Do Tough Times = A Rise in Employee Fraud?

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11 March 2009


  • Great topic, and one that deserves as much attention (and probably more) as it is getting these days. One of the difficult aspects of bank fraud prevention efforts– especially employee fraud – is measuring the value it delivers. If you catch fraud early, when actual losses are small, the “value” (in traditional ROI terms) is low. This makes investment in critical capabilities difficult to justify. But isn’t catching fraud early, before losses get big, the ultimate goal? An illustrative example is the recent internal case of a ex-bank manager stealing tens of millions from foreign customers over a period from the mid '90's to 2008,

    To overcome this paradox, banking as an industry needs a more consistent way to measure potential losses and damages for schemes that are either caught early and/or involve information or identity theft where no funds are stolen. The value challenge is particularly tough for employee fraud, where many of the schemes start off as small dollar infractions (e.g., fee reversals, self-dealing) or involve the theft of sensitive information. I’d be interested in what Celent has to say about the value of employee fraud prevention in this context.