Cost Savings On Incentives
Claims Through Superior
Validation Practices
Haris Khan
Manager, Risk and Compliance

Ranked # ...
Agenda
•
•
•
•

Fraud Trend – Altered Invoices
Voice of the Customer
Latest Threats
Detection, Mitigation and Remediation
Typical Incentive Fraud Scenario

Customer

Purchase

Altered Invoice
Lifecycle of a Fraudulent Claim

Fraud
Execution

Program
Target

Financial
Loss
Voice of Customer

Devon Reid, Consumer Promotions Associate
Emerging Threats

Account
Takeover

Fictitious
Consumer
Altered
Dates

Altered
Invoices
Evolution of Fraud Detection
KYC

IP and Device ID
Validation
Velocity

Address
Validation
Sales
Validation
Altered Invoic...
Non-Compliant & Fraud
$5,000,000.00

80000

$4,000,000.00

60000

$3,000,000.00

40000

$2,000,000.00
Claims Declined for
...
Questions

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Cost Savings On Incentives Claims Through Superior Validation Practices

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In today’s competitive business environment, companies are constantly looking for ways to increase sales and brand awareness in an effort to improve their bottom-line. The challenge is, of course, that keeping ahead of fraudsters is a moving target. Fraud is an overlooked & unspoken problem, the simple fact is fraud is very prevalent and very costly.

In this webcast, Haris Khan, and Devon Reid from Electrolux Home Products discussed the holistic impacts of fraud within the channel incentive industry, why you should care and what steps you can take to prevent fraud in your incentive programs.

Published in: Business, Economy & Finance
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  • HI everyone and welcome to Today’s Webcast – Cost Savings on Incentives Claims Through Superior Validation PracticesMy name is Haris Khan, Risk and Compliance Manager at 360incentives. For the past 13 years my career has been focused on detecting, investigating and preventing fraud. Here at 360incentives I head the Risk and Compliance team where I lead 360incentives fraud prevention, detection, investigation and compliance initiatives, share discoveries on emerging trends and provide insight on best practices to stop these sophisticated threats.We will also have Devon Reid joining from Electrolux North America to talk about the impact of fraud on promotional spend.At the end of our webcast I will be sending everyone a copy of our auditors checklist to review
  • Today’s Agenda would be split into 4 main sections Fraud Trend – Altered invoices– I’ll go over how this scheme worksWe’ll hear on how fraud impacts promotional spend at Electrolux North AmericaI’ve review with you all some of the emerging threats we are seeing And lastly review with you 360incentives detection, mitigation and remediation processAt the end of the presentation I will open the floor for any questions you may have.So lets get started
  • When we talk about fraud in sales incentives we particularly look at fictitious or altered invoices, where the sales associate will submit a claim where no product as been sold to the consumer or invoice has been altered reflect eligibility into the incentive program.It all starts with the customer making the purchase, most of the time the fraud is pre-meditated and the sales associate will not close the invoice. Once the customers transaction has been completed the sales associate will alter the invoice by changing the sales date to reflect an earlier sales to claim against an earlier program or the sales associate may add additional models to the invoice and submit to a incentive program.
  • Lets now see how the fraud life cycle is completed.We notice high value programs which offer a wide range of models and an extended period of time to allow submission of the claims are targets for fraudsters. So first, the right program is targetedThe fraud is then executed once the claim is submittedWithout the right controls in place the fraudster will soon receive a confirmation email advising of the approved claim.
  • I would like to now introduce Devon Reid from Electrolux – Devon manages the nation rebate programs for Electrolux, Devon thank you for joining us today. Once question I had for you, what impact does fraud have to the cost of promotion spend?AnswerIt has a huge impact. Fraud is costly and in todays competitive business environment, we are always looking for ways to save money and improve our bottom lin. I think about it this way: every dollar we save from fraud, is a dollar we can dedicate towards a higher value reward in our program, or rewarding an additional person. This can mean the difference between a good sales incentive program and a great sales incentive program. In turn, we keep our sales associates happy and they continue to support our business.Response:Great Points, its good to hear how every dollar we save is given back to the programQuestionsWhen it comes to fraud with incentives its at times difficult to get a handle of trends, especially since there are no set industry body that shares trends and data. How important is it for you to be aware of emerging fraud threatsAnswerIt is extremely important. As technology is advancing, people are becoming more innovative in their tactics of committing fraud. Therefore, it is important for our fraud detection technologies to keep up with these changes. But we also don’t want to over complicate the process with too many rules aimed at controlling fraud. Haris and his team are always updating me with new techniques they have put in place to continue with fraud detection improvement. This means I spend less time and money auditing the claims internally, it gives me additional money in my budget to dedicate towards communication of the program, allows me to dedicate higher value rewards to more people, and eliminate the obstacles that associates feel they might need to overcome and don’t feel are worth it. One thing that is really great is that with the advanced reporting at 360 , I always know exactly how much money we are saving … and as the 360 fraud checkpoints are improving, our cost savings increase. It makes me feel confident about doing business with 360, knowing they are constantly looking for new ways to evaluate our claims and detect potential fraud. 100% of our claims are audited, which means we are saving money, improving compliance and putting our money in the right places. ResponseThanks DevonIt is really important to ahead of the curb when it comes to fraud, whenever we Identify a fraud trend its seems the fraudster will create a new scheme to submit fraudulent claims.With that being said lets take a look at some of the current and emerging fraud threats we have identified with all types of incentives.
  • Account takeover – Accounts are usually taken over as a result of phising, spyware or malware scams. Once the fraudster gains access to the sales associates online account they will then submit fraudulent claims. With the pay card information on hand the fraudster will then transfer the funds to another account, Ultimately making is seem as if the sales associate submitted the fraudulent claims. The sales associate wouldn’t know they had been a victim of fraud until they review the claims submitted. By that point the financial loss has taken place and funds cannot be recovered. You can mitigate this threat by utilizing IP and Device id validation along with a real time activity monitoring checking for any variances. Fictitious Consumers – Another emerging fraud trend is submitting claims with fictitious consumer information, the sales associate will create an invoice with legitimate sku numbers, invoice number and dates applicable to the specific program they are claiming against. Without a consumer authentication tool in place there would be no way to identify these potential fraudulent claims as everything else on the invoice will clear the claims process.Altered dates and Altered invoices have always been a popular scam – associates will alter the sales dates or delivery date to reflect eligibility into the incentive program. Sales associates will also attempt to add additional products or change the sell price to meet MSP requirements.
  • At 360incentives we have several detection tools in place many more innovative solutions we are working on to prevent fraud from taking place.
  • Here is an example of one quarter for from one of our consumer hard goods customers. A total of 105,000 claims were processed last quarterly out of which we declined 9,765 for compliance and 1,068 for potential fraudThat is 9.3% for compliance and 1.017% for fraudResulting in a net savings of over $2.1M in a year,
  • Cost Savings On Incentives Claims Through Superior Validation Practices

