A Hand Book on Frauds by Kolluru N. Rao

Author:Kolluru N. Rao
Language: eng
Format: epub
Publisher: Prowess Publishing

PART TWO

5. FRAUDS DETECTION AND PREVENTION

In Part One, it was extensively discussed about Frauds—Meaning, Evolution, Psychology of a fraudster and various types of frauds.

Now one should also understand the methods of fraud detection and fraud prevention.

Fraud detection involves various methods by which frauds are detected before they occur thus preventing them before damage occurs. Such actions also facilitate early diagnosis of frauds and mitigate the losses as they are detected early.

The most effective method in any organization irrespective of size is establishing first SOPs-standard operating procedures and policies and a good internal Control system to make sure such SOPs are functioning effectively.

The employees of the organization should be explained the policies and their usage and the consequences of any fraudulent activity. There should be training sessions from time to time to update the policies and to train the new employees.

The following are the various methods by which frauds are detected before they occur or facilitate their early detection:

Hot Lines, Web based online, Whistle blowers and Internal and External auditors and Accidental detection.

Hot lines are the most effective method of detecting frauds. The person calling may be either an employee of the company or an ex-employee or a third party who may call confidentially and anonymously to report any suspicious activity, unethical behavior confidentially and thus gives an early warning signal. Hot lines will reduce costs and have a 50% or more chances of early detection of any fraudulent activity.

Web based online system fraud detection is a sophisticated method of early detection of fraud or signal a possible occurrence of fraud based on activity on online. This is made possible by data mining techniques and by incorporating software that detect any suspicious mails and other possible intrusions by controls at different data points. The web-based fraud detection is of high importance mainly for e-commerce and electronic payments.

The systems will recognize unauthorized payments by fraudsters posing as legitimate users. It is a cloud-based system of fraud detection. Irrespective of the size of the organization but where CNP - Card not present-transactions take place online these controls are essential. At times web-based fraud detection is referred as online fraud detection.

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