Fraud Mitigation Research Articles

What Should Health Care Organizations Do to Reduce Billing Fraud and Abuse?

Whether physicians are being trained or encouraged to commit fraud within corporatized organizational cultures through contractual incentives (or mandates) to optimize billing and process more patients is unknown. What is known is that upcoding and misrepresentation of clinical information (fraud) costs more than $100 billion annually and can result in unnecessary procedures and prescriptions. This article proposes fraud mitigation strategies that combine organizational cultural enhancements and deployment of transparent compliance and risk management systems that rely on front-end data analytics.

Management Accounting as an Instrument of Financial Fraud Mitigation

Management Accounting as an Instrument of Financial Fraud Mitigation

Risk management, top management support, internal audit activities and fraud mitigation

PurposeThis paper aims to examine the effect of top management support (TMS) and risk management (RM) on the internal audit activities (IAA) and fraud mitigation (FM) in the Libyan banking sector.Design/methodology/approachThe data is collected using a survey questionnaire of 16 commercial banks in Libya and analysed using a structural equation modeling.FindingsThe study shows positive and significant relationships between RM and employees’ FM and TMS and employees’ FM. The study also demonstrates a significant mediating effect on the relationship between RM, TMS and FM.Research limitations/implicationsThe study is conducted in the Libyan banking sector. Further research is needed in other contexts and sectors to understand the contribution of the RM and TMS on FM, including the impact of technology and internal audit characteristics in terms of experience, education and professional certificates on FM.Originality/valueThe study is the first attempt to explore FM in an emerging economy, particularly Libya, by introducing IAA as a mediator. The study provides implications for regulators and top management in the banking sector.

Refund fraud analytics for an online retail purchases

ABSTRACT Online shopping is growing fast across the globe and so are its complexities. Fraud is a complicated phenomenon and its mitigation is critical for running a smooth business. The case considered for the present study is fraud mitigation in return – refund process managed by the customer services of an online retail business. Predictive analytics approach was used to identify early indicators of agent refund fraud – a rare event. The technique used to solve the problem was a Penalised Likelihood based Logistic Regression model. The proposed model allowed the business to select top 5% sample of refund transactions with a higher likelihood of fraud as indicated and queue them for an audit. Implementation of this model resulted in an incremental lift in fraud capture rate.

Payment Card Fraud Rates in the United States Relative to Other Countries since Migrating to Chip Cards

The United States has lagged somewhat behind other countries in implementing steps to mitigate payment card fraud, such as chip card technology and personal identification numbers. Small delays in implementing fraud mitigation strategies could translate to large fraud losses relative to other countries. Although comparing fraud rates across countries can be challenging, Fumiko Hayashi examines payment card fraud rates in the United States along with three countries with the best available data?Australia, France, and the United Kingdom?and finds that the United States has the highest overall fraud rate. Even after migrating to chip card technology, the United States has a significantly higher in-person fraud rate than all three countries but a lower remote fraud rate than Australia and France. Fewer safeguards and differences in prevalent types of transactions may help explain this.

Development of a Hazard Classification Scheme for Substances Used in the Fraudulent Adulteration of Foods

Food fraud, the intentional misrepresentation of the true identity of a food product or ingredient for economic gain, is a threat to consumer confidence and public health and has received increased attention from both regulators and the food industry. Following updates to food safety certification standards and publication of new U.S. regulatory requirements, we undertook a project to (i) develop a scheme to classify food fraud-related adulterants based on their potential health hazard and (ii) apply this scheme to the adulterants in a database of 2,970 food fraud records. The classification scheme was developed by a panel of experts in food safety and toxicology from the food industry, academia, and the U.S. Food and Drug Administration. Categories and subcategories were created through an iterative process of proposal, review, and validation using a subset of substances known to be associated with the fraudulent adulteration of foods. Once developed, the scheme was applied to the adulterants in the database. The resulting scheme included three broad categories: 1, potentially hazardous adulterants; 2, adulterants that are unlikely to be hazardous; and 3, unclassifiable adulterants. Categories 1 and 2 consisted of seven subcategories intended to further define the range of hazard potential for adulterants. Application of the scheme to the 1,294 adulterants in the database resulted in 45% of adulterants classified in category 1 (potentially hazardous). Twenty-seven percent of the 1,294 adulterants had a history of causing consumer illness or death, were associated with safety-related regulatory action, or were classified as allergens. These results reinforce the importance of including a consideration of food fraud-related adulterants in food safety systems. This classification scheme supports food fraud mitigation efforts and hazard identification as required in the U.S. Food Safety Modernization Act Preventive Controls Rules.

