Benford’s Law: the fraud detection’s left hand

Fraud is a social dilemma that affects individuals, organizations and societies. The damage caused by perpetrating fraudulent acts is extremely costly, even if its impact may not be exclusively financial. Considering that fraud prevention does not always keep up with the evolution of the phenomenon, several techniques have been studied in the literature to seek effective fraud detection and minimize its impact. Benford’s Law is one of the analytical techniques aimed to assist in the effective detection of fraud and the purpose of this paper, oriented towards a literature review, is to evaluate the true role of Benford’s Law in this area. Regarding the evidence gathered in this study, it was concluded that Benford’s Law is a powerful analytical tool that enables the identification of anomalous data, with low implementation costs, and allows redirecting the greatest efforts to a further moment of analysis. It should be seen as a pointer for instances that deviate from the expected pattern, which should be analyzed by more robust tools. As it is applied at an early stage of the process, Benford’s Law could be seen as a genuine left hand in fraud detection.