How do you detect fraud in financial institutions?

Fraud detection is one of the top priorities for major banks and leading financial institutions, which can be addressed using machine learning.

In banking, fraud may include falsify checks or using stolen credit cards. Other forms of fraud may involve emphasize losses or causing an accident with the sole intent for the pay-out.

With an unlimited and increasing number of ways someone can commit fraud, detection can be difficult to accomplish. Activities such as downsizing, reorganization, moving to new information systems or confront a cybersecurity breach could weaken an organization's ability to detect fraud. This means facilities such as real-time monitoring for frauds is recommended. Organizations should look for fraud in financial transactions, location, devices used, initiated sessions and authentication systems.

How do you detect fraud?

The basic approach to fraud detection with an analytic model is to identify possible predictors of fraud associated with known fraudsters by tracking their activity in the past. The most powerful fraud models are built on historical data.

If the fraud response can be identified, it can be used to define the behavior of the fraudster in the specific fraud act and in historical data.

Fraud Detection Techniques

Fraud is typically an act which involves many repeated methods; making searching for patterns a general focus for fraud. Data analyst can prevent banking and insurance fraud by making algorithm to detect patterns.

Fraud detection can be separated by the use of artificial intelligence AI or statistical data analysis techniques

Statistical data analytics techniques:

Data Matching

Regression Analysis

Calculating Statistical Parameters

Probability Distribution and models

Artificial Intelligence (AI) Techniques used to detect fraud:

Data Mining

Pattern Recognition

Machine Learning (ML)

Neural Networks