Reducing Fraud in Financial Systems

(from FEI Daily) Fraud costs companies around 5 percent of revenues each year, according to the Association of Certified Fraud Examiners. Whether perpetrated by employees, third parties or some combination of both, fraud can occur in most financial and business systems including purchasing, payments, billing, payroll, inventory, shipping, reimbursable expenses and more. As organizations consider how to prevent and detect fraud when designing controls throughout financial and business processes, they should look beyond traditional approaches.

One solution takes the form of data analytics, which can both prevent and detect fraud and to improve control systems overall. The concept: Use data analytics to examine every transaction that flows through systems and flag any indicators of fraud. Various forms of fraud each have several indicators (red flags), so each transaction can be tested several ways. Then, develop automated routines to perform these tests on an ongoing basis (i.e. continuous monitoring) and implement processes to review and respond to fraud indicators as they arise.

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