Question

Compare and contrast the difference between fraud prevention and fraud deterrence? Provide examples, TTT Arial 3 (12pt) TEE 5.02

Answer 1

Fraud detection

Fraud detection is a set of functions undertaken for the purpose of prevention of money, property from going into the hands of unauthorised people by wrong manner.
It is reactive response to either assets misappropriation or missrepresentation of financial assets.
In today's technological world, with an unlimited rise in number of ways to commit frauds detection has become difficult to be accomplished.
It involves the historical transactions review for the identification of factors involved in frauds.

E.g of fraud detection:

• Real-time monitoring for frauds
• Making search for pattern
• Use of artificial intelligence

Fraud Deterrence
Fraud deterrence is proactive, preventive measure and enabling factor to remove fraud.
The roots of fraud deterrence is based on the concept that fraud is not occurred randomly.
It affects the root cause of fraud.
It has gained worldwide recognization and spotlight after the introduction of servicemen's oxley act 2002.
cost involved in fraud deterrence is in fraction of what is involved in fraud detection.

Example of fraud deterrence is :

• review the accounts in a part of fraud deterrence.

There is no major difference between the fraud deterrence and fraud detection but the difference are disscussed below

• Fraud deterrence is proactive whereas fraud detection is reactive.
• Cost incurred in fraud deterrence is very less as compared to cost incurred in fraud detection.
• Risk involved of not detecting fraud is higher in fraud detection than risk of prevention of fraud in fraud deterrence.