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Detecting fraud with artificial intelligence

Detecting fraud with artificial intelligence

Detecting fraud with artificial intelligence

 According to the  Global Economic Crime and Fraud Report conducted by the global audit firm PwC, financial fraud and cybercrime hit an all-time high this year. In fact, in the past two years, 49% of international organizations reported experiencing economic fraud.

While numerous institutions are introducing new technologies to eradicate crime, technology to prevent economic crime and fraud with artificial intelligence is attracting attention.

Economic Crime and Fraud

According to a report by PwC, there are three common types of economic crime and fraud. These are asset theft, cybercrime, and consumer fraud.

1. Asset embezzlement: The crime with the highest incidence rate of 45% among economic crimes and fraud. This refers to the theft of assets within an organization.

2. Cybercrime: This is a serious problem that belongs to the world's top three global economic crises along with corruption and drugs. The amount of damage caused by cybercrime has reached $600 billion (about 676 trillion won) worldwide.

3. Fraud by Consumers: Fraud by consumers accounts for 29% of economic crimes and fraud, and is a fraudulent activity in which consumers inflict losses on institutions in the course of what appears to be a legitimate business. These include mortgage fraud, debit card fraud, fake donations, and fake lottery tickets.

According to PwC, 68% of fraud is caused by external perpetrators and 40% by frenemy, i.e. agents, suppliers or customers working together and competing with each other on the other side. In addition, a total of 52% of fraudulent activities were carried out by inside actors and 24% by senior management. 91% of these scams were reported to the company's board of directors or senior management.

▲ Economic crime adversely affects sound economic activity (source = 123RF)

Prevent fraud with AI

Cyber-attacks cause so much trouble that businesses go out of business. That is why banks and public institutions are working to prevent fraud with artificial intelligence (AI) and machine learning. An advanced data analysis process makes it easier to track fraudulent transactions.

One company that has used AI to prevent multiple scams is Mastercard. Fraud has decreased by 80% since the company introduced AI. They detected unusual activity that could lead to fraud or theft, such as verifying customer identities and identifying suspicious behavior.

Back in 1992, FICO, the world's leading analytics software company, used AI and machine learning to combat credit card fraud. They were pioneers in adopting AI, reducing morale by 70%. This is the oldest example of AI solving real business problems.

One of the AI-based fraud prevention engines is Mitra. Mitra is a comprehensive AI that processes hundreds of parameters and transactions within seconds, used in fraud prevention. The accuracy is 100%.

Companies use AI to verify that customers' jobs, education levels, social media accounts, etc. match information in the database, and go through a screening process to detect fraud.

Investing in AI Crime Prevention

Mark Gazit, CEO of cybersecurity and big data analytics firm ThetaRay, said its AI and analytics solutions can detect fraud and money laundering schemes by companies and institutions.

They raised a total of $60 million (67.6 billion won) in AI crime prevention efforts. Investors include SVB Investments, Hapoalim Bank, Jerusalem Venture Partners and Our Cloud. They plan to expand their business throughout the United States, Europe and Asia.

Tetaray is being touted as the best technology solution to tackle cyberattacks in Asian banking risk management.

This technology provides a mature and advanced solution in detecting fraudulent activity and money laundering schemes.

“Criminal practices and money laundering are on the rise, and the methods are getting more sophisticated. So, the demand for our solutions is also growing. The amount of digital information has grown tremendously, so businesses cannot be protected without AI help. No. We need a solution that detects and prevents threats before they occur,” he said.

As Global Banking and Finance Review notes, "Risk management and compliance will evolve into more complex systems in the future. But with AI and machine learning, businesses can stay safe."

Fraud prevention with AI reduces financial fraud and cybercrime and improves service quality. We must move forward towards a cybercrime-free future.