    1. 1. Cost Savings On Incentives Claims Through Superior Validation Practices Haris Khan Manager, Risk and Compliance Ranked # 1– 2012 Impact Award 2013
    2. 2. Agenda • • • • Fraud Trend – Altered Invoices Voice of the Customer Latest Threats Detection, Mitigation and Remediation
    3. 3. Typical Incentive Fraud Scenario Customer Purchase Altered Invoice
    4. 4. Lifecycle of a Fraudulent Claim Fraud Execution Program Target Financial Loss
    5. 5. Voice of Customer Devon Reid, Consumer Promotions Associate
    6. 6. Emerging Threats Account Takeover Fictitious Consumer Altered Dates Altered Invoices
    7. 7. Evolution of Fraud Detection KYC IP and Device ID Validation Velocity Address Validation Sales Validation Altered Invoices Cross Client Validation Duplicate Invoice Check Auto Decision ve nti nce i 360 D ud Fra s Audit Score Duplicate Serial Check Distance Rule Dynamic Risk Scoring Consumer Authentication Altered Sales Date Fraud Database Intelligence Analysis n ctio ete High Risk Fraud Alerts Fraud Analytics
    8. 8. Non-Compliant & Fraud $5,000,000.00 80000 $4,000,000.00 60000 $3,000,000.00 40000 $2,000,000.00 Claims Declined for Compliance 9.3% 20000 Claims Declined for Fraud 1.017% 0 Claim Volume Declined for Compliance Quarterly Claims Volume Quarterly Claims Claim Volume $1,000,000.00 $- Declined for Fraud Querterly Claims Value Quarterly Claims Value @ $50/Rebate Volume Value $6,000,000.00 100000 Volume 120000 Yearly Total Claim Volume Yearly Total Claims Value @ $50/Rebate 105,000 $ 5,250,000.00 420,000 $21,000,000 Declined for Compliance 9,765 $ 488,250.00 39,060 $ 1,953,000 Declined for Fraud 1,068 $ 53,392.00 4,272 $ 213,570
    9. 9. Questions ?

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