India Fraud Indicator 2012

Increasing magnitude of fraud

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India Fraud Indicator 2012 is a first-of-its kind initiative in India conducted by the Fraud Investigation & Dispute Services team to look into fraud in all spheres of society, including the business and government segments, as well as in the case of financial institutions and individuals. In-depth analysis of the report suggests that businesses are continuously exposed to fraud risks, with losses recorded in this edition accumulating to around INR66 billion.

Some of the salient features of the report are:

  • The financial services sector was the worst hit, with more than 63% of the total fraud cases reported in 2011–12, followed by technology and transportation
  • In the financial services sector, banking was the major victim with 84% of the total number of reported fraud cases
  • Around 58% of fraud was committed by people below the age of 35
  • In our sector-wise analysis, financial institutions are the principal victims of fraud (by number of cases), followed by customers and commercial businesses
  • 61% of fraud cases committed against businesses are “inside jobs” committed by the employees of organizations
  • Delhi witnessed the largest number of fraud cases and suffered the highest aggregate losses by fraud (as compared to the rest of the country) in 2011–12

“Alarmingly the top 10 frauds recorded in this study accounted for losses amounting to INR56.7 billion i.e. 86% of the total losses due to fraudulent incidents in the FY12 clearly indicates that it’s the magnitude of these frauds that adversely impacts our economy and makes investors vary about doing business in India. Although, fraud is not avoidable, however it can be identified, deterred and prevented with guided pro-active measures”

says EY Partner Arpinder Singh.


Future outlook - How can organizations mitigate their risks in this scenario?

While it is not possible for organizations to operate in a zero fraud environment, proactive steps such as conducting risk assessments of procedures and policies can help them hedge their risk of contingent losses due to fraud.

The importance of regularly assessing and reviewing systems and processes for fraud risk cannot be emphasized enough. Just as in a fire safety exercise, where you constantly assess your premises, systems and equipment, and conduct regular drills, a fraud risk assessment will help you to recurrently review your policies and built-in checks, and use advanced technology to mitigate the fraud risk in your organization.

Proactive forensic data analysis: technological defense against new-age fraud

Some techniques such as data visualization have proved to be effective, since humans can absorb larger pieces of information when this is presented in a visual format rather than when it is displayed in plain numbers or text. A large amount of useful and “not so apparent” information related to a fraud scenario can be reviewed at one go by this technique. Fuzzy logic is another technique, which can be used on the data records of a company, e.g., the Employee Master, Vendor Master and Customer Master. These, clubbed with a social network analysis, can indicate possible threat of collusion.

Progressive reviews of unstructured data can help organizations analyze the sentiments, tones and elements described in the fraud triangle (incentive, pressure and rationalization). This, together with unsupervised pattern recognition, can proactively help them to put in place fraud parameters.

Although a company cannot be 100% secure against unknown threats, a certain level of preparedness can go a long way in countering fraud risk. It can limit damages and protect the reputation of organizations.

For more details, download a copy of India Fraud Indicator 2012