Jeremy Clopton, CFE, CPA, ACDA
Senior Managing Consultant, Forensics and Valuation Services, BKD, LLP
In nearly every industry in the 2014 Report to the Nations, corruption was the most common fraud scheme. And while this means there is likely plenty of attention given to corruption, it remains one of the more difficult types of fraud to detect and try to prevent. Much of the basis of corruption is power and influence, neither of which typically show up in the financial aspects of an organization. However, we do have something in our organizations we can use to take a more aggressive approach to detecting corruption — data.
We have more data in our organizations now than we have ever had. Organizations continue to generate more data each day — data with great variety. It is the variety of data that provides us a means by which to take a more aggressive approach to addressing corruption. We need to analyze all of the data we have in our organizations, both structured and unstructured. Structured data comes in columns and rows, neatly organized. This is the data traditionally analyzed in examinations. Unstructured data is everything else, which in many organizations accounts for 80 percent of the data. This has typically been left to the digital forensics specialists for analysis.
When it comes to analyzing data sets to address corruption, it takes more than just structured data. That said, the structured data is a great place to start. An analysis of attributes of vendors, customers, employees and others an organization is doing business with can provide insights into potential relationships and conflicts of interest. The results of the attribute analysis becomes the foundation for further analysis that includes unstructured data.
Incorporating all of the available unstructured data is a critical next step when addressing corruption in an organization. One of the key data sets for expanding the relationship network related to individuals in your organization is communications data. Email, phone logs, text messages and other means of electronic communication provide context around the relationships between individuals inside and outside the organization. Not only the entities and individuals in the email, but the actual content of the messages and nature (tone) of the communications.
In addition to communications data, other useful information includes social media postings, business documents and information regarding an individual’s role in a particular business process (such as purchasing/contracts). Using this information, coupled with the communications data and relationships from attributes, allows you to build an enhanced relationship network that provides insights not otherwise available in the normal course of business. This network may provide the information you need to identify signs of corruption in your organization.
To learn more about this topic, head over to Fraud-Magazine.com and check out the Fraud EDge column. A colleague and I recently wrote a six-article series on the topic of integrating data analytics and digital forensics for more effective analysis of all data in an organization. If you’re attending the upcoming ACFE Global Fraud Conference, I will be presenting on this very topic. I hope to see you there!