TransUnion has launched a new solution that seeks to help companies identify signs of fraud and corruption linked to their employees and suppliers by using advanced data analytics.
During his presentation at the Michelangelo Hotel on 23 July 2019 Keith Wardell, Director of Fraud and ID at TransUnion, unpacked the extent of the challenge faced by South African businesses, and how data analytics can be part of the solution.
He said, “Employees are increasingly committing economic crime and fraud. If you look at the PwC study, in 2016, they recorded fraud at 45 per cent. In 2018, the number went up to 49 per cent. For our Lifestyle Assessment, we’ve actually done some case studies already. Organisations like ours, and yours have got to continually get it right.”
The TransUnion Lifestyle Assessment uses big data to flag signs of financial distress for employees, potential conflicts of interest, sudden changes in asset ownership (including property and vehicles), and potential collusion and conflicts of interest between employees and suppliers.
“At TransUnion, we take the view that we have a big data universe, how do we actually utilize that with customer data, to provide insights. And I think this is why as TransUnion we are uniquely placed to help in this fight against fraud,” said Wardell. “We hold a wealth of information that includes things like payment profile that can actually help understand how financially stressed someone is. We know all about the vehicles that are owned in South Africa. We have the vehicle types, we know the purchase price, we know how much loan is outstanding on the vehicle. Assets like cars, property are one of the most common things that are actually bought when people are perpetrating fraud,” he continued.
It’s estimated 77 per cent of South African organisations have experienced economic crime – and most of them only identify fraud and corruption after it has already happened.
“Fraud and corruption have become significant threats to the people and businesses of South Africa, which has one of the highest rates of economic crime in the world,” stated Wardell.
Who is involved
According to Wardell, senior management have more access to authorizations, and the more senior one becomes in an organisation, and the larger the approval limits become, the bigger the chance that he or she can commit fraud.
“It’s no longer people’s perception that it’s low-level employees that are involved in this. When you look at the PwC study, you see that senior management is increasingly implicated as a source of fraud, and you’ll see that from 2016 to 2018, that actually grew and middle management dropped,” he revealed.
Faces of fraud
The solution aims to help South African organisations reduce fraud losses, reduce the cost to manage and investigate fraud, prevent reputational risk by reducing fraudulent activity in the business and continuously monitor and identify hotspots in the organisation.
“What we are seeing in South Africa is that fraud takes many different faces. With bribery and corruption sitting at 14 per cent, 13 per cent for procurement, 12 per cent asset misappropriation, 8 per cent business conduct. All of these things are areas where there’s an internal aspect, there’s someone within an organisation,” he said.
Cost of economic crime
The PWC study reveals that South African companies continue to invest in fighting the challenges that fraud and economic crime introduce into the business dynamic. With 41 per cent of respondents from Africa stating that they have increased their spend on combating fraud and 45 per cent plan to increase their spend.
Wardell said, “Organisations are actually spending two to 10 times as much on the investigations as the original amount lost. And that’s because, in part, it’s reactive, you’re not being proactive, you’re not actually getting ahead of the problem. In South Africa, 35 per cent of the respondents had lost more than 1.2 million and 1 per cent reported losses greater than 1.2 billion. The cost of investing is often equal more than the actual exposure itself. And that’s because of the reactiveness.
“Lifestyle Assessment cannot be a static thing. You can’t just do it once and think of tick that box. It’s got to be done on an ongoing basis, said Wardell.
The Lifestyle Assesment solution is only currently available in South Africa.