Being protected Using data analytics to detect fraud

Transcription

1 Being protected Using data analytics to detect fraud

2 Are you currently exposed to fraudulent activities? It will surprise few to learn that occupational fraud, IP infringement, corruption, cybercrime and money laundering continue to be a major concern for organisations of all sizes, across all regions and in virtually every sector. Economic crime threatens business processes, erodes employee integrity and tarnishes reputations. Organisations own and manage data, lots of it. Structured data like log files, spreadsheets and tables. Unstructured data like s, documents, images, and videos. This data is typically stored in multiple systems, where it s rapidly diversifying in type, exponentially increasing in volume and becoming more difficult to manage and control. While no entity is immune to the fraud threat, unfortunately, many organisations still suffer from an it can t happen here mindset. Our 2014 Global Economic Crime Survey revealed that economic crime is a persistent threat to business and business processes. More than 37% of respondents reported having been victimised by economic crime in the last three years, an increase of three percentage points compared to our 2011 survey. Small wonder that the threat of economic crime is very much on your minds. And you re likely looking at ways to minimise your exposure to fraudulent activities. Do you understand: how to become more effective in identifying and responding to serious fraud risks? what the techniques are to deliver more robust and effective analysis of key compliance issues? how to identify high-risk transactions, customers and vendors in your organisation? how to evaluate your company s compliance with internal and external controls, business rules, and organisational policies? Failure to adequately answer such questions may result in: regulatory censure deferred prosecutions significant fines imposed external oversight reputational damage serious financial losses If you don t take account of your compliance obligations, the cost and impact can be significant. You need to be able to ask sensitive and compliance-driven questions about data and receive answers in a language you understand and are able to process. PwC Being protected 2

3 Fraud is ubiquitous; it doesn t discriminate in its occurrence. The truth is that no entity is immune to this threat. * * ACFE Report to the Nations on Occupational Fraud and Abuse, % Organisations have been victimised by economic crime Facts 56% Corporate fraud committed by company insiders $1million Median loss caused per case of financial statement fraud 25% Of major fraud cases detected by data analysis and transaction monitoring 18months Median duration of the fraud before detection Chief Audit Executives Expectation Performance Senior Management Expectation Performance Board Members Expectation Performance 40% 68% 78% 81% 34% 59% Expectation: Performance: % who expect this from internal audit % who believe internal audit performs well in this area PwC Being protected 3

4 There s a clear gap in stakeholder expectations with regard to Leveraging technology effectively in the execution of audit services *. * Source: PwC s 2014 State of the Internal Audit Profession Study Data-driven fraud detection Red-Flag testing Detection of known fraud patterns by Red Flag indicators Experience-based approach, targeted view and results Rule based search techniques Mathematical and statistical Detection of known and similar fraud patterns Confirmatory approach based on (theoretical) assumptions e.g. K-means Advanced analytics Exploratory of unknown fraud patterns Use of Big data techniques e.g. Anomaly Detection, Qualitative Analytics Domain Know-how Analytics Know-how Planning Scoping Investigations Reporting Identify fraud risk areas that should be investigated Identify most efficient and effective approach and data sources Support investigations by analysis of data 360 view of the fraud scenario PwC Being protected 4

5 PwC s forensic data analytics capabilities How we can help Our clients benefit from the expertise of our former government regulators and industry leaders with extensive experience in effectively addressing a variety of fraud related questions. This expertise is enriched by our experienced forensic data analytics professionals who can help in all aspects of national and international fraud, compliance and litigation matters, from assessing and managing fraud risks, to fraud investigation support and integrating data analytics into daily processes and value streams. Our multi-disciplinary Forensic Services team has developed innovative approaches to help you assess fraud risks, plan your response and identify opportunities to increase compliance. To achieve this, we offer a proven data analytics methodology coupled with the ability to efficiently capture and analyse global data from multiple sources and languages. We augment these capabilities with allround Forensic analytical proficiency. Threats to the purchasing process In our experience, the requisitioning of goods is a ripe area for fraud. The threat is especially great in cultures where loyalty to family, school friends, local community or even national pride are strong influences stronger perhaps than dry corporate policy statements or legalistic sounding codes of conduct. An individual within the purchasing and supply department may have a pre-existing relationship with a vendor who wants to win business from the organisation. The insider provides information on the bidding process, such as the bid amounts of competitors, to ensure an advantage for their preferred bidder. Or, the insider could approve a price higher than necessary. Alternately, your controls may not function as planned. We ve observed countless incidences of employees in approval roles acquiescing to pressure from the boss to process payments that don t meet all aspects of policy and procedure. This tension between an executive s loyalty to the company versus their connectivity to the local milieu is a real and continuing threat to controls. Our data analytics team has supported numerous clients in managing challenges in the purchasing process by: gathering and cleansing data from various sources (such as invoices, log data, voice & video streams, etc) and preparing it to be retrievable for advanced fraud analytics defining and implementing tailored data analytics for complex procurement risks/audit objectives managing the challenges of procurement compliance with proactive reviews and risk-ranking of business partners ad hoc analytics to instantly respond and uncover emerging procurement fraud patterns. PwC Being protected 5

6 We give you comfort during a crisis and make sure you have a good night sleep. How we support you Incident response In the event of fraud, we design and implement a tailored analysis suite to investigate the incident and prepare a response, whether strategic or remedial. Remediation/look back reviews Meet the demands of reviewing or remediating past activities by restoring and analysing archived data to identify potential failures and restore integrity. Fraud investigations & monitoring support Need help on practical aspects of proactively addressing fraud in your organisation because you may have challenges with data integrity, too many false positives or difficulties interpreting results Regulatory responses Coordinate data extraction and analysis to meet demanding regulatory deadlines. Let s talk PwC helps organisations and individuals create the value they re looking for. We re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at For additional information, please contact: Rudy Hoskens Partner, Forensic Services Rudy.hoskens@be.pwc.com Sally Trivino Director, Forensic Services Sally.trivino@be.pwc.com PwC Being protected 6

7 2015 PwC Belgium. All rights reserved. PwC firms help organisations and individuals create the value they re looking for. We re a network of firms in 157 countries with over 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.