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

A comparative analysis of decision trees vis-a-vis other computational data mining techniques in automotive insurance fraud detection

The development and application of computational data mining techniques in financial fraud detection and business failure prediction has become a popular cross-disciplinary research area in recent times involving financial economists, forensic accountants and computational modellers. Some of the computational techniques popularly used in the context of - financial fraud detection and business failure prediction can also be effectively applied in the detection of fraudulent insurance claims and therefore, can be of immense practical value to the insurance industry. We provide a comparative analysis of prediction performance of a battery of data mining techniques using real-life automotive insurance fraud data. While the data we have used in our paper is US-based, the computational techniques we have tested can be adapted and generally applied to detect similar insurance frauds in other countries as well where an organized automotive insurance industry exists

Electronic fraud detection in the U.S. Medicaid Healthcare Program: lessons learned from other industries

It is estimated that between $600 and$850 billion annually is lost to fraud, waste, and abuse in the US healthcare system,with $125 to$175 billion of this due to fraudulent activity (Kelley 2009). Medicaid, a state-run, federally-matchedgovernment program which accounts for roughly one-quarter of all healthcare expenses in the US, has been particularlysusceptible targets for fraud in recent years. With escalating overall healthcare costs, payers, especially government-runprograms, must seek savings throughout the system to maintain reasonable quality of care standards. As such, the need foreffective fraud detection and prevention is critical. Electronic fraud detection systems are widely used in the insurance,telecommunications, and financial sectors. What lessons can be learned from these efforts and applied to improve frauddetection in the Medicaid health care program? In this paper, we conduct a systematic literature study to analyze theapplicability of existing electronic fraud detection techniques in similar industries to the US Medicaid program

Ensemble Learning for fraud detection in Online Payment System: Fraud Detection in Online Payment System

The imbalanced problem in fraud detection systems refers to the unequal distribution of fraud cases and non-fraud cases in the information that is used to train machine learning models. This can make it difficult to accurately detect fraudulent activity. As a general rule, instances of fraud occur much less frequently than instances of other types of occurrences, which results in a dataset which is very unbalanced. This imbalance can present challenges for machine learning algorithms, as they may become biased towards the majority class (that is, non-fraud cases) and fail to accurately detect fraud. In situations like these, machine learning models may have a high accuracy overall, but a low recall for the minority class (i.e., fraud cases), which means that many instances of fraud will be misclassified as instances of something else and will not be found. In this study, Synthetic Minority Sampling Technique (SMOTE) is used for balancing the data set and the following machine learning algorithms such as decision trees, Enhanced logistic regression, Naive Bayes are used to classify the dataset.Majority Voting mechanism is used to ensemble the DT,NB, ELR methods and analyze the performance of the model. The performance of the Ensemble of various Machine Learning algorithms was superior to that of the other algorithms in terms of accuracy (98.62%), F1 score (95.21%), precision (98.02%), and recall (96.75%)

Identify Credit Tag Scheme Using Enhance And The Bulk Of Votes

In financial services, credit card theft is a major concern. Thousands of dollars are lost per year because of credit card theft. Research reports on the analysis of credit card data from the real world are lacking due to problems with secrecy. The paper is used to diagnose credit card fraud using machine learning algorithms. First of all, standard versions are included. Hybrid procedures are then used using AdaBoost and plurality voting methods. A public credit card data collection is used to test the efficiency of the model. An analysis of a financial institution's own credit card records is then conducted. In order to better evaluate the robustness of the algorithms, noise is applied to the samples. The experimental findings show that the plurality vote system has strong rates of accuracy in the detection of cases of fraud on credit cards

A Novel Deep Learning-Based Identification of Credit Card Frauds in Banks for Cyber Security Applications

Due to the widespread use of constantly evolving internet technology and the increased frequency of cyber-attacks and crimes, cyber security is crucial for the banking sector. One of the biggest dangers confronting the banking sector globally is credit card (CC) fraud. It is becoming a serious issue and is growing rapidly, especially as the number of financial transactions utilizing CC keeps rising. The prevalence and growth of Internet banking have enhanced CC fraud identification. Finding fraudulent transactions of CC has become a major issue for internet buyers. In this study, an entirely novel deep learning (DL) algorithm is suggested for use in cyber security applications to identify CC thefts in the banking industry. We use a collection of significantly skewed CC fraud data sets to apply the proposed Multi-Gradient Whale Optimized Convolutional Neural Network (MW-CNN). The efficacy of the suggested methodis assessed depending on the performance evaluation criteria and comparing it with traditional techniques