A Cyber Weapon to Fight Cyber Fraud: Artificial Intelligence

Organized crime is very active throughout both the private and public sectors. From banks to major retailers, federal governments to small businesses, fraudsters aren’t discerning when choosing which type of organization to target.

What’s more, crime rings are actively recruiting and deploying groups of thieves across the U.S., making it increasingly difficult for companies to catch bad actors before they strike.

Overwhelmed by unmanageable amounts of data, companies have left gaps in their IT systems that criminals are eager to exploit.

It’s well past time for businesses and governments to take steps to thwart nefarious actors by using technology that outpaces them, keeps customer data safe, and protects organizations across the board.

Artificial intelligence can provide that edge.

It’s no secret that fraudsters seek out and exploit organizational weaknesses. Today, though, they have even more choices and more weaknesses to identify than ever: Nearly every business stores data online in some capacity.

This data is as much of an opportunity for businesses as it is a vulnerability if not managed well.  Unfortunately, countless organizations don’t handle their data appropriately.

At this point, data has become a friend of the criminal, who can easily set up phishing and social engineering scams not only in the digital world but in the physical world, too.

There’s been a boom in fraud and physical theft along train, shipping and trucking lines, as criminals approach financial institutions for fraudulent trade finance loans. For example, a criminal may approach a bank for funds to export thousands of televisions, using fictitious information.

Meanwhile, those individuals work with a false or bought-off importer to reroute the products, giving financial criminals the opportunity to file false claims to recover the money they’ve lost, claiming the TVs have been ‘stolen.’

They may also, just as easily, use synthetic IDs to apply for a loan to purchase products, only to default on the loans. It’s at this point that banks discover they’ve been victims of fraud as they investigate the identity of the loan applicant, only to come up empty.

The crime has been committed, the criminal has gotten away with it, and banks are left to clean up the mess, all sparked by gaps in the way institutions gather and monitor customer or supplier information.

AI Can Help Stop Fraud Before It Happens

 Data is only as good as the way it’s applied, which is why so many organizations struggle to prevent fraud. They have the data they need, but often don’t have the ability to easily access it, and if they do have the access, they don’t know what to do with it.

With the help of artificial intelligence (AI), however, banks and businesses can improve the security of their operations and their customers’ data. Instead of feeling inundated by endless lines of disorganized data, companies should embrace and leverage that data through the use of AI and machine learning.

It would improve the detection and identification of suspicious individuals before—not after—a crime has been committed.

Many organizations face the issue of how to actually navigate their mountains of data. It sits in silos, rather than in a contextual framework, making it difficult to sort through and make sense of. This means that organizations cannot drive any actionable value from their data

But AI can provide a way forward without having to first solve all of your data challenges.

Advanced technology takes the control out of the hands of criminals through powerful tools designed to catch discrepancies and suspicious patterns―tools such as entity resolution, network generation and advanced analytics. For example, the right algorithm can sort through data, developing ways to detect patterns that may lead to fraud.

These patterns may include similar names, addresses, locations, IP addresses, and multiple applications with only slightly differing information. These tools help companies not just identify, but also predict fraud among certain networks, making them indispensable in a world where the data keeps pouring in.

Quickly identifying patterns of behavior gives organizations, whether private or government-run, the ability to locate and root out fraud before it happens. As AI and machine-learning-based systems take charge of the task of collecting, sorting and analyzing data as it comes in, employees can spend their time and talents on tasks other than digging through endless data.

Instead, when AI-driven technology alerts these individuals to a potential for fraud, they can then use their human intelligence and judgment to determine whether or not to launch an investigation.

Clark Frogley

This puts more focus on actual risk and less on the noise that consumes organizations today.

In this way, companies can make better use of their time and talent rather than wasting it gathering and sorting through data.

AI can put data into context so that it’s actually useful, and as a result, organizations can more quickly detect potential fraud and stop criminals before they can carry out their plans.

Clark Frogley is Head of Financial Crime Solutions at Quantexa. He began his career with the FBI investigating organized and financial crime and served as the Assistant Legal Attaché in the US Embassy in Japan. Previously, Frogley worked as an executive at IBM in positions as the global head of AML and Counter Fraud Services in Banking, the Financial Crime Practice Leader for IBM in Japan, and the Financial Crime Solution leader for AML, Sanctions and KYC.

He can be reached via social media at Twitter: https://twitter.com/quantexa; and at LinkedIn: https://www.linkedin.com/company/quantexa/