Tech to Detect Fraud

Fraudsters are more often caught by tip-offs and complaints, management review, accidentally, suspicious superiors and internal audits than by use of technology and data analytics.

According to consulting firm KPMG, North American companies are not capitalizing on the use of data analytics and technology while fraudsters are finding new ways to use technology to commit fraud.

KPMG recently asked forensic specialists worldwide for details about 750 fraudsters investigated between March 2013 and August 2015 in 81 countries. The resulting report is titled, “Global Profiles of the Fraudster.”

KPMG’s analysis revealed that proactive data analytics was not the primary means of detection in any North American frauds, and organizations only used data analytics to detect 3 percent of fraudsters worldwide.

In addition, technology “significantly enabled” 29 percent of the 110 fraudsters analyzed by KPMG in North America and 24 percent of the 750 fraudsters analyzed worldwide.

In descending order, North American frauds were most often detected by tip-offs and complaints, management review, accidentally, suspicious superiors and internal audit.

“Companies can use advanced data analytics technology to search for suspicious and unusual business activity amid millions of daily transactions,” said Phillip Ostwalt, partner and Global Investigations Network Leader at KPMG LLP. “However, many are not capitalizing on such technology while fraudsters find new ways to gain access to confidential information, manipulate accounting records and camouflage misappropriations.”

In instances where fraudsters used technology to perpetrate frauds in North America, 35 percent included creation of false or misleading information in accounting records; 29 percent involved providing false or misleading information via email or another messaging platform; and 21 percent involved abusing permissible access to computer systems.

A higher proportion of frauds aided by technology may be skirting internal controls designed to detect them, according to analysts at KPMG, who found that 25 percent of frauds significantly enabled by technology were detected by accident rather than by other means, whereas 10 percent that did not use technology were spotted by accident.