industry says costs the U.S. as much as $80 billion a year and accounts for 3% to 10% of total annual healthcare spending. Medicare fraud alone costs $500 million.

A 2008 memo by the Department of Homeland Security has revealed that US immigration officials were instructed to use social media in order to detect fraud. The memo, entitled "Social Networking Sites and Their Importance to FDNS" (Office of Fraud Detection and National Security), was obtained by the Electronic Frontier Foundation (EFF) under the Freedom of Information Act. Agents were given instructions and information about social networks, including how to join, how to expand friend networks once one is a member and what the most popular social networking sites are. Agents were also given information on how they could use social networks to sniff out US Visa fraud and spot fake relationships.

One danger is that people constantly provide status "updates" on their Facebook pages.  Often this includes bragging or sharing about whatever cool and expensive vacation or other activity they are undertaking.  For example, claimant X might use his Blackberry to post: "Having a great day at the TCI golf course!"  But what if claimant X had also recently claimed a theft of his golf clubs?  Or an injury that prevented him from enjoying golf anymore?

If you feel you have been defrauded, I suggest you contact the Internet Crime Complaint Center. ICR was established as a partnership between the FBI and the National White Collar Crime Center. It serves as a means to receive Internet related criminal complaints and to further research, develop, and refer the criminal complaints to federal, state, local, or international law enforcement and/or regulatory agencies for any investigation they deem to be appropriate.

The bottom line is no one should commit fraud as it injures another person or organization and is motivated purely by self-interest. There is no more unethical activity than defrauding another out of money and other resources that belongs to that person.

Posted by Steven Mintz, aka Ethics Sage, on July 27, 2011