Discrimination of Shirazi thyme from thymus species and antioxidant activity prediction using chemometrics and FT-IR spectroscopy

Local names are not reliable sources for identification of plants, because they differ significantly from one region to another. Apart from confusing nomenclature, the similar appearance and fragrance of Shirazi thyme and Thymus species cause misidentification. In order to prevent the adverse events in relation to the use of improper herbal products, easy-to-use quality control (QC) methodology was developed to classify these culinary plants. Fourier transform infrared (FT-IR) fingerprinting technique was applied for classification of these plants on the basis of their biochemical compositions. Powerful PLS-DA classification model with classification accuracy of 100% was obtained. For the first time in the present study, it was revealed that Shirazi thyme samples have higher antioxidant activity [average IC50 of 37.03 (µg/ml)] compared to different Thymus species [average IC50 of 148.35 (µg/ml)]. FT-IR fingerprint profiles were also used to construct a predictive model for antioxidant activity of the plants based on a reliable PLSR model. The developed PLSR model revealed that IR wavenumbers of 1000–1200, 1700, and 3200–3500 cm−1 are important for antioxidant activity prediction of the analyzed plants. The applied approach has the potential for being used in QC programs not only for fraud mitigation and detection, but also for estimation of antioxidant activity of the culinary plants.

Assessment of food fraud vulnerability in the spices chain: An explorative study

Recent scandals have increased the need to strengthen companies’ ability to combat fraud within their own organizations and across their supply chain. Vulnerability assessments are a first step towards the inventory of fraud vulnerability and fraud mitigation plans. Spices are reported frequently in the international food fraud databases. In the current study the fraud vulnerabilities of various actors in the spices supply chain were examined. The SSAFE food fraud vulnerability assessment tool, which comprises of 50 indicators categorized in opportunities, motivations, and control measures was applied for getting insight into these fraud vulnerabilities. Eight companies participated in the study: a trader, two importers, two business to business companies, and three business-to- business/business-to-consumer enterprises. The ease to adulterate spices combined with the complexity of fraud detection create considerable opportunities to commit fraud (high vulnerability), whereas opportunities associated with supply chain transparency and fraudulent incidences in the past were judged as medium vulnerable. The high competition level in the sector together with the high added value of spices are perceived as important economic drivers to commit fraud (high vulnerability). Cultural/behavioural factors such as ethical business culture were considered to contribute to the actual fraud vulnerability to a lesser extent. The implementation of both the hard and soft control measures varied widely among the actors. Hard fraud specific measures are merely lacking or are at a very basic level. For soft control measures of the own company, the scores were higher. From the results of the full assessments can be concluded that the various actors perceived the level of food fraud vulnerability in the spices chain as medium vulnerable.

Collaboration and the sharing of information help reduce payment transactions fraud

In recent years, the Netherlands has benefited from the voluntary cooperation between various parties that play a role in the payment chain. For example, knowledge and experience in the field of fraud prevention and cyber security are shared and exchanged, more research and threat analyses are conducted, and fraud mitigation measures are coordinated and implemented jointly. This domestic partnership is unique in Europe. The Dutch Payments Association manages the collective aspects of cyber security policy in relation to the payment system, and works closely with other institutions, including the National Cyber Security Centre, to implement this policy. It also coordinates fraud prevention within the entire payment chain, compiles and analyses statistics on fraud, and drafts prevention policy. In addition, it coordinates the implementation of measures designed to prevent fraud. This unique Dutch partnership limits cyber crime and fraud. Any payment chain is only as strong as its weakest link, however; therefore, cooperation between the various parties involved is vital to ensure and enhance security in the payment chain. This paper describes the Dutch approach to fighting fraud in the payment system.

The significance of claims fraud in microinsurance and a statistical method to channel limited fraud identification resources

In the past decade, the topic of microinsurance has received much attention from researchers around the world as the drive to alleviate persistent global poverty intensifies. Although microinsurance is a powerful tool that can be used to assist in the fight against poverty by acting as a safety net for policyholders, the problem of claims fraud is a serious threat to its long-term sustainability. Analysis of the existing literature reveals a severe shortage of research into the problem of microinsurance claims fraud, even though we have found that it poses a greater threat in microinsurance than regular insurance. In this paper we highlight the problem of claims fraud in low-income markets and we explain how fraud has the potential to make microinsurance initiatives unsustainable. After establishing that action is needed to combat fraud in microinsurance, we briefly present a number of fraud mitigation techniques that have been successful in conventional insurance. However, certain characteristics that differentiate microinsurance from regular insurance reveal that most of these fraud combating approaches are not appropriate to microinsurance; the proportionately higher costs of identifying claims fraud relative to policy size, the lack of data and the lack of resources experienced by microinsurers render these methods impractical and unaffordable in the context of microinsurance. We proceed to demonstrate the workings of a statistical method known as Principle Component Analysis of Ridit Scores (the Pridit method), initially developed by Brockett et al. (2002) which has been shown to effectively identify fraudulent claims without the need for a training sample. The method can thus easily be applied by microinsurers to assist in the detection of claims fraud. While this method of fraud detection is not without limitations, it may provide a pragmatic and cost-effective way for microinsurers to begin tackling claims fraud. In this paper, the method is clearly explained by means of a worked example to help microinsurers implement the method at low cost.

