Analytics Magazine Analytics Magazine, November/December 2014 - Page 46

figh tin g frau d That, in turn, determines the kinds of data required and the kinds of analysis needed to find the insights lurking in the data. For anti-fraud efforts, the business can guide data needs by identifying: • Already-known fraud scenarios – this will provide an initial data set to begin monitoring. It will also provide a basis for monitoring algorithms. • Building up sensitivities to unknown scenarios – while, of course, unknown risks are by definition unknown, companies can identify areas where the effect of fraud would be especially negative, such as an increase in product prices paid by certain customers, which may indicate procurement kickbacks or provide funding for covering up other undesirable behaviors, such as bribing government officials to obtain government contracts, permits and licensing or to overlook illegal or non-compliant activities. Data analytics can help in monitoring these scenarios once desired business processes are defined and reporting dashboards are developed. Sophisticated Analytics Analytics, in this environment, does not mean just a spreadsheet. It means such things as advanced methods of pattern identification, to be designed and operated by experienced analytics and fraud professionals. Pattern recognition 46 | a n a ly t i c s - m a g a z i n e . o r g is a science of its own, but it is hardly new. For instance, the Fibonacci sequence was made famous by Italian mathematician Leonardo Bonacci, aka “Fibonacci,” in his 1202 book, “Liber Abaci.” Advanced practitioners today are using pattern recognition methods to establish relationships in fields as diverse as baseball and healthcare. Analytics have even reached the level of sophistication to create original works of art. Dave Cope, a musician and computer scientist, has developed a program called “Emily Howell” that can create original works of music seen by many critics as being on par with that of the world’s greatest musicians. When tackled by experienced professionals, these efforts should deliver: • Accurate insights – the “confusion matrix” is a standard tool to measure accuracy. It is used to identify type 1 (I said you were a safe transaction, but you were actually fraudulent) and type 2 (I said you were fraudulent, but you were actually a safe transaction) errors. The best monitoring provides a balance of missing only a few bad scenarios, but not calling too many scenarios into question. • Timely insights – as required by the nature of the business. • Simple access – delivery of fraud warnings in clear, easy-to-understand language and processes. w w w. i n f o r m s . o r g