What is 'continuous monitoring' in fraud detection?

Continuous monitoring in fraud detection refers to the ongoing surveillance of transactions and activities to identify potential fraud in real-time or near-real-time. This method allows organizations to detect discrepancies, unusual patterns, or anomalies as they occur, which is more effective than methods that rely on periodic assessments. By implementing continuous monitoring, organizations can respond more swiftly to potential fraudulent activities, minimizing losses and enhancing overall fraud risk management.

In contrast, yearly audits or periodic reviews of financial statements do not provide the same level of immediacy and responsiveness. These approaches may catch issues after they have occurred, potentially leading to greater losses. Similarly, monthly reporting of financial data could provide useful information, but it does not constitute ongoing surveillance or real-time monitoring, which is critical for timely detection and intervention in fraudulent activities. Continuous monitoring allows for a proactive stance in fraud prevention and detection, making it an essential tool in a comprehensive fraud risk management strategy.