Fraud and financial crimes have grown in volume and complexity over the years, with the magnitude of damage attracting more attention among top executives, with the level of fraud particularly extensive in data-intensive industries such as financial services, government and health care, according to a new report.
The study, from the IBM Institute for Business Value, found that fraud and enterprise risk have soared to the top of the agenda among CFOs and other top executives. However, only 64 percent of the 576 CFOs surveyed believe they are doing an effective job managing these new and emerging threats. The impact of fraud and financial crime isn’t limited to business brands or bottom lines, according to IBM. The collateral damage also hits consumers, citizens and employees through higher insurance premiums, slower medical claims processing and increased municipal tax rates.
Fraud is estimated to drain $3.5 trillion each year from organizations worldwide, according to the study. The global health care industry loses between $250 and $300 billion on health care fraud each year, and the problem is estimated to cost $650 million per day in the U.S alone. The Justice Department estimates that for every $1 spent on health care counter-fraud activities, $8.10 is returned in savings
Pending FBI fraud cases have skyrocketed since 2005, with securities fraud cases rising 162 percent, mortgage fraud up 373 percent and corporate fraud up 171 percent.
By 2016, more than 25 percent of large global companies are expected to use technology involving so-called “big data” and analytics to combat fraud, an increase from only 8 percent today, with those organizations expected to see a full return on investment within six months, according to IBM. The company plans to unveil an initiative next week to help organizations use data analytics to combat fraudsters and cybercriminals.