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Cultural Aspects of Fraud

As we ponder the most effective methods to thwart fraudulent occurrences using technology, data, local intelligence, and management dashboards, it is important to also consider the cultural aspects of fraud and how this could affect counter fraud tactics.

As someone who has been exposed to the counter fraud efforts of multiple international regions, I can attest to the fact that “cultural” factors play a very significant role. Consider areas of the world where ethics and honor is an engrained portion of that regions history and how this could affect counter fraud. The Asian culture comes to mind as one the most unique and challenging; and our focus will be on Malaysia, located in Southeast Asia. In this area of the world, insurance is a two-part system which is comprised of insurance and takaful policies. Each system is unique in the way that they are regulated and managed. The insurance products are managed by the Insurance Act of 1996 and follow the traditional flow of risk between an individual and a company. Insured’s pay a premium to carriers, who in turn reimburse the insureds if a loss occurs. In contrast, takaful is managed by the Takaful Act of 1984 and is governed by Shariah, or Islamic law. Under this program, policyholders will contribute a certain amount of money to a shared takaful fund (also known as participative contributions), and they then become members under contract. Under this system, all customers consent that they will help each other when another individual in the pool suffers a loss; these principles are based on the Holy Quran, which promotes assistance toward those in need. It is apparent that these two systems cause increased challenges for those operating in a counter fraud setting in this area.

Based on information gleaned from several sources in this geographical area, almost half of carriers reported some sort of internal theft in the last year, with all of them remarking that this is an increasing area of concern this year. Furthermore, approximately 15 to 20 % of their claims are fraudulent, significantly higher than the industry standard of 10 %. Sources also claim that opportunistic fraud is the most significant problem, with approximately 75% of their cases in this area and the other 25% in organized fraud.

The “take a way” here is make sure one is considering cultural aspects of fraud and how local mind-sets, perspectives, and norms could in fact affect ones counter fraud efforts. Even if you don’t write insurance in Malaysia, consider how cultural factors in Maine could be unique from Florida. Good luck and stay safe! And remember to send me your selfies with a Buddha statue! -Dr. Fraud


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