How Big Data can detect and prevent fraud and corruption

Posted by Katharine TAN Pei Shi, Year 4 undergrad at the School of Accountancy, Singapore Management University

80% of Indian respondents support the potential of emerging technologies such as Big Data to strengthen the compliance and anti-fraud efforts of organisations, states EY’s 2014 global forensic data analytics survey, Big risks require big data thinking. However, according to the report, there is a low adoption and awareness around deploying the right tools which manage fraud and bribery risks, only 3% of the respondents surveyed were aware of them. It also states that regulatory compliance with respect to global anti-corruption laws, recent enforcement trends and increased focus on data privacy are the key factors fueling the design and use of forensic data analytics (FDA) among Indian organisations.

The survey showcases the opinions and views of senior Indian executives across functions such as internal audit, finance, compliance, legal and others, about their use of FDA in anti-fraud and anti-bribery compliance programs. Challenges related to bribery and corruption, asset misappropriation and capital projects emerge as a mutual adversary across the board, and a majority of respondents express concerns related to such risks, which stand higher than the global average. In line with this, organisations have aligned their FDA efforts to address key areas related to these risks. 80% of respondents agree to using FDA to investigate risks around bribery and corruption, while 83% deploy it during asset misappropriation. However, the perils of the current business environment continue to increase in magnitude and complexity. Therefore 65% of senior executives surveyed also agree that they need to do more to improve their anti-fraud and anti-bribery procedures, including the use of FDA.

Arpinder Singh, Partner and National Leader – Fraud Investigation and Dispute Services, EY India says, “Today, organisations are cognisant of the issues around fraud and corruption in India, and how they are evolving and becoming more complex with changing technology. The results of our survey echo a similar sentiment, with 65% of the respondents voicing the need to enhance their existing anti-bribery and anti-corruption procedures. While many have undertaken several steps, implemented good governance policies and proactive security measures to minimise such hazards, corporate India still has a long way to go before it can shift from a compliant to a complacent role.”

David Stulb, EY’s Global Leader of Fraud Investigation & Dispute Services (FIDS), says: “With regulators and law enforcement agencies intensifying their cross-border cooperation, resulting in significant corporate fines and jail sentences for executives, boards should encourage management to leverage forensic data analytics in their ongoing compliance efforts.”

Harnessing the power of FDA to battle fraud

Managing a holistic anti-bribery and anti-corruption framework is paramount to alleviate any immediate or impending risks in global companies, and FDA plays a key role in solidifying that framework. Rightly so, an overwhelming majority, 98% of Indian respondents say that using FDA is a significant factor which improves the efficacy of the risk assessment process. Another major advantage highlighted by 95% of the Indian respondents is the ability to detect a potential misconduct which couldn’t be detected before. FDA is also a key catalyst in improving fraud risk decision making as stated by 85% of the respondents, because of its capabilities to offer a better comparison of data. According to the survey, 93% of the respondents consider people in Internal audit and Corporate executive management as the primary beneficiaries of FDA. It is also advantageous to those in director, compliance and investigation roles.

Mukul Shrivastava, Partner – Fraud Investigation and Dispute Services, EY India says, “Changes in the Indian regulatory landscape, rapid digitisation and rising cases of cybercrime and data theft has increased today’s business risks by manifold. In line with this, the deployment of cutting edge, disruptive technology solutions and advanced forensic data analytics will be instrumental in safeguarding organisations from the detrimental effects fraud and corruption.”

Anil Kona, Partner – Fraud Investigation and Dispute Services, EY India says, “The ever expanding volume of data across disparate systems is a reality as well as a challenge for companies across all industries. Managing this data deluge and mining key elements of evidence from it during a possible fraud investigation or litigation scenario will be essential in addressing the financial and reputational risks faced by companies. The deployment of FDA will also be a huge contributing factor in building the foundation for a robust anti-fraud mechanism with continuous monitoring that enables easy adaptability and responsiveness to changing regulations”

Roadblocks hinder turning data into information

The results of survey reflect optimism around the deployment of FDA across multiple sectors. However, a majority of organisations typically analyse an insufficient portion of data volume in comparison to the size of their corporate revenues. This means that many companies may overlook critical fraud prevention and detection opportunities by not mining larger datasets. Hence, 82% of India respondents over US$1 billion in revenues report working with data sizes less than or equal to 1 million records and only 4% indicate working with data sets over 1 million records.

The survey also states that 25% of respondents have identified getting the right tools and expertise for FDA as the biggest challenge. While the leadership team should ideally explore FDA as part of their boardroom agendas, 18% of respondents maintain that they still need to increase management’s awareness about the benefits accrued. 13% of respondents also remark that the global nature of organisations augments the difficulty in adapting FDA to comply with different regulations across markets.

Bigger data, deeper insights

Traditional spreadsheet and database applications can struggle with the increasing volumes, velocities and varieties of data generated by global companies. Advanced FDA technologies including statistical tools that incorporate predictive modeling, anomaly detection and risk-scoring algorithms, can mine such big data to detect possible fraudulent transactions in real, or near-real, time. The effective use of natural language processing, or text-mining, combined with data visualisation, can handle a wide variety of sources, including both structured and unstructured data, to improve overall detection, reduce risk and increase return on the investment in FDA. So it’s no surprise that Indian respondents expect an uptick in the organisation’s spending on FDA over the next three years – almost 35% state a significant increase in the annual spend.


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