The number of fraud cases continues to rise spectacularly

This finding was the impetus for the Graydon Fraud Event in the Lotto Arena in Antwerp. Guest speaker Peter De Keyzer showed how Belgium can close the gap in the budget in one year. But then our country must urgently restore confidence in the government and at least use the resources that are available to tackle fraud. Marc Lammers, hockey coach of the Red Lions, made the link between data and fair play in sport and tackling fraud. We also talked to some CEOs of leading companies about fraud in their sector and immediately tested the Graydon fraud model against the importance of social justice. Because that's what it's all about in the end.

Incidentally, it is no longer about Nigerian gangs fishing for your bank account details in bad Dutch. They have made considerable progress in that area, though. Fraudsters are sophisticated in their approach and are becoming more and more inventive in order to extort money from other parties.

Examples

Lithuanian Evaldas Rimasauskas, for example, managed to defraud giants like Facebook and Google to the tune of more than $100 million. However, the method he used was not that complicated. He created fake accounts in the name of the company Quanta Computing and bombarded the internet companies with fake invoices. His business ran undiscovered for two years.

It seems like it is a problem for someone else, but it isn't. Your company may not be comparable to Facebook or Google, but there are also casualties in Belgium. Here too, there are companies that are lurking to take a piece of the cake from someone else.

What about the companies that quickly changed their activity during the coronavirus crisis to obtain illegal support? (Tijd.be, 6 March 2021) Graydon tested these companies against the fraud model. What does that analysis show? The chance that these companies engage in fraudulent practices is significantly higher.

We find another example in the UBO register. Many companies have still not registered their Ultimate Beneficial Owner(s) – despite various reminders. A similar conclusion followed from a similar analysis. Companies that have not completed this or have filled it in incorrectly appear to be much more likely to perpetrate fraud.

Facts & figures

“Figures from the University of Portsmouth indicate that the cost of fraud globally is equivalent to 6.4% of global GDP. In other words, it's about $5.38 trillion or an amount that we can hardly imagine. If you project those figures onto Belgium, then each year it comes to an amount of 25 billion euros. Just calculate what that 6.4% means on your turnover”, says Peter De Keyzer, Chief Economist and Managing Partner of Growth Inc.

Graydon brings all the data and insights together – connecting the dots – with one goal in the end: more social justice. Some figures show that this is not a superfluous luxury.

• 32% of Belgian companies (excluding independent entrepreneurs) have been confronted with some form of fraud in the past 5 years.
• Graydon has been collecting cases for several years where fraud is suspected or where the fraud has actually been proven. In sectors that are very vulnerable to fraud, such as leasing, banking and insurance, we collected 1,200 cases last year and that number continues to increase every year.
• The average amount in all those cases amounted to 29,000 euros, although this is highly dependent from sector to sector. It doesn't happen that often that cars disappear, but when it does, the damage for the leasing company is many times higher than this average amount.
• The 1,200 cases together represent a total amount of about 40 million euros in one year.
• In Belgium every year (outside of the pandemic) around 10,000 companies go bankrupt. An analysis showed that 16% of those bankruptcies already exhibited fraud-sensitive behaviour 12 months before the bankruptcy decision.

Definition of Fraud

Fraud is often defined differently depending on the sector. In general, we can distinguish two types of fraud.

Criminal Fraud

The code word for criminal fraud is 'intentional'. The companies, and the people behind those companies, will consciously do everything they can to present the organisation as better than it really is. They will systematically polish the company's reputation for the outside world. Experience shows that criminal fraud usually takes place at the beginning of the contract period, after which the organisation in question quickly goes into bankruptcy.

Liquidity Fraud

In the case of liquidity fraud, we can make a very strong link with the current coronavirus crisis, which hit us in February last year (2020). This concerns companies that initially have no intention to commit fraud. These are companies that are actually not on the radar, but that find themselves in a situation where they need liquidity. For example, the coronavirus crisis has affected the financial situation of many companies and brought them into financial trouble. They then create false situations or steal valuable goods in order to generate liquidity for themselves. This often happens within our own customer portfolio.

Fraud Model

Graydon collects a mass of data via the business community to detect and predict fraud, with a view to more fair play or social justice. After all, there are numerous signals that indicate when a company shows an increased risk of fraud. All these data elements were collected in the Graydon fraud model, which indicates the reliability of an organisation based on a score.

“As a hockey coach, I don't focus so much on the end result. But on the processes leading to it, because I can influence them," says Marc Lammers. “We use all kinds of data to prepare ourselves as a team much better and in a much more targeted way. We call that statistics in sports. Graydon calls it data and insights, but they help to achieve a good end result. In this case, to predict fraud”

Solidarity

But it really shouldn't stop there. Solidarity is a word that is high on the wish list of all stakeholders. Video images are also exchanged in sports, for example. If different players in the business world want to tackle the same social or sectoral problem together, the results will only be beneficial for all parties.

A company that intends to make a move and wants to steal cars will not limit itself to one leasing company. No, they go shopping with different companies. It is an example that comes straight from practice. Thanks to the community and by proactively using the ecosystem, the fraudsters failed on every attempt.

It becomes even more interesting if data is shared across the sectors. Experience shows that there is a lot of overlap. Because a company that is ready to commit fraud will not only commit fraud in leasing, but also in other sectors. In that sense, the ecosystem is invaluable.

In practice

Looking at the entire population in Belgium, 0.9% of organisations received the red label of high risk, 5.8% received the orange label of medium risk. By excluding this 6.7% of the organisations, the model has a prediction rate of 76%. This means that three out of four cases can be predicted.

“If you want your organisation to go for gold, you need data. Otherwise you don't know anything. You also need expertise to interpret that data, because otherwise you still don't know anything. And finally, you need to share best practices with each other. I regularly do internships in other sports to see what I can learn from the successes. Also, check out how other companies tackle fraud. What can you learn from it?”, says Marc Lammers.

The Graydon fraud model is the extra pair of glasses that every company needs. Because if you look purely at creditworthiness, fraudulent companies stay neatly under the radar to bypass your checks. Be prepared. Be wary of false identities and false invoices. These are the most common forms of fraud that we encountered in the cases that Graydon collected. You need to recognise the patterns before the fraudster can make his move. So that you can take preventive action and help to get rid of fraud.