Don’t be secretive about fraud detection

Don’t be secretive about fraud detection

Don’t be secretive about fraud detection

Fraudulent activity may be underhanded in its nature but prevention and detection tools don’t have to be – in fact, one industry expert says employers should be open and honest about any systems they have in place.

“As somebody with a background in fraud detection and fraud investigation, I think one of the mistakes we can make as practitioners is being secretive when looking at data,” says Dan Zitting, a former auditor with Ernst and Young.

According to Zitting – who is now chief product officer with global software firm ACL – organizations are increasingly turning to data analytics to track anomalies and detect fraudulent activity but many don’t tell their workforce they’re doing it.

“I think a much more effective approach to the problem overall is being quite open with employees and saying; ‘While we believe 99 per cent of employees operate within our code of conduct, most companies have situations where somebody doesn’t and therefore we use data analysis and monitoring to make sure we can identify anomalies that put the rest of the organization at risk.’”

Zitting says informing employees about any detection tools in place will help undermine one of the major pillars which make up the fraud triangle – opportunity.

“The fraud triangle has been popularized for many years and it’s the notion that a fraud typically occurs when three things come together,” Zitting explains. “Those three things are motive, opportunity and justification or rationalization.”

If an employer can convince staff that there is no opportunity to commit fraud without being detected, one of the key pillars will collapse.

“By telling employees that you watch transactions and you watch data for this kind of activity, you are eliminating the opportunity side of the fraud triangle.”