sascom voices - The sascom magazine blog

Fraudsters are very much like a pack of wolves, says Chris Swecker, corporate security expert and former Assistant Director of the FBI. And the financial institutions are the prey: Theyre really trying not to be the next victim, and theyre trying to outrun each other or hide the best they can.

But it doesnt have to be that way. I think those roles can be reversed, says Chris. With the help of analytics designed to look at ring-related network activity, you become the hunter and the fraudsters ...

become the prey.

Rex Pruitt, a Business Analyst at PREMIER Bankcard LLC, agrees that it is possible to reduce fraud, and he has the numbers to prove it. Using predictive models to anticipate fraud activity before it occurs, his organization reduced the rate of fraud in its portfolio from 6.7 percent down to 3 percent.

That equates to about $9 million in total revenue to the company, says Rex. You gain a lot by being able to identify those fraudsters.

How does it work? The predictive model identifies fraudsters with a score during the application process. Accounts identified as fraudulent are eliminated from the portfolio before the bank has even incurred the cost of fraud. Rex says early identification can also free up volume capacity, so the bank can bring on more good applicants.

To build on the type of analysis PREMIER is already doing, Chris Swecker suggests banks use network analysis to identify rings of fraudsters that can be observed in the banks data. Youre not going to eliminate fraud but you can create better deterrents and a much higher risk environment for fraud, he says. What I advocate, and the record is very clear: the way to get at financial crimes is to look at them, address them and detect them as a network.

Chris worked with a large, international bank on a networked fraud detection project using SAS and was able to identify 40 new fraud rings almost instantly. We had billions of transactions, hundreds of thousands of customer accounts, and myriad of products and services. SAS provided a way to look at the data and see the broad network activity thats going on using our own data.

Chris says theres a clear supply chain that you can see when investigating networked crimes, especially with Internet crime: You have individuals that steal and sell the data, buyers who usually resell it, and eventually the data makes its way to the people who exploit it by manufacturing credit cards and debit cards, which then pop up somewhere in the hands of someone committing the detectable fraud act.

Im careful not to use the word organized crime, because its network crime,' says Chris, and there's a difference. Its not like a hierarchy with a crime boss on top and layers below him in an org chart. Fraud networks are spidered out. It is a network, and we ignore the network at our own peril.

Cameron Jones, Chief Compliance Advisor, SAS Financial Crimes, SAS

Ellen Joyner, Global Financial Services Marketing Manager, SAS

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