Fraud Prevention: Strategies & Techniques
Everyone has their own vocabulary and language to talk about how they prevent fraud:
Rules, strategies, business processes, checklists, weights, techniques, tools, tests, modules, applets, policies, procedures, queries, lookups, investigations, reviews, requests, confirmations, qualifications, audits, compliance, verifications, quality assurance and quality control.
DID YOU KNOW
Everyone has their own vocabulary and language to talk about how they prevent fraud:
Rules, strategies, business processes, checklists, weights, techniques, tools, tests, modules, applets, policies, procedures, queries, lookups, investigations, reviews, requests, confirmations, qualifications, audits, compliance, verifications, quality assurance and quality control.
I am not trying to define an official fraud practitioner “speak” in this website, but I want to take a little time to define some concepts so everyone understands context. In working with your peers, don’t get stuck on what everyone calls a solution, technique or process, instead focus on what it does. I have had more titles than I can remember, and have had to explain my role and duties to customers on more than one occasion, but I didn’t take it personally.
I like to keep my conceptual planning simple — the simpler the better. This is important because if your staff and peers can’t understand what you are talking about when you walk them through it, you probably need to rethink how you are presenting it. I have found in some extreme cases that the conceptualizations and processes put into place at a business were so complicated it would take over a week with people from multiple departments just to decipher what was actually being done. This does not instill confidence in your management, and it could cost you valuable time in spotting a fraud trend.
There are two major concepts you need to be familiar with: “Fraud-Prevention Strategies ” and “Fraud-Prevention Techniques.”
Strategies consist of business process and fraud-prevention techniques. A strategy is intended to manage fraud losses while keeping administration costs and sales conversion at acceptable levels.
A technique is intended to check for a specific condition in an order and to prevent an order from processing if it passes or fails that check. A technique can be used to validate positive or negative conditions, and can be either interrogatory or descriptive.
To illustrate the two concepts and how they work together I will use an example that most of us have thought about. Most of us have a retirement strategy. We state that we want to have a certain amount of money by the time we reach a certain age so we can retire comfortably.
Now there are a lot of different ways we could attempt to reach this goal, we could put money into a 401k, IRA, stocks, bonds, certificates of deposit or lottery tickets. Each of these is a technique for investing, and provides different potential returns with varying degrees of risk. Our strategy has to take into consideration our age, our comfort with risk and our day-to-day needs to survive.
Creating a fraud-prevention strategy is not that different. You have to understand the goals of your business and weigh the value of each technique you implement to understand the associated costs and implications to administration costs, fraud reduction and potentially lost revenue.
In the Fraud Library we provide detailed descriptions of individual fraud-prevention techniques including what it takes to build the technique in-house, sample vendors, key considerations, and more. At the end of this section you should be able to understand what they are, how they work and what fraud they can effectively stop.
Fraud-prevention techniques are the building blocks of your fraud-prevention strategy, and your strategy will only be as strong as your understanding of their use.