banking-fraud-losses-2004-2014

How to combat financial fraud by using big data?

How to combat financial fraud by using big data?
Financial fraud methods are becoming more sophisticated and the techniques to combat such attacks also need to evolve. Big data has brought with it novel fraud detection and prevention techniques such as behavioral analysis and real-time detection to give fraud fighting techniques a new perspective.

Financial fraud methods are becoming more sophisticated and the techniques to combat such attacks also need to evolve. Financial institutions have been investing on preventing and combating fraudulent attacks but the extent and nature of financial fraud continues to change. While eliminating financial frauds is not a practical goal, there is a need to evolve the ways fraudulent attacks are dealt. Clearly, the paradigm needs to change and big data, it appears, is a novel and potentially potent weapon. Big data has brought with it novel fraud detection and prevention techniques such as behavioral analysis and real-time detection to give fraud fighting techniques a new perspective. Analytics allow financial institutions to gain a deeper understanding of suspicious activities, derive patterns and locate unusual transactions that are helpful in preventing fraud. Financial institutions are slowly waking up to the new ways of fighting fraud.

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Experian, a reputed global information services company conducted a survey in 2014 on financial fraud. Experian’s 2014 fraud report lists the top trends in fraud across the globe. The trends give an idea of how the fraudulent attacks have been evolving. Here are some of the salient findings from the report.

According to AFPs (Association for Financial Professional) payments fraud and control survey, following image shows the statistics for payment frauds in 2015.

Change has been the only constant when it comes to finding novel ways to fraud. Fraudsters have been constantly finding smarter, quicker and innovative ways to steal identity and data. The first step to combating such fraud is to accept that there will constantly be new ways of attacks. The section below provides a case study on how a highly sophisticated phishing attack, which the Federal Bureau of Investigation (FBI) dubbed as business email compromise, resulted in a loss of millions of dollars.

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The phishing attack claimed victims who were the employees of a number of large corporations in the US. The attackers would first do a reconnaissance of the executives who dealt with large payments, wire transfers and bank accounts. Secondly, the attackers would spoof top executives with financial decision-making powers and obtain their email credentials. Third, the attackers would send emails from the executive’s account to persons dealing in large payments asking them to transfer large sums of money to an account controlled by the attackers. As a result, Ubiquiti Networks lost $46.7 million; Crelan Bank in Belgium bled $75.8 million and FACC A.G, a Boeing supplier, aircraft component manufacturer, lost $54.5 million.

An FBI advisory stated how chilling and clinical the attack was, “The accountant for a U.S. company recently received an e-mail from her chief executive, who was on vacation out of the country, requesting a transfer of funds on a time-sensitive acquisition that required completion by the end of the day. The CEO said a lawyer would contact the accountant to provide further details.

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