March 16, 2011

Combat Internal Fraud

If you read our January newsletter, you already know that Shift4 was founded in response to a customer service inquiry. A client was looking for a unique solution, we were able to deliver that solution, and in the process come up with what we now call DOLLARS ON THE NET®.

Another customer request came in a few years later and, as a result, we created Fraud Sentry®, our powerful “trusted-employee” fraud detection and prevention tool. The following story is true; however, names have been changed to protect the privacy of those involved.

More than a decade ago, John, then CFO of a well-known hotel chain, came to us with a concern. He was seeing a disturbing trend: revenue was down but room occupancy and all other indicators were holding steady. John knew something was going on, but was struggling to figure out exactly what it was. He asked if there was anything we could do to help him sort through the mass of data and figure out where money was going missing. Of course, we agreed to help.

It took a few weeks of brainstorming to come up with a workable solution, but our team worked alongside John and eventually we found the cause. A few of John’s controllers and at least one auditor were issuing credits on accounts with no corresponding charges.

The solution we developed was to imbed monitoring functionality into DOLLARS ON THE NET® that would watch for suspicious credits and automatically alert management to the questionable activity. We built the program so that clients could choose to block the transaction (preventing potential fraud) or to immediately receive alerts to suspicious activity (allowing them to catch dishonest employees in the act). John opted to configure the alerts to go directly to him – preferring to weed out these thieves rather than just stop their exploits.

Today, in addition to sending alerts to upper management confidentially, Fraud Sentry can also be set up to send alerts at the account level to managers/auditors at individual locations or at regional offices, thus giving a two-tier approach to fraud protection.

Within days, Fraud Sentry began to flag suspicious transactions and fraudulent activity at some of John’s locations. His company had fallen victim to “trusted-employee” fraud. This internal fraud is rapidly becoming a major threat, with a recent study showing that nearly 50 percent of all fraud cases last year were internally generated. An enormous amount of money is lost each year when greedy and/or disgruntled employees who have been trusted with keys, passwords, and everything else they need to perform their daily operations turn against an organization and become thieves.

In addition to monitoring for suspicious credits, the current version of Fraud Sentry also offers a number of other ways to analyze trends that can point to fraudulent activities: users may set thresholds to know if a card was used multiple times during a day, week, or month; whether the total purchases for a card exceeded a certain amount in any given timeframe; or even whether the total number (or dollar amount) of credits for a single card exceed the slated amount. These trend analysis capabilities allow merchants to uncover even the most creative fraud schemes.

If you are not familiar with Fraud Sentry, or need help setting up your automatic alerts, or need assistance validating who may be receiving these alerts currently, please send an e-mail to [email protected], or give us a call at (702) 597-2480, option 2.