Using Data to Combat Financial Fraud

Using Analytics to Solve Financial Crime

Like many of the articles featured in the blog, Unisys’s “Using Big Data Analytics to Fight Financial Crime” begins by informing the reader of the growing amount of data. It reports that the amount of digital data is doubling every 2 years per a recent study by the IDC.  Digitization has caused consumers to create large trails of data from communicating, browsing, buying, sharing, and searching.

Although consumers generate large amounts of data, companies are generating large amounts of transactional data by capturing information about their customers, suppliers, and operations. The article mentions the millions of networked systems that are in place to record and analyze the data.

The articles “thesis” is How can financial institutions use this data to get ahead in Financial Crime Management.  They argue that traditionally, firms utilize less than 5% of available data to combat illicit financial activities.

Financial institutions are facing a growing problem. Customers are demanding improved and more personalized service, while the institutions are facing increased regulations. Recognizing that data is significant is an important step that many companies are taking by assigning a Chief Data Officer.  Big data creates a model built on every incidence of fraud on every single person, rather than restricting a sampling group. Each time there is a deviation in the model, it can be updated to prevent further fraud.

The article that soon, data analysis will be used to determine financial crime management solution rules by detecting the correlation between financial crime and attributes of the transaction, or series of transactions.

There are 2 main types of fraud being detected, Cases investigating fraud involving employees and an Anti Money Laundering perspective. Financial institutions have begun to identify suspicious transactions. An example of employee fraud would be an increase in the number of inquiries made against customer accounts to determine available funds followed by a series of transfers to an account an employee the employee has control of.

As the rate data is generated increases dramatically, what else can banks and financial institutions do with available data to combat fraud?

Source: http://www.sourcingfocus.com/uploaded/documents/Unisys_-_Using_big_data_analytics_to_fight_financial_crime.pdf