Companies Failing to Use Technology to Fight Fraud

While an increasing number of malicious actors are using technology to perpetrate fraud, the vast majority of companies are not using the technological resources available to fight it. According to KPMG’s new report Global Profiles of the Fraudster, technology significantly enabled 29% of the 110 fraudsters analyzed in North America and 24% of the 750 fraudsters analyzed worldwide. What’s more, 25% of frauds that hinged on the use of technology were detected by accident rather than safeguards or analytics, compared to just 10% spotted by accident in cases where the criminals did not use technology.

Indeed, proactive data analytics was not the primary means of detection in any North American cases and was only used to detect 3% of fraudsters worldwide. In North America, the most common means of detecting fraud were: tip offs and complaints, management review, accidentally, suspicious superiors and internal audit.

KPMG found that weak internal controls contributed to 59% of frauds in North America. Companies are failing to focus on strengthening controls, the firm reported, despite the increasing threat of newer types of frauds, such as cyber fraud and continued traditional forms of wrongdoing.

“In addition to ensuring internal controls are thoughtfully designed, companies should deploy effective training and instill a culture of integrity so that controls are properly executed,” said Phillip Ostwalt, partner and Global Investigations Network Leader at KPMG LLP. “Companies should also adopt new controls as their risk profiles change. Ongoing risk assessments can help cost-constrained companies ensure they are properly investing in such controls.”

Who are these fraudsters?

  • 65% are between ages 36 and 55
  • 39% are employed by the victim organization for over six years, most in operations, finance or office of the chief executive
  • 42% operate in groups and 52% of collusive frauds involved external parties

Check out the infographic below for more of the study’s findings:

Profiles of the Fraudster InfographicFraudster Infographic Women

Risk Link Roundup

Link Roundup

Here are a few recent articles highlighting some interesting issues that impact the world of risk and insurance. Topics include the impact of the Paris attack on the stock market, the emergence of the world’s largest hotelier, a former Department of Defense director of operations charged with taking bribes, criminal charges in a huge cyberfraud ring and four business owners charged with workers compensation fraud.

Wall St. Rises as Little Impact Seen From Paris Attacks

Reuters: U.S. stocks were higher in early afternoon trading on Monday after a choppy start as investors absorbed the impact of Friday’s deadly attacks in Paris.

Marriott Becomes World’s Largest Hotelier, Buying Starwood

Associated Press: Hotel behemoth Marriott International is becoming even larger, taking over rival chain Starwood in a $12.2 billion deal that will catapult it to become the world’s largest hotelier by a wide margin.

Former DoD Contractor Pleads Guilty to Taking Bribes from UK Company

FCPA Blog: The former director of operations of a Department of Defense contractor in Washington, D.C. pleaded guilty to soliciting and receiving nearly $200,000 in kickbacks in return for steering U.S. government subcontracts to a U.K. company.

U.S. Charges Three in Huge Cyberfraud Targeting JPMorgan, Others

Reuters: U.S. prosecutors on Tuesday unveiled criminal charges against three men accused of running a sprawling computer hacking and fraud scheme that included a huge attack against JPMorgan Chase & Co and generated hundreds of millions of dollars of illegal profit.

4 New York Business Owners Charged in Workers’ Comp Fraud Sweep

Insurance Journal: The New York inspector general’s office announced the arrests of four New York state business owners on fraud and theft charges as part of an ongoing series of investigations into employers and employees who defraud the state workers’ compensation system.