3 Ways to Use Data and Technology Proactively

3 Ways to Use Data and Technology Proactively

One aspect of fraud examinations that is constantly changing is the use of technology for fraud prevention and detection, with an emphasis on detection. From rules-based systems, fraud analytics and artificial intelligence-based programs, examiners look to increase the effectiveness and efficiency of their work through the use of technology. However, it is critical to the management of fraud risk that examiners focus more of their efforts on the use of data and technology on the mitigation of fraud risk.

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How is Your Company's Fraud Health? Test It and Find Out.


Mandy Moody, CFE
ACFE Content Manager

As we prepare for International Fraud Awareness Week, November 12-18, we make sure to always share one of our tried and true, free resources: the ACFE Fraud Prevention Check-Up. The complimentary tool will test your company’s fraud health with a detailed checklist and video.

Why you should take the Fraud Prevention Check-Up:

  • It is an easy-to-use way to identify gaps in your company's fraud prevention processes. By identifying risks early, you have a chance to fix the problem before losing money and becoming a victim of fraud.
  • It is a great opportunity to establish a relationship with a Certified Fraud Examiner (CFE) whom you can call when fraud questions arise. Since the risk of fraud can be reduced but is rarely eliminated, it is likely your company will experience fraud in future and will need a CFE's assistance.
  • Strong fraud prevention processes bolster the confidence investors, regulators, audit committee members and the general public have in the integrity of your company's reports, which will help you attract and retain capital.

Make it a priority to get your ACFE Fraud Prevention Check-Up and share it with your colleagues and managers during this year's Fraud Week. Also, check out more free resources like this at FraudWeek.com.

Fraud Week 2015: What You Might Have Missed



Mandy Moody, CFE
ACFE Media Manager

The ACFE would like to thank all International Fraud Awareness Week Official Supporters, supporting media, bloggers, tweeters and posters for their amazing participation in Fraud Week last week. We would also like to thank our Featured Supporters this year: CRI Group, BNP Paribas, Mashreq, USAA, FGB and ADCB. The success of Fraud Week could not have happened without all of these dedicated people working together around the globe to spread the message that fraud can be prevented and detected.

Even with the many articles and resources shared, you might not have seen all that was done to highlight fraud detection and prevention. Here are some Fraud Week highlights you might have missed:

  • Video - Fraud: Yes, It Can Happen To Your Business
  • Video - Too Much Trust: How Fraud Happens Where You Least Expect It
  • Infographic - The True Cost of Fraud
  • Article - Know Where You Are Going: The Value of Interviewing Fraudsters
  • Article - Frontline Impact: 3 Practices For Creating Organizational Fraud Awareness
  • Article - Tackling Fraud in Higher Education: Universities Are Taking Up the Mantle of Fraud Prevention for Fraud Week

Remember, fraud awareness doesn't begin and end with Fraud Week. It is a year-round effort being supported by fraud examiners all over the world. Thank you all again, and we look forward to next year’s event!

Think Outside the Financial Data: Visualize Employee Activities


Jeremy Clopton, CFE, CPA, ACDA
Senior Managing Consultant, Forensic and Valuation Services

We have more data available to us as fraud examiners today than we ever have before. However, we have less data today than we will likely have in the future. These new data sets are new opportunities for us, but also present new challenges. What data sets do you have that you need to leverage for your next fraud examination?

I am a big fan of podcasts, especially those that really grab my attention. Two recent podcast episodes, When Your Conspiracy Theory is True from Note to Self and Eye in the Sky from Radiolab, focused on the use of surveillance in crime prevention and detection. While fascinating, these podcasts didn’t directly relate to the world of fraud prevention and detection. But I found that the same principles can still be applied because of the focus on the use of non-traditional data sets — in this case, location-based — and visualizing them in an fraud examination.

