Most companies have controls in place to stop fraud, waste and abuse and comply with growing regulatory requirements. General counsel, along with the board and executive management, are responsible for knowing whether those controls actually work, with organizational and individual consequences if they don’t.
Increasingly, GCs recognize the need to proactively uncover problems and improve internal controls. Better controls are critical in meeting the expanding antifraud requirements of mandates arising out of statutes such as the Dodd-Frank Act, the USA Patriot Act and the Foreign Corrupt Practices Act. If the company ends up facing an investigation, stronger controls can help confirm compliance, assure regulators the problem is being addressed properly and contain news media fallout. They also can help GCs be confident that the information received from internal audit and other sources within the organization is accurate.
During testing and optimization (3), rules and models are fine-tuned using advanced analytical techniques and statistical tools. They are then applied to a real-time screening process (4) in which transactions and data are evaluated to determine whether they should be flagged as fraud risks. Flagged transactions are put into different queues for further review (5). Most importantly, the disposition of every flagged transaction is fed back to the advanced analytics process. This continuous feedback loop is necessary to refine models and to improve the quality of decisions.
Three key elements to establishing and maintaining the continuous loop: