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

Towards a Comprehensible and Accurate Credit Management Model: Application of four Computational Intelligence Methodologies

The paper presents methods for classification of applicants into different categories of credit risk using four different computational intelligence techniques. The selected methodologies involved in the rule-based categorization task are (1) feedforward neural networks trained with second order methods (2) inductive machine learning, (3) hierarchical decision trees produced by grammar-guided genetic programming and (4) fuzzy rule based systems produced by grammar-guided genetic programming. The data used are both numerical and linguistic in nature and they represent a real-world problem, that of deciding whether a loan should be granted or not, in respect to financial details of customers applying for that loan, to a specific private EU bank. We examine the proposed classification models with a sample of enterprises that applied for a loan, each of which is described by financial decision variables (ratios), and classified to one of the four predetermined classes. Attention is given to the comprehensibility and the ease of use for the acquired decision models. Results show that the application of the proposed methods can make the classification task easier and - in some cases - may minimize significantly the amount of required credit data. We consider that these methodologies may also give the chance for the extraction of a comprehensible credit management model or even the incorporation of a related decision support system in bankin

A survey on utilization of data mining approaches for dermatological (skin) diseases prediction

Due to recent technology advances, large volumes of medical data is obtained. These data contain valuable information. Therefore data mining techniques can be used to extract useful patterns. This paper is intended to introduce data mining and its various techniques and a survey of the available literature on medical data mining. We emphasize mainly on the application of data mining on skin diseases. A categorization has been provided based on the different data mining techniques. The utility of the various data mining methodologies is highlighted. Generally association mining is suitable for extracting rules. It has been used especially in cancer diagnosis. Classification is a robust method in medical mining. In this paper, we have summarized the different uses of classification in dermatology. It is one of the most important methods for diagnosis of erythemato-squamous diseases. There are different methods like Neural Networks, Genetic Algorithms and fuzzy classifiaction in this topic. Clustering is a useful method in medical images mining. The purpose of clustering techniques is to find a structure for the given data by finding similarities between data according to data characteristics. Clustering has some applications in dermatology. Besides introducing different mining methods, we have investigated some challenges which exist in mining skin data

An Architecture-Altering and Training Methodology for Neural Logic Networks: Application in the Banking Sector

Artificial neural networks have been universally acknowledged for their ability on constructing forecasting and classifying systems. Among their desirable features, it has always been the interpretation of their structure, aiming to provide further knowledge for the domain experts. A number of methodologies have been developed for this reason. One such paradigm is the neural logic networks concept. Neural logic networks have been especially designed in order to enable the interpretation of their structure into a number of simple logical rules and they can be seen as a network representation of a logical rule base. Although powerful by their definition in this context, neural logic networks have performed poorly when used in approaches that required training from data. Standard training methods, such as the back-propagation, require the network’s synapse weight altering, which destroys the network’s interpretability. The methodology in this paper overcomes these problems and proposes an architecture-altering technique, which enables the production of highly antagonistic solutions while preserving any weight-related information. The implementation involves genetic programming using a grammar-guided training approach, in order to provide arbitrarily large and connected neural logic networks. The methodology is tested in a problem from the banking sector with encouraging results

ANTIDS: Self-Organized Ant-based Clustering Model for Intrusion Detection System

Security of computers and the networks that connect them is increasingly becoming of great significance. Computer security is defined as the protection of computing systems against threats to confidentiality, integrity, and availability. There are two types of intruders: the external intruders who are unauthorized users of the machines they attack, and internal intruders, who have permission to access the system with some restrictions. Due to the fact that it is more and more improbable to a system administrator to recognize and manually intervene to stop an attack, there is an increasing recognition that ID systems should have a lot to earn on following its basic principles on the behavior of complex natural systems, namely in what refers to self-organization, allowing for a real distributed and collective perception of this phenomena. With that aim in mind, the present work presents a self-organized ant colony based intrusion detection system (ANTIDS) to detect intrusions in a network infrastructure. The performance is compared among conventional soft computing paradigms like Decision Trees, Support Vector Machines and Linear Genetic Programming to model fast, online and efficient intrusion detection systems.Comment: 13 pages, 3 figures, Swarm Intelligence and Patterns (SIP)- special track at WSTST 2005, Muroran, JAPA

An academic review: applications of data mining techniques in finance industry

With the development of Internet techniques, data volumes are doubling every two years, faster than predicted by Moore’s Law. Big Data Analytics becomes particularly important for enterprise business. Modern computational technologies will provide effective tools to help understand hugely accumulated data and leverage this information to get insights into the finance industry. In order to get actionable insights into the business, data has become most valuable asset of financial organisations, as there are no physical products in finance industry to manufacture. This is where data mining techniques come to their rescue by allowing access to the right information at the right time. These techniques are used by the finance industry in various areas such as fraud detection, intelligent forecasting, credit rating, loan management, customer profiling, money laundering, marketing and prediction of price movements to name a few. This work aims to survey the research on data mining techniques applied to the finance industry from 2010 to 2015.The review finds that Stock prediction and Credit rating have received most attention of researchers, compared to Loan prediction, Money Laundering and Time Series prediction. Due to the dynamics, uncertainty and variety of data, nonlinear mapping techniques have been deeply studied than linear techniques. Also it has been proved that hybrid methods are more accurate in prediction, closely followed by Neural Network technique. This survey could provide a clue of applications of data mining techniques for finance industry, and a summary of methodologies for researchers in this area. Especially, it could provide a good vision of Data Mining Techniques in computational finance for beginners who want to work in the field of computational finance