Intelligent Financial Fraud Detection Practices: An Investigation

Financial fraud is an issue with far reaching consequences in the finance industry, government, corporate sectors, and for ordinary consumers. Increasing dependence on new technologies such as cloud and mobile computing in recent years has compounded the problem. Traditional methods of detection involve extensive use of auditing, where a trained individual manually observes reports or transactions in an attempt to discover fraudulent behaviour. This method is not only time consuming, expensive and inaccurate, but in the age of big data it is also impractical. Not surprisingly, financial institutions have turned to automated processes using statistical and computational methods. This paper presents a comprehensive investigation on financial fraud detection practices using such data mining methods, with a particular focus on computational intelligence-based techniques. Classification of the practices based on key aspects such as detection algorithm used, fraud type investigated, and success rate have been covered. Issues and challenges associated with the current practices and potential future direction of research have also been identified.Comment: Proceedings of the 10th International Conference on Security and Privacy in Communication Networks (SecureComm 2014

Fraud Detection in Credit Card System Using Web Mining

Abstract: Now a day the usage of credit cards has dramatically increased. As credit card becomes the most popular mode of payment for both online as well as regular purchase, cases of fraud associated with it are also rising. Various techniques like classification, clustering and apriori of web mining will be integrated to represent the sequence of operations in credit card transaction processing and show how it can be used for the detection of frauds. Initially, web mining techniques trained with the normal behaviour of a cardholder. If an incoming credit card transaction is not accepted by the web mining model with sufficiently high probability, it is considered to be fraudulent. At the same time, the system will try to ensure that genuine transactions will not be rejected. Using data from a credit card issuer, a web mining model based fraud detection system will be trained on a large sample of labelled credit card account transactions and tested on a holdout data set that consisted of all account activity. Web mining techniques can be trained on examples of fraud due to lost cards, stolen cards, application fraud, counterfeit fraud, and mail-order fraud. The proposed system will be able to detect frauds by considering a cardholder"s spending habit without its significance. Usually, the details of items purchased in individual transactions are not known to any Fraud Detection System. The proposed system will be an ideal choice for addressing this problem of current fraud detection system. Another important advantage of proposed system will be a drastic reduction in the number of False Positives transactions. FDS module of proposed system will receive the card details and the value of purchase to verify, whether the transaction is genuine or not. If the Fraud Detection System module will confirm the transaction to be of fraud, it will raise an alarm, and the transaction will be declined

A survey of outlier detection methodologies

Outlier detection has been used for centuries to detect and, where appropriate, remove anomalous observations from data. Outliers arise due to mechanical faults, changes in system behaviour, fraudulent behaviour, human error, instrument error or simply through natural deviations in populations. Their detection can identify system faults and fraud before they escalate with potentially catastrophic consequences. It can identify errors and remove their contaminating effect on the data set and as such to purify the data for processing. The original outlier detection methods were arbitrary but now, principled and systematic techniques are used, drawn from the full gamut of Computer Science and Statistics. In this paper, we introduce a survey of contemporary techniques for outlier detection. We identify their respective motivations and distinguish their advantages and disadvantages in a comparative review