Internal Control Techniques and Fraud Mitigation in Nigerian Banks

Internal Control Techniques and Fraud Mitigation in Nigerian Banks

Continuous Audit and Enterprise Resource Planning Systems: A Case Study of ERP Rollouts in the Houston, TX Oil and Gas Industries

ABSTRACTThe use of enterprise resource planning software has become an essential part of conducting business for many small, medium, and large companies. This paper presents a case study of accounting information specialists in different divisions of the same conglomerate in the energy industry in Houston, Texas that engaged in anti-fraud audits following the rollout of enterprise resource planning (ERP) systems by implementing continuous auditing processes (CA). The results indicate that the adoption of an ERP system has a significant impact on the efficiency, fraud risk reduction, knowledge application, as well as the credibility of the auditing team. The most important factors for the successful use of fraud mitigation techniques rely on ERP systems, which have continuous audit functions. The major and minor themes that emerge from the results of this case study are thoroughly dissected and discussed. Future studies of the use of ERP and CA systems to combat fraud should examine how auditing teams can apply superior fraud detection through preparation and training, education, and on-the-job experience.

LEGAL OBLIGATION OF FRAUD PREVENTION TO PROTECT FINANCIAL INTERESTS OF THE EUROPEAN UNION

Legal instruments that are required for fraud prevention are developed by European Union countries, however their results are not sufficient. Aim of this article is to review how legal obligation of fraud prevention to protect EU financial interests is fulfilled according to the requirements of Treaty on European Union, as well as to propose improvements for fraud mitigation of EU funds. To analyze possibilities how to prevent / mitigate fraud of EU Funds, fraud analyst’s Dr. Donald Cressey “fraud triangle” conception is reviewed in the article.

AMIA board of directors response to Simborg perspective

AMIA board of directors response to Simborg perspective

A business process mining application for internal transaction fraud mitigation

Corporate fraud these days represents a huge cost to our economy. In the paper we address one specific type of corporate fraud, internal transaction fraud. Given the omnipresence of stored history logs, the field of process mining rises as an adequate answer to mitigating internal transaction fraud. Process mining diagnoses processes by mining event logs. This way we can expose opportunities to commit fraud in the followed process. In this paper we report on an application of process mining at a case company. The procurement process was selected as example for internal transaction fraud mitigation. The results confirm the contribution process mining can provide to business practice.

Cyber Fraud Trends and Mitigation

Cyber Fraud Trends and Mitigation

The Effectiveness of State Legislation in Mitigating Moral Hazard: Evidence from Automobile Insurance

Abstract Insurance fraud, which adds an estimated $85 billion per year to the total insurance bill in the United States, is an extremely serious problem for consumers, regulators, and insurance companies. This paper analyzes the effects of state legislation and market conditions on automobile insurance fraud from 1988 to 1999, a period exhibiting a substantial increase in the enactment of antifraud legislation. Our empirical results show that the laws have mixed effects: two laws have no statistically significant effect on fraud. The strongest evidence of fraud mitigation effects is associated with mandatory special investigation units, classification of insurance fraud as a felony, and mandatory reporting of professionals to licensing authorities. However, laws requiring insurers to report potentially fraudulent claims to law enforcement authorities actually increase fraud, which may reflect some substitution from more efficacious private efforts to less productive state activity. Many underlying charact...

The Effectiveness of Insurance Fraud Statutes: Evidence from Automobile Insurance

Insurance fraud, which adds an estimated $85 billion per year to the total insurance bill in the U.S., is an extremely serious problem for consumers, regulators, and insurance companies. This paper analyzes the effects of state legislation and market conditions on automobile insurance fraud from 1988 to 1999, a period representing a substantial increase in the enactment of antifraud legislation. Our empirical results show that the laws have mixed effects; two laws have no statistically significant effect on fraud. The strongest evidence of fraud mitigation effects are associated with mandatory Special Investigation Units, classification of insurance fraud as a felony, and mandatory reporting of professionals to licensing authorities. However, laws requiring insurers to report potentially fraudulent claims to law enforcement authorities increase fraud, which may reflect some substitution from more efficacious private efforts to less productive state activity. Many underlying characteristics of the market also affect fraud.