Today marks the beginning of International Fraud Awareness Week, when hundreds of organizations join together to promote fraud awareness and prevention. This is ever more critical given the growing complexity of the fraud problem and the increasing sophistication of bad actors. Despite recent advances in detection and prevention methods, fraudsters are finding ways to prevail, underscoring the opportunity for a new approach – one that takes into account the need for collaboration and data sharing to counteract the cross-over nature of fraud.
The Impact of Cross-Industry Fraud Cases
Criminals looking to defraud data-dependent systems are inclined to do so in ways that supersede industry boundaries. It stands to reason that someone who cheats on a tax return would also fraudulently apply for human services benefits, or falsify details on a mortgage application, automobile insurance claim, health care claim, and so on. This reality was illuminated in the 2018 LexisNexis® Risk Solutions Fraud Mitigation Study, LexisNexis® Risk Solution’s annual survey of 800 fraud prevention experts from insurance, financial services, government, retail, health care and communications. Since 2015, the study has tracked fraud trends, particularly those related to cross-industry fraud. Each year the research has validated the prevalence of cross-industry fraud, but this year marks a study-wide high for the reported incidence of such cases – with a bump up to 89 percent from 84 percent in previous surveys.
Moreover, a large majority (80%) of these cross-industry fraud cases have moderate-to-high financial repercussions, and an increasing number of respondents indicated that cross-industry fraud also tends to have a higher impact on their organization than within-industry cases.
Given the volume and impact of cross-industry fraud, it’s time for professionals to consider prevention methods that look beyond their organization’s four walls.
A New Way of Thinking About Fraud Prevention
Big data and predictive analytics have led to higher success rates in identifying fraudulent transactions and helped insurers gain an improved understanding of fraudulent behaviors. Current prevention methodologies, however, are still proving to be no match for today’s ruthless fraudsters. Modern fraud is often perpetrated by sophisticated criminals with the expertise and infrastructure to systematically defraud financial, government and corporate entities and inflict massive financial damage. Because current mitigation methods are mostly managed and contained within industry silos, professionals are missing critical pieces of the fraud prevention puzzle that could speed up investigations and reduce overall impact. By pooling together data points to shed more light on investigations and suspicious transactions, organizations can be more effective in combating the most egregious and destructive types of fraud.
Fraud prevention professionals recognize the benefits in sharing information. According to the LexisNexis study, 81 percent of respondents indicated that they see value in having on-demand access to data about known fraud activities, events, persons or other attributes from companies or agencies outside of their own industry. Of respondents from all industry groups, more insurance professionals (53%) saw the highest value, followed by financial services (49%).
One of the most effective data sharing methods is a contributory repository, where members provide data that can then be accessed among all participants. Those of us in insurance are oriented toward this type of information exchange, with numerous examples of established contributory initiatives to combine policy and claims information (think of the Claims Liability and Underwriting Exchange, or C.L.U.E.® contributory database for personal auto claims history). Because of the cross-industry nature of fraud, a centralized fraud database with contributors from multiple sectors could broadly benefit organizations. Data could be normalized, standardized and linked together to illuminate patterns and provide a more holistic view of a suspect or case to keep investigators a step ahead of savvy criminals.
Evidence points to the fact that mitigation professionals from all industries are embracing this type of solution. The percentage of those who responded on this year’s study that they would “highly consider” contributing their outcomes of fraud cases to a centralized solution jumped to 52 percent, from 44 percent in 2017. Once again, insurance was at the top of the pack along with financial services, with more respondents who were “very likely” to contribute compared to those from all other industries.
Broadening the Effort
International Fraud Awareness Week’s significance is that it unifies those of us in disparate organizations and industries to rally around a common fraud prevention goal. When this week is done, we’ll likely go back to our silos and plod forward with our respective myopic views, while the bad guys continue to scan the landscape for ways to opportunistically exploit any organization within any industry sector as they see fit. We can build on Fraud Week’s sentiment of collaboration by taking things a step further to share data points and critical information across industries to offer a more complete and informed view of a transaction or case. What better way to beat the fraudsters at their own game, and more effectively address this shared problem?
Access the full 2018 LexisNexis® Fraud Mitigation Study, and tools and fraud prevention tips on our 2018 Fraud Awareness Week site.