We all know that it has increased the market span of digital technologies, and even though this has eased our day to day existence, it has paved the way for fraud and corruption as criminals hack into digital platforms.
The increase in fraud with cybercriminals targeting people with fake activations of debit and credit cards, online bookings, free coronavirus tests, and job offers have led to the adoption of fraud detection and prevention systems.
Over and above this, people have hit against hard times, which has increased the need to steal. Corruption are generally facilitated through four primary schemes, conflict of interest; bribery; illegal gratuities and extortion.
Many industries are vulnerable to protect transactions from fraud, which includes financial risk mitigation and fraud detection – in real time.
The insurance industry, for example, has also experience its share of fraudulent claims, in the funeral claims alone as an outsource partner for a large portion of the funeral insurance industry in South Africa, we have risk-rate between 250,000 and 500,000 claims per year and the majority of these claims are flagged with a high propensity for fraud. We believe that despite this not being the full number in the country, it is a realistic picture of the impact of Covid-19 locally, both in terms of changes to claims frequency and the propensity of fraud.
What is more alarming than the number of claims processed is the increase in fraud rejections when compared to the previous year. In 2020, the number of fraudulent claims increased by 35.9% and the average value per fraudulent claim increased by 15,5%. More fraudulent claims as a percentage of total claims and higher average quantum – definitely indicative of opportunists and syndicates taking maximum advantage of the carnage caused by Covid-19.
Fraud detection technologies have evolved with the introduction of pattern recognition. Machine learning has given a major boost to artificial intelligence to defend as it can protect companies from insider fraud and identify anomalies in individuals who might leak data.
As such there has been an increase in demand for Artificial Intelligence and Machine Learning.
This is all good, but one of the biggest challenges facing companies today is the lack of skilled professionals who are able to deal with fraudulent activities. Companies lack the right skill set to analyse and identify advanced fraud, and global stats show that there will be a shortage of these talents going forward.
The answer to fighting fraud today and into the future is a combination of skilled professionals and using the sophisticated technology of Artificial Intelligence and Machine Learning.
A paper published by The Royal United Services Institute (RUSI) for Defence and Security Studies in the UK – “The Silent Threat: The Impact of Fraud on UK National Security” – indicates that “fraud has reached epidemic levels in the UK and should be seen as a national security issue”.
The paper speaks to many aspects similar to what we have seen in South Africa. All the revelations at the Zondo commission on State Capture, evidence of fraud and corruption published and even all the promises of Government to tackle and address fraud and corruption, have not made any difference to our dire situation.
The RUSI-publication points out that we are not unique – “Although the greater airtime for fraud in government, parliamentary and media circles is welcome, this has not resulted in the fundamental strategic shift in the thinking needed to tackle the problem, with the debate continuing to view the issue primarily as one of criminal justice. While a policing and criminal justice response is clearly an essential part of the response (and one which this research found to be chronically under-resourced), this response alone has clear limitations against the modern face of fraud, which is increasingly cross-border and cyber-enabled.”
The old saying from the 15th century “prevention is better than cure” is a fundamental and proven principle in modern health care, but seemingly ignored in other spheres. Our challenges are many, but as fraud fighters, the question needs to be asked, how do we convince a business or person who has not been a victim of fraud to implement preventative measures?