Fraud Management strategies

By Metatomix

Fraud and financial crime is ever-evolving, and occurs swiftly. Innovative approaches to fraud and new attacks happen every day and no one can speculate what the fraudsters will do next. Criminals are constantly modifying their techniques to create new forms of fraud.

One of the most effective ways to keep up with the fraudsters – and to keep fraud at a minimum – is to centralize case management.  Centralized case management solutions automate the case management process, monitoring cases in near-real time and in-flight, ensuring that fraud cases don’t fall through the cracks, and significantly improving the efficiency of the case management process.

An AITE study on Fraud Management Strategies of US Financial Institutions offering several insights supporting addressing fraud via centralized case management:

• “The largest area of concern is internally related to the lack of a robust enterprise case management system.” 
• “Cross Channel Fraud is expected to grow the most of all fraud types.” 
• “The greatest area for immediate action appeared to be in the area of centralizing the fraud management function”. 
• “Concern for the ability to achieve enterprise case management for clarity when it comes to monitoring fraud.”

[Source: Aite Group, “Fraud Management Strategies of U.S. Financial Institutions: The Drive Toward ‘Enterprise-Wide,’” April 2008.]

To address the need for a better centralized case management system, ACI Worldwide and Metatomix have partnered to build the first semantically-enabled enterprise case management system for financial services risk management. ACI Worldwide looked to Metatomix to build a single integrated platform for fraud and risk case management. The financial services risk management industry demands an enterprise case management solution that integrates data from multiple detection systems, and can identify relationships and link analysis from this data. This type of proactive analysis in fraud case management is increasingly critical as organizations strive to reduce their fraud write-off by making their investigation processes more efficient, and closer to real-time. Allowing better intelligence to be gathered to prevent the same fraud pattern from being repeated again, providing financial institutions with the ability to help lower their fraud point of detection rates (at what point fraud is actually detected on an account). 

The Metatomix Semantic Platform can uniquely address this challenge with our semantic data modeling, and the capability of our semantic technology to uncover relationships and patterns that previously went undetected. 

Increased Concern about Complex Fraud Schemes
Criminals have become more sophisticated, and their fraud schemes have become more complex.   Identity theft has become a serious and pervasive threat to consumers and financial institutions. Estimates vary on the true impact of the problem; however, the U.S. Federal Bureau of Investigation (FBI) reports that “law enforcement and consumer advocacy groups agree that financial institutions lose billions of dollars each year to identity theft, and consumers face additional hardships, ranging from financial loss to time spent trying to undo the harm caused to their credit records and other aspects of their lives.”

A 2006 Federal Trade Commission (FTC) survey estimated that 8.3 million American consumers, or 3.7 percent of the adult population, became victims of identity theft in 2005. Credit issuers and banks take the brunt of the losses because victims are rarely held responsible for fraudulent debts. The ability to profile customer payments across channels and products is an important key to detecting fraud early.

In addition to the identity theft fraud trend, cross-border and faster payments initiatives have created new opportunities for fraud. Faster Payments (FPS) is a banking initiative in the United Kingdom to improve the speed of low value person-to-person or business-to-business payments to near real time.  In a faster payments environment, it is vital that financial institutions have the technological intelligence to make informed decisions against fraudulent payment attempts. If a payment is fraudulent, then the bank must be able to stop the attempt before it happens. New products, such the Faster Payment service truncate the traditional 3-day clearance cycle for traditional ACH transactions allowing payment to be made instantly. This provides opportunities for the fraudsters to move money between accounts very quickly.  The ability to monitor payments in-flight is becoming more crucial than ever as the industry strives to fight the war on financial crime. Timely and accurate intelligence is now critical to making informed decisions and lowering operational losses.

The Move to Enterprise Risk Management (ERM)
The concept of enterprise risk management (ERM) is based upon the premise that to effectively prevent and detect fraud, a financial institution must develop a framework for managing risk across the organization. This includes understanding and maintaining internal controls; ensuring all risks are identified and mitigated in strategic planning initiatives; and underpinning all of this with sound, low-risk operational management at every level and unit and across every business line, account, process, function and role.

ERM also takes a holistic view of a financial institution’s relationship with a customer by collectively viewing every product or service the customer uses. This enterprise-wide approach protects financial institutions from fraud at every level, from money laundering activity to identity theft to deposit fraud — essentially any type of fraud that causes an institution or its customer’s monetary loss or potentially damages the institution’s reputation.

The Value of Metatomix Semantic Technology in Fraud Management
Semantic tools discover applications, data and relationships without change to or impact on existing IT infrastructure, and present them in a single common view. This aggregated view enables financial services organizations to take action, in real-time. Current metadata repositories are often passive, offering data but no way to act on it.  ACI’s Automated Case Management system is ontology-based, enabling organizations to describe the relationships between a case, fraud incident, people, accounts, and transaction data. The Metatomix Semantic Platform enables the integration, analysis, and visualization of this disparate data from multiple fraud detection and case management systems throughout the enterprise. This intelligence is gathered and maintained in ACM, without change to or impact on existing applications.  Allowing financial institutions to make intelligence based decisions, lowering traditional point of detection rates and prohibiting future losses.

ACI’s Automated Case Manager (ACM) Solution
The ACI Automated Case Management solution allows financial institutions to protect themselves and gather counter intelligence, managing threats against high risk channels and payment types including identity theft and fraud by check, telephone, POS, ATM, e-commerce and employees.  The ACI Automated Case Management System offers flexible case management across the entire enterprise, utilizing ontologies to create highly flexible dynamic screens. The solution is built upon a semantic user interface framework that defines processes for researching and resolving cases, including investigation resources, time frames, escalation paths and alerts.   ACM leverages semantic data modeling, which defines the relationships of the variable data across business units, allowing for connections and patterns to be recognized that previously went undetected.  This type of data modeling provides for extensive case data enrichment through iterative searches across data sources. ACM provides for analysis across all transaction and customer information for comprehensive fraud management.

The ACM system offers the flexibility to automate activities and processes across channels, and across the complete life cycle of a case. The Automated Case Management System also acts as a central repository for case histories and resource activities to provide organizations with centralized auditing capabilities. ACM offers the seamless data integration capabilities of the Metatomix Semantic Platform, enabling data integration to of multiple detection and case management systems, for more timely, more informed decision-making.

With the Automated Case Management System, organizations can adopt new approaches to address the shortcomings of existing risk management processes and strategies. Activities are automated, reducing the need to move paper among investigators, analysts and management. Organizations can also be assured that high priority cases won’t fall through the cracks, since the system issues real-time alerts and escalates fraud cases when appropriate.

Conclusion
The need to search and gain greater business knowledge from existing fraud databases and legacy systems is imperative to enable better fraud management strategies.  With the use of Metatomix Semantic Technology, ACI’s Automated Case Management system is able to facilitate better trend analysis, for improved fraud and risk protection. The Metatomix Semantic Platform enables the Automated Case Management System to intelligently connect all data in real time and make it available immediately to fraud analysts, giving fraud risk managers a contextual view of fraud and risk exposure across the enterprise.

Contact details:
Ronda Billings, Director of Marketing
T: 781-907-6721, E: rbillings@metatomix.com, W: www.metatomix.com