Application in Examinations
Much of the data fraud examiners focus on is in the traditional accounting system, and the data that doesn’t come from the accounting system is still likely financial in nature. As I have mentioned in previous posts, to effectively leverage an organization’s data we need to think outside the financial data. Beyond the financial information, we have great amounts of data at our disposal about our companies and related activities. Take, for instance, data regarding access: access to buildings, computers, networks, phones, access to anything that tracks the user. This information can be used to essentially track an employee throughout your organization during the day, using such details as:

  • Time of first email access
  • Time when the person entered the parking garage
  • Time accessing the building
  • Time logging on to the computer
  • File access times
  • Breaks during the day based on computer activity
  • Print times for individual documents
  • Time logging off the computer
  • Time leaving the building
  • Time leaving the parking garage
  • Re-entry of any location
  • IP address if logged in off-site

While you may not have video or pictures tracking your employees, like the technology referenced in these podcasts, you do have individual data points that allow you to track your employees’ activities during the day so you can begin to create a picture of what their activities look like. Visualizing this information may be a benefit to you in your next fraud examination. If nothing else, it may help you narrow down the list of those you want to investigate further.

The Top 3 Fears that Paralyze Fraud Prevention


Tasha Bailey, CFE

As a senior risk vendor analyst, I've primarily worked with companies that bring in annual revenues of $5 billion or more, and I've seen the full range of attempts to address fraud within the purchasing-to-accounts-payable cycle. Often, the company doesn't put a robust process in place until it's in the news with a violation, an FCPA incident or an internal case of undetected embezzlement that might have gone on for years. But why? As money walks out the door, why wouldn't companies adopt a more proactive stance for early detection?

The answer is fear. Fear can prevent a mom-and-pop shop or a Fortune 500 industry leader from becoming serious about fighting fraud. Business analytics and portal systems certainly enable companies to more quickly mine through volumes of data and identify red flags, yet they're not a requirement for fraud prevention. Depending on the size of the company, it can data mine and detect fraud early with such basic tools as Microsoft Access and Excel. And while companies pay lip service to efforts to fight fraud, they're often slow to take advantage of even these most elementary methods. Let's consider how the fear factor plays into the decision — or indecision — to fight fraud.

Fear No. 1: Cost. Like health or car insurance, fraud prevention software is a cost for which you don't always recognize an immediate return. Management wants money brought back to the bottom line, and it's easy to assign a dollar figure to payment errors using platforms like duplicate invoice analysis. But when it comes to identifying and preventing risk and potential fraud, returns can be harder to quantify.

I often hear concerns about spending money on a system that might or might not identify fraud. And if the system does identify fraudulent activity, companies are now obligated to spend more for the additional investigation and possible litigation. Larger companies might see money lost to fraud as "pennies," but pennies add up. That's money that could have been reinvested toward a company's bottom line.

Fear No. 2: Technology. Companies are concerned that implementing new software technology might increase their exposure to fraud via data breaches. They're also concerned that technology will replace internal auditors. While data encryption and similar tools can combat the risk of data breaches, addressing personnel concerns are trickier.

When I work with companies, I point out that technology in any form is a means to assist — not replace — people. Computers alone don't "discover" fraud; they simply detect red flags that can point you in the right direction. The red flag could be a simple data-entry error or an anomaly within the data. Technology helps identify red flags, but human input and investigation is required to determine if fraud is indeed occurring. From there, companies must ask questions.

Fear No. 3: Loss of reputation. Companies might fear their reputations will take a hit if they uncover ongoing fraud schemes. Social media has evolved to become an incredibly popular form of information sharing, so all it takes is the hint of a rumor and the damage is done. Employees might post information — or alleged information — that makes it appear as though a company is attempting to hide something. For that reason, it's to a company's advantage to be open with their employees in their effort to fight fraud. Employees are less likely to whistleblow in public when there are safe, internal options for them to report discrepancies to management. For example, use proactive social risk-management strategies, such as toll-free hotlines, to help employees feel comfortable reporting potential or suspected frauds without the fear of retaliation.

Passive detection methods aren't enough anymore. It's been proven time and again that instilling proactive efforts to discover or reduce fraud will increase the bottom line and enhance a company's reputation.

Read more from Tasha, and find out the best practices for engaging analytic tools and front-line staff to identify and prevent fraud on Fraud-Magazine.com.