Real World Applications of Fraud Analytics

By Kirstie Tiernan| May 03, 2019

Although organizations have accumulated more data than ever before, many businesses still struggle to understand what their data is telling them. Fraud analytics applies the latest technology and subject-matter expertise to help organizations more quickly digest, assess, and utilize their data in high-stakes matters involving voluminous data sets, disparate information, and complex issues. With greater awareness and deeper insights, fraud analytics can surface issues and operational inefficiencies that would have otherwise remained hidden if traditional methods were still being used.

Use Cases for Fraud Analytics

Despite the common perception that some of the tools and methodologies used in Fraud Analytics are far too radical and complex for the average organization to take on, advancements in cloud-based data-analytics platforms, coupled with service providers who understand the needs of the midmarket, are putting fraud analytics within reach of organizations of all sizes.

Let’s take a look at some real-world use cases that illustrate the ways fraud analytics is helping organizations identify fraudulent activities, reduce spend, and improve operational efficiencies.

Ghost Vendors

A large plumbing products distributor with an array of more than 6,000 products was concerned about the lack of controls and potential “ghost vendors” invoicing the firm fraudulently. The company partnered with BDO’s fraud analytics team to surface red flags and identify false payments. They leveraged existing fraud tools to deliver internal audits efficiency and automation through geo-identification and review of vendors. Vendor addresses were visualized with geographical coordinates to perform a more thorough review of vendors using physical pictures of locations in Google Maps and other tools. After the initial audit, more than $1 million in false payments to ghost vendors was identified.

Duplicate Payments

A large hospitality group that manages and provides food and beverage concessions, premium dining, entertainment, lodging, and retail at many large venues engaged BDO to analyze their ERP system for duplicate payments to vendors. The default duplicate payment control looked for duplicates within business units, but not across business units. Over time, vendors learned that they could send the same invoice to two different business units and get paid twice. By leveraging AI-powered fraud analytics, they were able to identify anomalies or patters across disparate data sets that led to the discovery of more than $2 million in duplicate payments to vendors.

Manipulation of Point of Sale (POS) Systems

A franchisor of a pizza chain suspected manipulation of Point of Sale (POS) systems aimed to decrease revenue and royalty payments, thereby increasing franchisee’s individual profits. After working with BDO’s fraud analytics team to perform an investigation, they determined the total number of deleted sales transactions, which exceeded 100,000, and calculated the value of the missing orders. In addition, the team discovered how the culpable franchisees were committing the fraud: an unauthorized back door had been coded into the POS system, enabling the franchisees to access the system and delete orders. As a result, the franchisor was able to recover over $1 million in unpaid royalties and address the vulnerability in the POS system to prevent any fraudulent behavior in the future.

Manual Data Entry

A company hired a new head of tax who quickly diagnosed the reason that his group was under-performing: too much work and too little time. When engaging with BDO’s analytics team, one of the tasks was to develop an automated solution that would reduce the amount of time it took to prepare the monthly CFO update presentation slides. Information for their report had previously been pulled from multiple Excel files and involved a large amount of manual data entry and manipulation. An automation (bot) was created to look in the source files and automatically create the presentation slides, including all the formatting changes and updates to the captions in the notes.

The automated solution saved the team 15 hours every quarter, along with ensuring the numbers were accurate. Because all the data was now being pulled together in a database, they were also able to add value to their current update by analyzing trends over time, creating a more insightful analysis to the CFO. This resulted in an estimated savings of $7,500 per year.

What Will You Uncover with Fraud Analytics?

Fraud is a big problem for many businesses. These examples just scrape the surface of the many types of fraud with which today’s businesses must contend. If you’re interested in learning more about how fraud analytics and automation can help you uncover and even prevent fraud, contact us to learn more.

Kirstie Tiernan is a managing director in BDO’s Technology & Business Transformation Services practice with more than 15 years of experience providing data analysis, information technology (IT) advisory, digital forensics, and e-discovery services. 

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