Fraud and Corruption Detection System
World BankIndia Ministry of Health and Family Welfare
Conan C. Albrecht, PhDBrigham Young University
Type 1 and 2 Errors
Problems Exist No Problems
Problem Found and Reported
✔ Wasted Money or Embarrassment
Problem Not Found or Not Reported
Very Bad; Problem Will Be Found Later!
✔
Detectlet Introduction
A Detection Solution
Detectlets
• Since fraudsters constantly change and update their schemes, the system needs to quickly adapt and improve
• The fraud knowledge is encoded in detectlets: small, self-contained plugins
Sequential Security Instrument Numbers
Contracts not matching Benford’s Law
Item Amounts That Are Exact Percentages
Fraud Detection System
Detectlets
• A detectlet encodes:– Background information on a scheme– Detail on a specific indicator of the
scheme– Wizard interface to walk the user
through input selection– Algorithm coded in standard format– “How to interpret results” follow-up
Detectlet Example: Digital Analysis
View All Contracts Screen
View Contract Detail Screen
View Contract Indicators Screen
Maintain Indicators Screen
Example Fraud Indicators
• Red Flags of Collusion– Winning bid too high compared with cost estimates,
published price lists, similar jobs or industry– Persistent high prices by all bidders– Bid prices drop when a new bidder enters the competition– Rotation of bidders by job, work, or geography– Losing bidders hired as subcontractors– Round numbers in bids– Bids exact percentages apart– Address, phone, name matching of bidders– Sequential bid securities, bonds, etc– Certain companies always bid against each other– Losing bidders submit identical bids on different jobs– Distant bidders underbid local bidders– Different amounts bid on same items by same bidder in
different contracts
Why Detectlets Work
• Economy– Framework is free (and always will be)
• It is released under the GPL
– The entire cost structure is based on open source software• Linux operating system (if desired)• Python language• PostgreSQL, MySQL, ODBC databases• Picalo
Why Detectlets Work
• Self-Sustainability– Detectlets puts the development and
maintenance of the tools in the hands of the community. It does not rely upon a company or single source.
– The framework allows countries to build and evolve their own, specific corruption libraries• It also encourages sharing of these libraries
Why Detectlets Work
• Repeatability– Detectlet routines are scripted,
meaning they can be repeated, adjusted, and upgraded
• Routines developed for one area can serve as the basis for routines in another area
• A central repository is being developed right now– http://www.picalo.org/
Why Detectlets Work
• Viability– The framework is realistic -
comprehensive data analysis requires scripting. Detectlets support this advanced type of analysis
– Detectlets can be embedded into existing systems
– The framework makes logistics easier• No keys to buy and distribute (or lose)• No need for expensive piracy audits• It can be installed on as many computers as
desired
Example Fraud Detection Systems
• United Nations Red Flags Application
• Amoco Oil (now British Petroleum) Fraud Detection Database
• North Carolina Picalo Data Mining System
• India Ministry of Health andFamily Welfare