SFIO 'miserably' failed to develop fraud prediction model

The Early Warning System, initially projected as an effective tool for detecting cases of potential fraud, has been shelved mid-way on account of unsatisfactory results

SFIO's 'trial and error' approach has resulted in the investigation agency "miserably" failing to develop a coherent fraud prediction framework, according to a Parliamentary panel.

The Serious Fraud Investigation Office (SFIO), under the administrative control of the Corporate Affairs Ministry, was asked to probe 139 cases in the last three years.

The Parliamentary Standing Committee on Finance has also called for a comprehensive review of the agency's functioning as well as giving more autonomy to it.

According to the panel, the Early Warning System (EWS), initially projected by the Ministry and SFIO as an effective tool for detecting cases of potential fraud, has been shelved mid-way on account of unsatisfactory results.

"SFIO has miserably failed in developing a coherent and efficacious fraud prediction/prevention framework... The major reason for this failure appears to be the trial and error approach followed by SFIO in formulating modules/systems for detecting and preventing fraud," the panel said.

The committee, chaired by Veerappa Moily who is also a former Corporate Affairs Minister, has made the observations in its report on the Ministry's Demands for Grants for 2015-16.

The report, tabled in Parliament on Friday, said the investigation agency also failed to explain the outcome of the fraud prediction module for which a token allocation of Rs 1 lakh was made last year.

This year, the agency has sought Rs 75 lakh to implement the new institutional mechanism to detect fraud at an early stage through its Market Research Analysis Unit (MRAU).

"The committee hopes that this mechanism brings some sort of certainty and finality in instituting effective fraud prediction/prevention model," the report noted.

Noting that SFIO's track record has been far from satisfactory, the panel asked the Ministry to carry out a comprehensive review of the agency's working, including their budgetary allocations and utilization of funds alloted earlier.

The panel has also recommended the Ministry to "give more functional/professional autonomy to SFIO, while upgrading the status of director, SFIO from a joint secretary level post to a secretary level post".

As SFIO matures into a full-fledged investigating agency, all the systemic tools deployed will be gainfully applied for concrete outcomes by way of investigation and prosecution, the report said.