For industries with a full-time focus on fighting fraud, such as banking, insurance and healthcare, greater visibility and timely intelligence is invaluable.
Key takeaways from Aberdeen Group’s recent analyst insight on Fighting Fraud with Big Data Visibility and Intelligence include the following:
Fraud is costly
Direct financial losses from fraud can vary significantly from one industry to another or in different parts of the world, but the annual cost of fraud is substantial.
In the Association of Certified Fraud Examiners (ACFE) 2012 Global Fraud Study, an average of 5 per cent of annual revenue, with a median loss per incident of $140K (£87.5K).
Fighting fraud is complex
External sources, including tips, notification by law enforcement, external audits, accidental discovery and confessions are responsible for a higher percentage of detection and higher median losses, than are internal sources and methods, including management review, internal audit, account reconciliation, document examinations, and IT controls. Time to detection ranges from 12 to 36 months.
Current methods are inefficient
Even in a backwards-looking forensic mode, current IT controls were found to be the source of the fewest incidents detected. This is a situation that cries out for a technology-based solution.
Fraud frequency doesn't tally with impact
Doing the simple mathematics of frequency multiplied by impact doesn't help much with focus.
Financial statement fraud, for example, is the least common (7.6 per cent) but has the highest median loss ($1,000K; £625.8K), while asset misappropriation has the highest frequency (86.7 per cent) but the lowest median loss ($120K; £75K).
The choice of death-by-severe-trauma or death-by-a-thousand-cuts leads to pretty much the same result.
Success in fighting fraud pays off
Every penny of fraud loss recovered or avoided goes straight to the organisation's bottom line.
In the example of the Health Care Fraud and Abuse Control program (HCFAC), under the US Department of Health and Human Services and the US Department of Justice, every $1.00 expended in fighting fraud returned an impressive $7.20 in judgments and settlements.
New strategies for fighting fraud are emerging
Rapid changes in information technology infrastructure are increasing the difficulty of maintaining high levels of preparedness simultaneously against the full range of threats.