[Flashback] Firms eyeing growth in anti-fraud market


Posted by Eugene SAY Gui Hua , Year 4 undergrad at the School of Business, Singapore Management University

AS CORPORATE hacking becomes commonplace and regulators face no shortage of wayward companies to put under scrutiny, the cyber-security and anti-corruption business is growing fast.

The market for fraud investigation and dispute services in the Asia-Pacific region – including China but excluding Japan and India – is worth more than US$400 million (S$530 million) a year, estimates professional services firm Ernst & Young (EY). If compliance work were included, that number would rise dramatically.

“More organisations are realising that fraud is no longer a matter of if but when. And they’re taking a more pre-emptive rather than a reactive approach,” said Mr Reuben Khoo, EY partner and head of forensic technology and discovery services in the Asia-Pacific.

About 60 per cent of EY’s Asia-Pacific fraud investigation and dispute services business comes from investigations – the unit’s traditional focus.

But fraud prediction and proactive compliance work across all industries is growing, and makes up 30 per cent of the business now.

Driving the globalisation of anti-corruption activities are regulation and enforcement, which firms have come to recognise as business risks.

“The regulatory environment is changing very fast, and many multinational corporations are subject to local regulatory requirements here, as well as from where they originated,” Mr Khoo said.

Governments have also been stepping up enforcement. Leadership change has become associated with anti-corruption crackdowns, said Mr Khoo, noting the series of high-profile bribery probes of drug-makers in China.

In Singapore, financial services firms which have had to respond to regulators’ inquiries around Singapore Interbank Offered Rate (Sibor) rate-fixing are some of EY’s largest clients.

Multinational life sciences and pharmaceutical firms, many of which have their regional headquarters here, as well as oil and gas companies, listed companies and even government agencies add to the client mix.

EY is bent on expanding its fraud investigation and dispute services unit here. Last year, it invested US$1 million in its first

eDiscovery data centre here. The Serangoon office is a node in a network including three other data centres in Hong Kong, Sydney and Shanghai that will help EY serve its clients who have offices throughout the Asia-Pacific region.

“Why a data centre? Big data,” explained Mr Khoo. “Today, we have high volumes of data with high velocity that change all the time – voice and e-mail correspondence, data coming from mobile devices – all this has caused an explosion of data.”

In the past, investigators used to be able to work on cases uploaded onto mobile platforms. Now those are too small. The average investigation requires EY to store and sift through some four terabytes of data in a high-security environment. One terabyte is 1,000 gigabytes.

To predict fraud, keyword searches are run to catch patterns that are associated with fraud.

One pattern is the use of phrases such as “help fee”, “resolution data” or “facilitation pay” to describe improper payments. Another pattern is for fraudsters to transfer money through different counterparties.

After the predictive coding and manual checks, a data set might yield only 100 or 200 “hot documents” that are relevant to the investigation.

“Basically, we’re taking large amounts of data and looking for patterns of behaviour that may indicate malfeasance,” said EY fraud investigation and dispute services managing partner Chris Fordham.

EY’s fraud investigation team has tripled in strength over the last four years, and Mr Fordham intends for it to double in the next year or two.

But EY is not the only firm eyeing this market. “Everyone’s trying to build teams as well, and you can say there’s a war for talent here,” said Mr Fordham.


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