Keith Williamson, Head of Disputes and Investigations Asia explores the reasons behind the likelihood of increased fraud in 2020 and how the use of data analytics can help companies satisfy regulators’ concerns in a proportionate manner in investigations and compliance reviews in this video documentary with the TEH Group.

Tough Economic Times Create Pressure and Increased Risks

With continued economic uncertainty in 2020, management and employee fraud are likely to increase as personal and business financial pressures lead individuals to look at ways to “extract value from the company” and businesses to manipulate financial results, said Keith. Financial pressures arise for individuals to maintain their bonuses, jobs and lifestyle and for businesses to present better financial results to maintain share prices, avoid breaching banking covenants and forestall financial distress.

Keith also cites more opportunity for bribery and corruption as tough times lead to a smaller more competitive market than before. In this environment, companies “will look to distinguish themselves from the competition and this may be by paying bribes to win business”.

Against a backdrop of companies “spending less money on corporate governance and compliance, there are going to be more opportunities for these issues to develop” said Keith.

Using Data Analytics to Convince Regulators

Keith explained how he works with data analytics experts in the team during investigations. “We create a series of tests using data analytics to identify the highest risk third parties, employees and transactions” he said. Examples of the focus of such tests include duplicate invoices and  high value payments to offshore locations that are outside the ordinary geographical reach of the group’s business.

During investigations, regulators or law enforcement agencies need to be satisfied that the company has done everything they can to identify a particular issue that has been alleged. Just sample or random testing may not be enough to convince the regulators that the company has done enough to find an alleged issue, and manually interrogating every transaction is not practical and may not yield reliable results. However, with data analytics we can electronically analyse and evaluate every transaction to focus on those with the highest risks. Using this methodology, the company will be better placed to convince the regulators that they have done sufficient work to identify the alleged issue that is the focus of the investigation.