TABLE OF CONTENTS
Fraud Detection and Prevention: Navigate Your Way
While the fraud rates go up and up continuously, an ultimate, end-to-end guide can be a good resource to capture it all. Today fraud affects various fields ranging from banking to insurance, e-commerce to fintech. Fraudulent activities may realise as identity theft, money-laundering, terrorist funding, payment frauds, bonus abuses, stolen credit card transactions and many more. It’s clear that with the rapid digitalization of the world, fraud is also taking new digital forms.
Through this article, you can find relevant resources to navigate your way in the dark jungle of fraud detection and prevention.
What is Fraud and Fraud Detection?
The UK’s National Fraud and Cybercrime Reporting Centre, Action Fraud, defines fraud as “Fraud is when trickery is used to gain a dishonest advantage, which is often financial, over another person.” We should also emphasise that the dishonest advantage can be gained over businesses too, along with other individuals. Especially for online businesses there’s an evolving danger of fraud which can result in financial losses as well as reputational ones.
If you’re just getting started with fraud detection, you can take a look at the resources below to get a full-frame picture of fraud and fraud detection.
- https://www.formica.ai/blog/introduction-to-fraud-detection
- https://www.heavy.ai/technical-glossary/fraud-detection-and-prevention
- https://www.formica.ai/ebook/fraud-glossary-free-ebook
- https://www.marketsandmarkets.com/Market-Reports/fraud-detection-prevention-market-1312.html
- https://www.formica.ai/blog/how-to-detect-payment-frauds-in-real-time
- https://wso2.com/whitepapers/fraud-detection-and-prevention-a-data-analytics-approach/
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What is Artificial Intelligence?
With its most basic definition, artificial intelligence is smart computers that imitate the cognitive capabilities and thought processes of human-beings. To understand how this technology works, these articles can be a good starting point.
- https://www.formica.ai/blog/brief-history-of-ai-artificial-intelligence
- https://www.formica.ai/blog/which-ai-is-learn-by-its-own
- https://www.formica.ai/blog/10-shows-that-will-help-you-understand-ai
Artificial Intelligence for Fraud Detection and Prevention
Artificial intelligence is an irreplaceable component of modern-day fraud detection technologies and solutions. As a result, everything that AI offers is very valuable for anti-fraud solutions, including machine learning. To learn how machine learning helps fraud detection, take a look:
- https://www.formica.ai/blog/how-machine-learning-helps-fraud-detection
- https://intellias.com/how-to-use-machine-learning-in-fraud-detection/
- https://www.analyticssteps.com/blogs/how-ai-used-fraud-detection
- https://spd.group/machine-learning/fraud-detection-with-machine-learning/
- https://peltarion.com/use-cases/fraud-detection
- https://www.forbes.com/sites/louiscolumbus/2019/08/01/ai-is-predicting-the-future-of-online-fraud-detection/?sh=65abfe9974f5
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What is False-Positive and How to Reduce the Rate of it?
False-positive is an important term in fraud detection. Basically, the situation becomes a false-positive case when your anti-fraud system or software doesn’t accept a payment from a legit customer or when a non-fraudulent transaction is marked as fraud. Although It isn’t possible to totally prevent false-positives, you should aim to minimize the rate of your false-positive cases or in the long run you might lose a lot of loyal customers as well as money.
- https://www.formica.ai/blog/false-positive-in-fraud-detection-benefits-of-reducing-fpr-in-fraud
- https://www.fiserv.com/en/about-fiserv/the-point/its-not-you-its-a-false-positive.html
- https://www.sciencedaily.com/releases/2018/09/180920131513.htm
- https://softjourn.com/insights/how-machine-learning-can-reduce-false-positives-increase-fraud-detection
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What is Graph Analytics?
Graph analytics is a big data analytics technique that uncover the details of the relationship between different data. To learn more about this technology, check out the resources below.
- https://research.aimultiple.com/graph-analytics/
- https://cambridge-intelligence.com/graph-analytics-101/
- https://analyticsindiamag.com/what-is-graph-analytics-its-top-tools/
Fraud Graph Usage in Fraud Detection and Prevention
Graph analytics or link analysis is a great asset for fraud detection technologies. For this purpose, there are fraud graphs which are visual schemas of all data in a given transaction. Thanks to fraud graphs, the links between historical and present data becomes clearer and you can see the behaviour of your customer from a holistic view, hence, false-positive rates can be reduced.
If you need a hand in understanding fraud graphs here are some useful resources:
- https://www.formica.ai/ebook/fraud-graph-free-ebook
- https://towardsdatascience.com/fraud-detection-with-graph-analytics-2678e817b69e
- https://thefintechtimes.com/5-steps-for-better-fraud-detection-using-graph-technology/
- https://www.formica.ai/blog/detecting-anomalies-with-fraud-graph
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E-Commerce Fraud Detection and Prevention
E-commerce industry has become one of the biggest victims of fraud. As digitalization rises, fraudsters attack even stronger to e-commerce because there are made millions of purchases every day, there is a bottomless pit of options and there’s also technology to benefit from. In result, e-commerce needs all the help it can get to fight fraud, especially the help of the smart fraud detection tools and software.
