Taking a Byte Out of Crime – An introduction to computer fraud

Computer operations are particularly vulnerable to fraudulent manipulation. This article reviews some of the more common types of fraud.

Virtually every phase of computer operations is vulnerable to fraudulent manipulation. A particular phase may serve as the ultimate target of a fraud scheme, a tool in the commission of the scheme or both. While computer fraud can take many forms, the following types of fraud are common:

Computer manipulation. Computer manipulation fraud usually targets intangible assets represented in a data format, such as deposited money or credit card information. Advances in remote access to databases replete with such data provide fraudsters with the opportunity to carry out their schemes from afar. Because assets stored in data format frequently boast a much higher value than other economic assets, the losses from their theft can be significant.

Program manipulation. Program manipulation is performed by a fraudster with knowledge of the particular computer system and program. The perpetrator can leverage that knowledge to alter existing programs or tuck new programs into the computer system. Fraudsters can exploit such manipulated programs to perform unauthorized functions. Program manipulation is tricky to uncover and often goes undetected for long periods of time.

Input manipulation. The most common type of computer fraud involves the manipulation of input, usually through the intentional entry of false data, like credits for merchandise returns that did not actually occur. A fraudster needs no specialized knowledge or expertise — just access during the input phase of operations. Input manipulation is easy to do and difficult to detect.

Output manipulation. Output manipulation typically is accomplished by manipulating output-related computer codes. One of the outputs of an automated teller machine, for example, is cash. Fraudsters can encode false electronic data on the magnetic strips on bank and credit cards to induce an ATM to dispense money.

Document manipulation. Two types of document manipulation, or forgery, implicate computers. Documents stored in electronic form can be forged by changing or copying the original documents. Technological developments, like high-quality home laser printers, also make forgery more likely. Little computer expertise is required to create counterfeit checks, invoices, letterhead and other documents, either with or without originals.

Understanding the most common types of computer fraud makes it easier to uncover schemes. But computer and other types of fraud are dynamic and take advantage of ongoing technological developments. Forensic specialists can prove invaluable in the virtual hunt.