Sometimes ROI can be measured by what you don’t lose. According to Stephen Hollander, co-coordinator of economic crime studies at the British Columbia Institute of Technology (BCIT), in an industrialized country five to six per cent of the gross domestic product is lost to fraud and similar abuses.
In B.C. alone, that could amount to $4.2 billion.
Hollander’s program teaches students to use analytic tools to examine transaction datasets for patterns indicating suspicious activity. Using theories such as Benford’s Law, which predicts the frequency of each digit in various positions in a number, students can detect patterns of fraudulent entries in transaction databases — say, the records from an ATM, or a company’s procurement records — and build models that will spot and flag future mischief in real time. That means losses can be prevented, which can more than pay for the tools.
Government and financial agencies use analytics to look for evidence of money laundering. Says Hollander, “”If they’re not using this kind of technology, they’re kind of lost. If they’re trying to do (the analysis) with index cards or OLAP (online analytical processing), they can’t get useful information in real time. The best they can do is find out after the fact.””
Peter Reimer, president of independent risk management firm P. Reimer and Associates in Delta, B.C., says analytics can be used to forensically prove a case, but it’s better to use them as a prevention tool.
“”There are so many different frauds coming at financial institutions that having really good risk management tools through analytics gives a cost advantage,”” he says. That cost advantage, says Reimer, leads to a competitive advantage for the institution.
“”Anyone who wants to be around in five years needs to look at these things.””
