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Continuous fraud monitoring and forensic investigations

Acknowledging and addressing the risk of being blindsided

​Organizations that use technology to monitor for potential risks, as well as analytics to identify new emerging threats, may be better positioned to mitigate the blind spots in their fraud defenses and address the risks of being blindsided financially, operationally, and legally.

The nature and potential of continuous fraud monitoring

Proactive monitoring that leverages advanced analytics can help organizations identify trends, as well as fresh schemes that aren’t based on known instances of fraud. Rather than relying on rules, analytics produce new insights driven by what the data is showing. Attention to several considerations can help an organization generate greater value from its monitoring activities:

Embrace the deterrent effect. People have a way of falling in line when they’re being watched, whether by humans or machines. The mere existence of monitoring, properly communicated, can help nurture compliance with protocols, policies, and guidelines.

Keep it in house. Conducting monitoring within the organization instead of turning to an outside party offers several advantages, including data security and privacy. Data can be analyzed more easily on a continuous basis, and the in-house personnel can learn both how the solution works and how to maintain it.

Customize monitoring to specific risks. Disparate organizations, industries, and locations can present different exposures and threats. Data formats, complexity, and availability can vary widely. Understanding trends and tailoring fraud solutions to specific organizational characteristics and situations, with business unit involvement, can help capture greater value from monitoring activities.

Capitalize on available resources. Some of the tools needed to conduct monitoring may already exist within the organization in areas such as finance and supply chain. Opportunities may exist to leverage these investments for risk management.

Use a range of approaches. Different risks can require different analytical tools. Unsupervised modeling creates statistical profiles of normal transactions or entities and identifies outliers from these profiles.

Involve stakeholders. Risk management is no longer just the responsibility of internal audit and compliance. Business units and other functions have roles to play in identifying, understanding, and addressing fraud risks.

Focus the effort. Monitoring solutions are complex, touching disparate parts of the business. The investment and time required to implement them can seem overwhelming. Rather than casting a wide net, consider conducting a focused, specific proof of concept to understand how a solution works and the value it could potentially provide.

Stop chasing, start preventing

Establishing effective fraud monitoring can seem a monumental task, one requiring significant investment, a major implementation initiative, and huge effort to wrangle the needed data. It needn’t be overwhelming, however. Start by abandoning the idea that an ideal situation and perfect data are required. Deploying analytics is just element of a longer and broader enterprise risk management and compliance journey—a vital part, but just one nonetheless.

Next, conduct a current state assessment to determine where relevant data resides, as well as the infrastructure and tools available to house and carry out continuous monitoring. Then, define objectives, establish focus areas, and prioritize needs and actions. With such an approach, monitoring capabilities can improve iteratively over time, yielding deeper insights, fewer false positives, and a resilient organization less vulnerable to being blindsided by fraud threats.

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