It’s the second-largest financial crime on the planet, according to PricewaterhouseCoopers. So why is no one talking about procurement fraud?
Actually, people are—the media, government watchdogs, a public losing confidence in institutions—but in an increasingly complex procurement landscape, are organizations themselves asking the right questions about the role of technology in the governance of public sector procurement?
Every level of government in Canada has suffered a procurement scandal of some description in recent years, says Marc Tassé, an investigative and forensic accountant and internationally renowned expert in the fields of anti-bribery and anti-corruption, anti-money laundering, and combating the financing of terrorism.
Allegations of scandal are now tried in the court of social media long before they reach a court of law, Tassé says, and the public remembers allegations, not acquittal.
Pressure for governance of procurement practices is not simply coming from the risk of being “named and shamed” by the media, but also in the form of exposure to penalties through ever-increasing legislative and regulatory requirements, international conventions, certification standards, not to mention the potential real dollars lost.
Additionally, Tassé says, governments are expected to set a standard for transparency and ethics to be reflected by the private sector. “At the same time, procurement is becoming more complex, more integrated, more data-rich,” says Tassé. “It’s hard to do with only human skills.”
Tassé joins Amanda Holden, SAS Canada Executive Lead for Financial Crimes, and Christopher Egan, CEO of the Financial Management Institute of Canada (FMI), for the Webinar “Good Governance And Integrity In Public Procurement: How Analytics And Artificial Intelligence Can Help,” discussing technology’s role in the new reality of public sector procurement.
“Good Governance And Integrity In Public Procurement:
How Analytics And Artificial Intelligence Can Help"
Public sector procurement is exposed to abuse through a number of vectors: fraud, bribery, price-fixing, collusion, patronage, to list a few. Aside from reputation damage and financial loss, there are costly investigations, political and operational disruption, and possible legal action compounding the risk.
These systematic abuses raise a number of red flags as signals: complaints from bidders, issuance of multiple contracts below an RFP threshold, inflated agency fees, suspicious bidders. While people alone do not have the bandwidth to monitor them all, it is a problem that plays to the strengths of analytics and artificial intelligence.
Under the new ISO ISO 37001: Anti-Bribery Management System standard, due diligence in the selection of suppliers is more important than ever, Tassé says. Organizations are responsible not only for the integrity of their own teams, but also integrity throughout the supply chain. Tassé calls it “KYS”—Know Your Supplier, an evolution of the anti-fraud and money laundering maxim “KYC” (Know Your Customer).
The SAS solution for procurement governance boasts a number of features ideally suited to creating a preventative procurement transparency strategy:
Entity resolution. Are Amanda Holden, Holden Consulting, and A. Holden Consultants the same supplier bidding or billing under different names? SAS uses various analytical techniques to resolve multiple identities, flagging common names, phone numbers, addresses, and other details that indicate such multiple billing personality disorders.
Network analysis. SAS integrates multiple sources of information—contract terms and history, employee and supplier records, banking information, relationship connections—to discover hidden links among entities, predict which connections create possible conflicts, and detect “ghost companies” operated by employees to bill for services. Add external risk-based data to this mix and you have a holistic view of your procurement eco-system (a “Know Your Supplier” perspective) and this risks within it.
Monitoring and reporting automation. Proactive detection and reporting allow an organization to triage anomalies for investigation and take a preventive approach to procurement issues. An interface designed for investigators helps to drive your efficiency up and your risk down.
User-centric discovery tools. Sometimes, abuses aren’t readily apparent. Search and investigation tools allow users to explore data based on hunches or “whistle-blower” reports of abuse empower investigation and auditing of procurement processes.
A properly executed analytics-based governance strategy also accrues value beyond the prevention and detection of misuse. Those value-adds may be the best way to start the conversation in your organization about applying analytics to procurement governance.
“Fraud” is a hard word to start with, I suggest leading the discussion with the softer value propositions: driving operational efficiencies, continuously improving business processes and data quality, removing data silos, and ensuring compliance among them.
Many public sector organizations are undertaking modernization of their technological infrastructure. This is a perfect time, to embed the legislative, regulatory, conventional and public transparency requirements within the procurement process.
JOIN SAS AND FMI FOR OUR ON-DEMAND WEBINAR AND LEARN ABOUT:
- The 10 “red flags” of procurement abuse.
- The risks of inaction to you, your funding and your citizens
- How methods like ISO 37001: Anti-Bribery Management System, combined with analytics support the importance of due diligence in the supply chain.
- How to move beyond the application of business rules and policies in a procurement integrity system, to a proactive AI based approach to prevention.
- The soft benefits of anti-corruption technology and how to use them to build a case internally.
- How to start small with an analytics strategy for procurement integrity.
- And more.
Looking for more information on procurement integrity?
You might also like this whitepaper:
Procurement Integrity Powered by Continuous Data Monitoring:
Getting predictive with analytics to prevent fraud
About the Author
Amanda Holden is a technology, fraud and operations executive with over 15 years experience in payments and 25+ years experience in financial services. Amanda is focused on finding solutions to customers’ financial crimes, loss and AML problems. She is passionate about data & analytics and the role they play in reducing financial crimes in Canada. Amanda works to bring business and technology together, in partnership and is a proud sponsor of SAS's Women in Analytics Program.
- Online payment fraud stops hereBillions of dollars each year are lost to online payment fraud through channels that provide convenient – yet vulnerable – ways to shop and bank. See how to fight back and win with advanced analytics.
- 3 ways to rethink retail forecasting and demand planning The pandemic has profoundly changed consumer shopping behaviors and experiences and the increasing pressure has retailers scrambling to improve their ability to precisely predict and plan for demand. If you don’t know where to start, here are three questions to ask as you rethink your forecasting and demand planning.
- Unemployment fraud meets analytics: Battle lines are clearly drawnMany fraudsters seized opportunities presented by the COVID-19 pandemic. During the crisis, unemployment fraud became a battleground between international criminal networks and government agencies. Learn how analytics can save billions – and deliver benefits to those truly in need.