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Memo: Fraud Prevention Initiative



Office of the Attorney General
Washington, D.C. 20530

         May 6, 1998




SUBJECT:             Fraud Prevention Initiative

    All of us who have been involved in the civil or criminal investigation and prosecution of fraud cases deeply appreciate the vital role that the Department plays in pursuing white-collar criminals and bringing them to justice. I believe, however, that the law enforcement community and the governmental agencies with which they work should place greater emphasis on the importance of fraud prevention in the overall mission of law enforcement.

    Preventing fraudulent conduct before it occurs advances two of the main purposes of the criminal law: deterring future criminal conduct and protecting the public from dangerous offenders. Indeed, the mark of truly successful fraud enforcement is its effectiveness not only in apprehending those who have already violated the law, but also in preventing others from committing future acts of fraud. Federal prosecutors and agents, because of their experience and perspectives, are familiar with those portions of the public and private sectors that are particularly susceptible to fraud. Through their investigations, they obtain a wealth of information about how criminals operate fraudulent schemes--including whom they target, what weaknesses they look for, and what steps can be taken to prevent future fraudulent schemes. Unlike individual victims of fraud, members of the law enforcement community can use their experience and existing resources to help detect similarities between various types of fraudulent schemes and identify systemic conditions that encourage criminals to perpetrate fraud.

    We, at the Department, should use these experiences and perspectives, as well as the opportunities we have to inform the public about our enforcement efforts, to prevent fraudulent activities. A greater emphasis on fraud prevention reinforces the traditional mission of law enforcement in combating fraud, since a primary goal of enforcement activity is to prevent the occurrence of future crimes.

    Moreover, aggressive prevention programs can facilitate and enhance the success of law enforcement initiatives.  For example, prevention programs that sensitize certain segments of the population to particular frauds not only reduce the risk that people will be victimized by fraudulent conduct, but also increase the probability that individual citizens will recognize the signs of potential criminal activity and report this information to the appropriate investigative agencies. Finally, successful fraud prevention efforts that are well publicized and lead to a reduction in crime also enhance the reputation of law enforcement in the eyes of the public and increase public support for traditional law enforcement activities.

    Because I believe that we can do more to harness our collective knowledge and experiences in a systematic approach to fraud prevention, I am announcing today the creation of an initiative at the Department of Justice. This Fraud Prevention Initiative will have four principal components: (1) expansion of Systemic Weakness Reporting to all areas of fraud; (2) modification of the Department s Website, and promotion of other public awareness programs to educate consumers about fraud and assist them with reports of fraudulent schemes; (3) promotion of "Exemplary Practices in Fraud Prevention" at all offices; and (4) establishment of an Attorney General's Award to recognize achievements in fraud prevention.

    1. Systemic Weakness Reporting

    To ensure that the Fraud Prevention Initiative has the benefit of the widest possible range of information and suggestions, I am expanding a policy that I instituted last year in the area of health care fraud. At that time, I required prosecutors and investigators in health care cases to report any systemic weaknesses they discovered in health care benefit programs that failed to prevent, detect or minimize losses due to fraud, waste, abuse or mismanagement. Starting today, this obligation will now extend to prosecutors and agents investigating all types of fraudulent activity. In this way, I hope to encourage all components and offices in the Department to lend their expertise and experience to prevent fraudulent activity before it occurs. Attached to this memorandum is a sample form to use in reporting possible systemic weaknesses to the Department of Justice through the appropriate supervisory channels. The Criminal Division, Fraud Section, will determine which reports identify issues of national significance, refer the reports to the appropriate departments, agencies or industries for corrective action, and follow up with departments or agencies to ensure that program changes are implemented.

     2. Use of the Department's Website and Other Educationai Efforts to Enhance Fraud Prevention

    A number of agencies in the enforcement community have been using the "information superhighway" of the Internet to educate potential targets of fraud and prevent them from being victimized in the first place. Both the Securities and Exchange Commission (SEC) and the Federal Trade Commission, for example, have used Websites on the Internet to inform the public about recently discovered fraudulent practices in the marketplace and the common indicators of fraud. These sites are cross-linked with other Webpages in order to provide one-stop access to all relevant information and to direct citizen complaints and referrals to the appropriate investigative offices.

    To give citizens the greatest possible access to information about the fraudulent schemes we investigate, I have authorized the Department of Justice to modify its Website and make it more informative to people with questions about various types of fraud, such as securities, health care, and telemarketing fraud. In addition to providing useful information to consumers about how to identify and avoid fraud, the site will provide links to several federal, state and local agencies that have expertise in combating certain types of fraud. For example, under the telemarketing fraud heading, the Webpage will list some of the standard practices that fraudulent telemarketers use to solicit customers, and will provide telephone numbers or direct connections for complaints or reports of fraud to state Better Business Bureaus. Because the Department's Website receives approximately 500,000 visitors every week, it provides an excellent vehicle for reaching out to consumers and alerting them to the dangers of fraud.

    In addition, the Department will continue to increase public education about fraud through cooperative relationships with the public and private sector entities that have access to the mass media. Providing updates and bulletins about fraudulent activity to entities such as the National Association of Attorneys General and the American Association of Retired Persons can greatly enhance prevention and enforcement efforts by spreading information about frauds and their indicators to a wider and more diverse audience. Along with the Department's Website, these efforts can warn potential victims about their susceptibility to fraud and educate them about how to avoid such dangers.

    3.  Exemplary Practices in Fraud Prevention

    Some members of the law enforcement community, often in conjunction with the private sector, have taken a proactive approach towards fraud prevention by reaching out directly to the communities most at risk from fraud. Many of these programs can be replicated by other offices that are experiencing similar problems with fraudulent crime without significant expenditures of personnel or resources. As an example, since December 1996, the Federal Bureau of Investigation, the Postal Inspection Service, the National Association of Attorneys General, and several other partners from the public and private sector have been combining their resources and experiences with telemarketing fraud to conduct "reverse boiler rooms." Staffed by members of these various agencies and companies and armed with phone lists seized from several fraudulent telemarketing operations, these "reverse boiler rooms" have called approximately 8,600 potential telemarketing fraud victims and advised them about the dangers of fraudulent telephone solicitations and how to avoid becoming a victim of such schemes. In another project, the Securities and Exchange Commission has conducted several "town meetings" throughout the United States in order to educate consumers about the dangers of fraud in the stock market. Often hosted by the Chairman of the SEC, these town meetings provide an excellent opportunity to explain deceptive and confusing stock market schemes, and to publicize the efforts of the SEC against such kinds of fraud.

    In a follow-up memorandum, I will be providing detailed information about these and other Exemplary Practices in Fraud Prevention, and asking you to consider implementing these or similar programs in your office or region. The follow-up memorandum will include guidance on how to carry on these programs and information on where to turn for more assistance or information. These Exemplary Practices in Fraud Prevention are excellent examples of how law enforcement can effectively combat fraud through prevention, and I ask every component and office to consider whether enforcement efforts could benefit from the employment of prevention programs that are best suited to attack fraud problems in your areas.

    4. Attorney General's Award for Successful Fraud Prevention

    To encourage offices and components to devise their own fraud prevention efforts, and to recognize those who successfully identify systemic fraud problems or implement effective fraud prevention programs, I am creating an Attorney General's Award for Successful Fraud Prevention. As with many other annual Awards, this honor will be available to attorneys, agents, and employees within the Department of Justice, as well as to teams comprised of various Department personnel. With this Award, I hope to motivate attorneys and agents involved in fraud investigations to use their experiences and creativity to develop successful strategies and programs to prevent fraud.

    To coordinate the various aspects of this Initiative, Jonathan J. Rusch, a Senior Litigation Counsel in the Fraud Section of the Criminal Division, will serve as Special Counsel for Fraud Prevention. You may enlist Mr. Rusch's assistance in your efforts to institute Exemplary Practices in your district, discuss with him the specific fraud problems your office or component is encountering, and convey to him your ideas for implementing appropriate program changes. Mr. Rusch will also monitor and periodically report, through the Attorney General's Council on White-Collar Crime, on the progress of the Initiative and the preventative solutions we have developed in response to your systemic weakness reports. Mr. Rusch can be contacted by telephone at (202) 514-7027, by e-mail at CRM2O.PO(JRUSCH), and by fax at (202) 514-7021.

    I urge every member of the Department to consider how to make the best use of his or her position within the law enforcement community to prevent fraud from victimizing the citizens of this Nation. If law enforcement approaches the task of fraud prevention with the same vigor that it employs when pursuing and prosecuting those who have already committed fraud, I am confident that we can significantly reduce the incidence of fraud and its debilitating effects.



Updated March 8, 2017