Most of the e-commerce marketplaces and large-sized businesses have a transaction frequency that is impossible to manage manually. Furthermore, without a tool or software it’s almost impossible to be ahead of the fraudsters 7/24, because human-beings can’t work non-stop. To be on top of every transaction made, anti-fraud software can do a lot for a merchant. Go on and take a look at the resources below that will help you defend your business.
- https://www.formica.ai/blog/ecommerce-payment-fraud-types
- https://www.merchantfraudjournal.com/ai-ecommerce-fraud/
- https://www.formica.ai/blog/upcoming-fraud-surge-on-christmas-experts-are-warning
- https://www.cloudways.com/blog/ecommerce-fraud-prevention/
- https://www.formica.ai/blog/ecommerce-fraud-prevention-best-practices
- https://spd.group/machine-learning/e-commerce-fraud-detection/
- https://www.formica.ai/blog/five-types-of-ecommerce-fraud-and-prevention-tips
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Banking Fraud Detection and Prevention
Banking is another sector that must have fraud detection. Handling, conserving and transferring billions of dollars every day, banks are appealing targets for criminals and fraudsters. From money laundering to loan and identity frauds, banks encounter all kinds of criminal and fraudulent activities. While getting familiar with one fraud method, cunning fraudsters strike with another one.
In order to protect their customers, money and reputation banks have to be ahead of fraudsters with the help of the latest technology products. Here are a few resources to help you out how fraud detection works for banking.
- https://www.formica.ai/blog/graph-analytics-for-fraud-detection-in-banking
- https://www.sailpoint.com/identity-library/top-5-banking-fraud-prevention-methods/
- https://www.formica.ai/blog/real-time-fraud-detection-in-banking-protecting-with-ai
- https://www.bankofamerica.com/security-center/fraud-prevention-checklist/
- https://www.elinext.com/blog/fraud-management-detection-and-prevention-in-banking-industry/
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Gaming Fraud Detection and Prevention
Gaming industry is a fairly new target for hackers and fraudsters. While online gaming scene gets wider and wider each day, it gets noticed as an outcome. Recently, there has been a lot of fraud cases in the industry that cause both the companies and the customers to lose money.
- https://www.formica.ai/blog/how-to-detect-and-prevent-gaming-fraud
- https://thefintechtimes.com/gametech-the-growing-gaming-fraud-threat/
- https://www.formica.ai/blog/latest-example-of-the-importance-of-fraud-detection-2021-twitch-scandal
- https://razorpay.com/learn/everything-you-need-to-know-about-tackling-gaming-fraud/
- https://igamingbusiness.com/understanding-and-solving-fraud-in-igaming/
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Blockchain and Crypto World Fraud Detection
Although blockchain is a technology that is used and known for its strictly secure infrastructure, fraudsters have found ways of scamming people and companies in blockchain and crypto world too. As the popularity of a few relatively new concepts such as NFTs and cryptocurrencies grows, the more criminal minds search for new ways to attack.
Take a look at these practical resources to stay safe in the dynamic ecosystem of the crypto world.
- https://support.blockchain.com/hc/en-us/articles/4413805384852-What-are-the-most-common-scams-
- https://www.formica.ai/blog/how-does-blockchain-prevent-fraud
- https://www.investopedia.com/articles/forex/042315/beware-these-five-bitcoin-scams.asp
- https://www.formica.ai/blog/nft-frauds-how-to-avoid-them
- https://help.coinbase.com/en/coinbase/privacy-and-security/avoiding-phishing-and-scams/avoiding-cryptocurrency-scams
- https://www.formica.ai/blog/5-cryptocurrency-frauds-and-how-to-avoid-them
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AML & KYC Compliance and Fraud Detection
AML (Anti-Money Laundering) and KYC (Know Your Customer) are two major concepts for financial institutions. These two terms cover a series of processes that are obliged to be followed in order to help stopping certain criminal activities such as money laundering, terrorist financing, and human trafficking.
Since these procedures are related to crime, the ultimate observation and audit institutions are parts of government agencies. So, the financial institutions should obey certain compliance programs as well. If you’re just getting started with AML and KYC, go on and check these records to get a better understanding of it:
- https://www.formica.ai/blog/aml-fraud-detection-and-compliance
- https://www.investopedia.com/terms/a/aml.asp
- https://www.formica.ai/blog/kyc-and-aml-relationship
- https://www.docusign.com/blog/kyc-aml-compliance-customer-onboarding-experience
- https://www.formica.ai/blog/kyc-verification-process-preventing-user-friction-
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