The battle against fraud steps up a gear

For some time now I have been drawing links between the economic crisis and the increased discovery of fraud. It is not rocket science really, as economic hardship can make people that may not normally commit fraud, find themselves suddenly fiddling the books or altering accounts in order to cover up losses or poor performance.

Of course, there is always the more criminal element that looks for vulnerabilities to commit new and varied forms of fraud. Most of the fraud experts I have spoken to have said that the crisis is not likely to lead to a greater incidence of fraud, but greater discovery of frauds that may have been going on for some time. The Madoff Ponzi scheme is a case in point.

However, a survey conducted by Vanson Bourne on behalf of predictive analytics software provider, SPSS Inc., has found that one in four (26%) financial companies reported increased levels of fraud, which it claims is double the UK average of 12%.

But it is not necessarily a lack of preparation that is exposing financial service providers to fraud, as 82% of respondents said they were very or well prepared to combat fraud, compared to 73% across all industry sectors. Now this is obviously where SPSS comes in and says predictive analytics is one tool that financial service providers should have in their anti-fraud armoury.

Yet, having the latest whizz bang anti-fraud solutions in place does not necessarily mean you are less exposed to fraud. Firstly it depends what solutions you have in place, whether they are joined up enterprise-wide or operate in silos, how well educated and trained your staff are to uncover various types of fraud and to interpret various data inputs and analytics that could suggest fraud.

We have all heard the stories of fraud technologies that generate "false positives", which means staff spend more time responding to false alerts or red flags than they do to real incidences of fraud. Professional fraudsters are also fairly adaptable and can change certain behaviours in order to circumvent technologies, which may only be programmed to look for past known behaviours of fraudsters, not new permutations.

While the bulk of the responsibility and liability for fraud has historically been with the companies that are the victims, increasingly the government appears to be assuming more responsibility with the setting up of a National Fraud Reporting Centre (NFRC) where people and businesses will be able to report suspected cases of fraud.

The UK National Fraud Strategic Authority has also given the Crown Courts extended powers to bar solicitors and estate agents from working if they are convicted of fraud. It is all part of the Government's efforts to change the perception that fraud is a "victimless" crime, but while businesses take fraud seriously, will this get the police to treat fraud more seriously?

There was an interesting report on the BBC's Panorama program recently about the government's inability to successfully recover the assets of organised crime or money earned through illicit means. While a reporting centre is a step up as information sharing can often uncover patterns of fraud across various enterprises, the authorities need to make the evidence stick and the information needs to be adequately followed up by the police, which to date have not made significant inroads when it comes to catching fraudsters.