Risk Management

AI isn’t taking over fraud fighting just yet

Traditional data analytics are still a key tool against fraud.
article cover

Vladwel/Getty Images

4 min read

If one of your junior accountants shows up to work in a Lamborghini, you just might have an occupational fraud problem. Financial crime committed by employees against their employers, also known as occupational fraud, is a growing problem that costs organizations trillions of dollars a year globally, and may be the most common type of financial crime in the world, according to Association of Certified Fraud Examiners (ACFE) research.

As organizational financial guardians, CFOs are at the forefront of the battle against fraud. To help CFOs understand what they’re up against, CFO Brew spoke with Andi McNeal, chief training officer for the ACFE, about fraud trends, investing in fraud fighting, and how CFOs should be prioritizing fraud, as the organization’s annual conference kicked off this week in Las Vegas.

The following interview has been lightly edited for length and clarity.

What are the big trends that you're seeing this year that you hadn’t expected?

I’m not sure theres anything we didn’t expect. But we do have a lot of trends right now. We’re hearing a lot of companies are still fighting with some of the tried and true frauds that we’ve known for a long time. Obviously, employee fraud is always going to be a risk for any organization, just by nature of hiring people to work on their staff. Cyber-related risks, we still are hearing a lot of organizations having external fraudsters—people they don’t even know—trying to attack their infrastructure or trying to get access to their funds through social engineering, whether that’s in emails or phone calls or even text messages, trying to get staff to supply some unknown party access by pretending to be a known party. Those risks are still very, very large for organizations.

You’re going to hear a lot about AI at the conference, and that’s understandable. I think that’s still kind of the large, growing unknown for most organizations, both in terms of, ‘How are the fraudsters using it to try to attack us more successfully? And how can we more successfully guard against those attacks?’

You mentioned AI, and obviously our audience is thinking a lot about AI, but when it comes to technology, where do you see organizations investing their money?

We’re actually still hearing a lot of focus on the more traditional data analytics. Even before you get into AI, we know robust data analysis and monitoring tools are very important for finding fraud—still very, very effective in helping find fraud. I think there are some organizations that are starting to dabble in using AI, but we also recognize that, especially with AI, you’re only going to get out as much as you put in, and a lot of organizations are still really struggling to get their data ready for that level of deep dive analysis.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.

So as far as the technology component, I think it’s really still focused on a lot of the things we already have proven to be very successful in terms of enhancing fraud prevention and detection with analytics.

We talk a lot about the accounting talent shortage. How are you seeing the fraud fighting talent pipeline?

It’s interesting, we’re actually seeing a lot of very excited younger folks joining the fraud field. You know, a decade ago, it was very hard to find an entry level fraud role. Usually an individual would have to start in other areas of an organization and move their way into fraud. We’re hearing from the larger organizations that there are more opportunities for younger professionals to start joining more directly into that area. So that’s very exciting.

What’s your advice to CFOs for recognizing and prioritizing fraud in their organization?

Our research shows that organizations stand to lose up to 5% of their revenues every year to fraud. And that’s every type of fraud. And my hunch is that no CFO is really going to be excited about putting an expense on their financial statements that shows 5% of their revenues going out the door with no business benefit—it goes straight into the pockets of the perpetrators.

My advice for CFOs is to recognize not only the potential scale of the problem, but that those in the accounting and finance departments probably have the best front row seats to catching anything that looks suspicious within the organization itself. So they can really be that frontline defense against protecting the organization from losing that money…because you don’t want to be one of the headline-making companies, you don’t want to be the ones that are caught flat-footed when somebody does attempt something unethical at your organization.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.