Challenges in Proactive Fraud Control

In the last article, I had spoken about Risk Management as an area of great focus for most organizations with a great deal of energy expended around understanding various risks and mitigating them. However, one area that is often underestimated is that arising from fraud or inadvertent process violations.

As per ACFE data, 2-5% of the business turnover could be lost to occupational fraud. The typical fraud gets detected after 18 months and many go undetected. If the fraud were to be a collusive action between two groups with senior level perpetrators, the impact of fraud is greater and likelihood of detection is lower.

Likewise, when policy controls are violated, organizations get impacted from regulatory actions, customer dissatisfactions and operating risks. The reasons for violation are varied - lack of attention, indifference to follow policy, short-cuts for a business exigency or a failure to sufficiently error-proof processes and IT systems. The impact could be in a wide variety of areas - for example, offering services in a regulated domain with a lapsed certification, violating customer confidentiality through improper data handling and a data entry error. While the motivation is not mala fide, there is a significant loss of customer trust and increased compliance burdens.

In either case, the key to risk reduction would be a mechanism to monitor business activity and respond rapidly if any transaction appears improper - so the damage could be either stopped or mitigated. Unfortunately, most industries take a very ad hoc view to handling such risks - typical response is a knee-jerk reaction to a recent incident with creation of a SWAT team to look for similar instances. Over time, the focus dissipates with no concrete steps taken to address the underlying problem.

The key would be to have capability to identify and trap both deliberate frauds and inadvertent "mistakes". Over the next few blogs, we will talk around the key challenges in building such capability and how our platform addresses this challenge.

Wipro has built the Apollo^TM platform for Fraud Control using Big Data Analytics that has been deployed in various use cases in multiple industry domains. For details on the platform and underlying philosophy, please visit the Apollo^TM webpage.

About the Author

R.Guha heads Corporate Business Development at Wipro Technologies and is focused on two strategic themes at the intersection of technology and business: cybersecurity framed from a business risk perspective and how to leverage machine learning for business transformation.

Guha is currently leading the development and deployment of Apollo, an anomaly detection platform that seeks to mitigate risk and improve process velocity through smarter detection.

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