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The forensic professional’s perspective on fraud and fraud detection
Journal of Financial Compliance,
5
(1),
85-93
(2021)
Abstract
As banks and other financial institutions become increasingly complex and rely more heavily on remote and online services, they face an ongoing and ever-changing challenge presented by fraudsters who also have devised increasingly sophisticated methods to commit fraud. An effective compliance and fraud risk management programme must incorporate better and more sophisticated ways to meet the challenge of fraud. To this end, most organisations are increasingly turning to data analytics to help devise better methods to prevent and detect fraudulent activities. At the core of this effort to develop technology solutions to combat fraud are the skills, experience and competencies of forensic professionals. It is essential that any fraud risk management programme rely upon and leverages the diverse expertise of forensic professionals who will have the industry expertise, understanding of regulatory mandates, knowledge of fraud and their red flags and the various schemes devised to commit fraud. These professionals must also possess the investigative and forensic accounting acumen to detect fraud and the data analytic competency to help programmers and data scientists devise the rules and algorithms required to detect fraud and, ultimately, the ability to identify and investigate the data anomalies that will result and require further analysis. This paper discusses the unique perspective and expertise of the forensic professional, the nature of fraud, the forensic fraud detection process, sample banking fraud schemes and how the forensic competencies inform and enhance the power of data analytic processes from rules-based to artificial intelligence (AI) and predictive analytics.
Keywords: fraud; forensic; scheme; analytic; risk factors; red flags
The full article is available to subscribers to the journal.
Author's Biography
Timothy P. Hedley PhD, is a Certified Public Accountant, Certified in Financial Forensics and a Certified Fraud Examiner. He has over 25 years of experience providing clients with a wide range of forensic services by assisting with the prevention, detection and response to fraud, misconduct and other integrity risks. He was a partner in the forensic practice at KPMG LLP, serving as Global Lead for the firm’s Fraud Risk Management service offerings. He has served on the faculty at several universities, including New York University and the State University of New York at Albany. Currently, he serves on the faculty at Fordham University, where he teaches Business Risk in a Global, Digital Economy. He is also a board member and treasurer of the Connecticut Society of CPAs. He frequently presents to corporations, professional organisations and academic institutions on a variety of topics, including fraud, misconduct and compliance risks.
Richard H. Girgenti is an attorney, risk and compliance consultant and Certified Fraud Examiner. He graduated from Georgetown Law School and formerly served as a prosecutor in the Manhattan District Attorney’s Office. He also served as the NYS Director and Commissioner of Criminal Justice Services and a Board Director and leader of KPMG, LLP’s Forensic Advisory Services and member of the Global Forensic Advisory Board. He currently serves as the Vice-Chairman of K2 FIN, an investigations, compliance and risk advisory firm, the Senior Counsel to Compliance Systems Legal Group (CSLG), a boutique law firm that focuses exclusively on corporate compliance, ethics and governance and the CEO and Founder of IDPL, a risk consulting and executive coaching firm. He is a frequently called upon author and lecturer. Rich and Tim are coauthors of the books Managing the Risk of Fraud and Misconduct: Meeting the Challenges of a Global, Regulated, and Digital Environment (2011) and The New Era of Regulatory Enforcement: A Comprehensive Guide for Raising the Bar to Manage Risk (2016). Both were published by McGraw Hill.
