Companies are failing to use technology in the fight against fraud, one of the big four accounting firms has warned.
New research from KPMG has found that technology is the Achilles heel in the fight against fraud, with only three per cent of companies successfully using data analytics to detect fraud.
Meanwhile, it says, a quarter of fraudsters use technology to rip off companies.
In fact 24 per cent of technology-enabled frauds were caught accidentally, demonstrating that companies are failing to harness new methods of fraud detection, the research states.
"As technology becomes more advanced, so too do the schemes to use it maliciously. And while it’s clear that fraudsters are all too comfortable using technology to perpetrate a fraud, we are seeing little evidence that companies are doing the same in response to prevent it," said Alex Plavsic, head of investigations at KPMG in the UK.
"A shockingly small number of companies have invested in threat-monitoring systems and data analytics, which can shift through data looking for suspicious items and help businesses uncover and question anomalous or suspicious behaviour."
"Social media is also an important weapon in the fight against fraud, and needs to regularly monitored by companies to uncover suspicious behaviour. Fraudsters’ urge to brag, show off assets and reveal their business connections can prove insightful as they unwittingly share too much online."
More specifically, the research found that companies are using traditional methods to detect fraud, remaining reliant on employees or third parties like suppliers and customers to report suspicious behaviour.
As 44 per cent of fraudsters ended up caught as a result of a tip or whistleblowing hotline, KPMG said this highlighed the importance of enabling individuals to feel safe to step forward without fear of retribution, and giving them the means to do so.
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While technology is key, it is just therefore one of the core elements needed to detect fraud, including a team of accountants, investigators and technologists working with data scientists.
Of note is that the average fraudster was male, aged 36 to 55 and holds a senior role in the company. In fact, 44 per cent of the fraudsters were able to commit fraud due to their virtually unlimited authority, which meant they could easily circumvent or override company contols.
“Without anyone to keep their power in check, these executive fraudsters can commit high value fraud and remain undetected for a significant amount of time. They pose a double threat to their employer: not only can they use their authority to override controls, they can also order employees to perform tasks to assist or cover their misdeed, making it harder to detect,” Plavsic added.
Earlier this year KPMG reported that frauds in the UK in 2015 were worth £732m, up from £717m in 2014, with crimes committed in London and the South East having accounted for over half of the fraud taking place across the country.