Despite the pandemic being the main influencer of the hybrid work trend, the model appears now to be here for good. With more people working from home than ever before, how can companies manage internal fraud cases?
Internal fraud has always been an occasional change that businesses need to handle. However, with people now more regularly working from their home office, there are now new possibilities for those fraudsters who are looking to eat away at the company from the inside.
In a recent post by Quantexa, the company detailed this shift in working arrangements, as well as the impact it has had on fraud tackling practices, and how these issues can be dealt with.
According to the Chartered Institute of Internal Auditors, hybrid working has created a ‘culture crisis’ for firms by eroding staff loyalty and by making it tougher for companies to retain talented employees and easier for individuals to hide fraud.
Quantexa added, “Insiders pose the greatest risk to financial institutions because they have the knowledge and insight to manipulate their organization’s systems. All banks and financial institutions face this problem. No bank is exempt.”
What are the challenges to combatting internal? In the opinion of Quantexa, one of the key challenges is that there is no clear profile of what could be described as the ‘corrupt bank employee’. Age, gender, location and number of years of service can often fail to provide a strong correlation with fraudulent activity and internal theft.
The common motivations for why employees may engage in internal fraud, Quantexa believes, can range from dissatisfaction because they feel undervalued to being simply opportunistic.
What are the best practices for internal fraud detection and prevention? Quantexa suggests monitoring bank employee transaction activity, sphere of influence detection, anomaly detection, uncovering undisclosed conflicts of interest, monitoring logon/access to IT and security systems and formalising organisation learning based on past fraud events.
The company gave an example of how data from HR could be combined with open source and other external data sources to enable an effective system for employee sphere of influence monitoring.
Quantexa continued, “Corrupt insiders often try to avoid detection by transferring money into accounts controlled by personal associates and/or family members, but with a sphere of influence database and an effective analytic tool, any links between a corrupt employee and collaborators – including telephone numbers, addresses, social media links, family relationships, past transactions, and so on – will be flagged immediately.”
The company commented, “It is encouraging that more and more banks have recognized the value of using analytic tools to prevent fraud. The same Kroll research report cited above found that in Financial Services, data analytics was rated the most effective method of detecting incidents (by 75% of respondents).”
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