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Financial Fraud Law

Fighting Financial Fraud with Big Data? That’s IBM’s Goal

 Can the fight against financial fraud be waged with computers and software? That’s what IBM seems to believe.

IBM said that it has introduced new software and services to help organizations use ”Big Data and Analytics” to address the $3.5 trillion lost each year to fraud and financial crimes. In particular, IBM has launched its “smarter counter fraud” initiative, which it said would draw on more than 500 fraud consulting experts, 290 fraud-related research patents, and $24 billion the company said it has invested in its Big Data and Analytics software and services capabilities since 2005.

In a statement, IBM said that its announcement comes at a time when “a new generation of criminals are using digital channels – such as mobile devices, social networks, and cloud platforms – to probe for weaknesses and vulnerabilities.” The pace of this threat continues to accelerate, IBM added, observing that identity fraud impacted more than 12 million individuals in 2012, resulting in theft of nearly $21 billion, and that each day the U.S. health care industry loses $650 million due to fraudulent claims and payments.  

The company said that, to address these complexities, it is delivering new software that allows organizations to “gain better visibility and take a more proactive, holistic approach to countering fraud.” This includes the ability to aggregate Big Data across a variety of internal and external sources – including mobile, social, and online – and apply sophisticated analytics that continuously monitor for fraudulent indicators. The new offerings, according to the company, feature advanced analytics that understand non-obvious relationships and co-occurences between entities, new enhanced visualization technologies that can identify and connect fraudulent patterns closer to point of operation, and machine learning to help prevent future occurrence based on previous attacks and behaviors.   

“With today’s news, IBM is applying many of the same tactics, techniques, and procedures used by the intelligence and law enforcement communities to help commercial organizations take a holistic view of this growing and pervasive threat,” said Robert Griffin, vice president of IBM Counter Fraud Solutions. “These technologies allow line of business leaders to quickly adapt to emerging threats across the entire organization.  Our new initiative puts Big Data and Analytics into the hands of those tasked with defending their organizations from financial losses, protecting the brand, and delivering exceptional customer service.”   

IBM said that it can combine its software, services, and research capabilities to address the full spectrum of fraud and financial crimes – from tax evasion, money laundering, and cyber-attacks to threats from inside the organization. For example, the new offerings can detect cross-channel mobile fraud and prevent cybercrime enablers like phishing scams. They can enable an insurance company to review thousands of claims in real-time to flag potentially fraudulent activity while processing legitimate claims faster, or help a global bank more accurately detect and investigate money laundering activities to meet regulatory compliance, according to the company. 

IBM said that its new counter fraud portfolio builds on the company’s R&D investments and recent acquisitions of Cognos, i2, SPSS, Q1 Labs, Trusteer and SoftLayer. The company said that the new software and services include:    

Counter Fraud Management Software:  A single offering that brings together IBM’s Big Data and Analytics capabilities to help organizations aggregate data from external and internal sources and apply sophisticated analytics to prevent, identify, and investigate suspicious activity. It includes analytics that understand non-obvious relationships between entities, visualization technology that identifies larger patterns of fraud, and machine learning to help prevent future occurrence based on previous attacks. To enhance these capabilities as new threats emerge, IBM also launched a new counter fraud intelligence task force – IBM Red Cell – that will work in tandem with the IBM X-Force unit to continuously research trends, develop strategies, and deliver enhancements to the software and services R&D team.   

Counter fraud service offerings:  Industry-aligned services that combine IBM’s consulting, software, and technology expertise to help clients improve their counter fraud programs, including:  

·         Outcome-based Accelerators: Evaluate an organization’s counter fraud capabilities and provide rapid prototyping to demonstrate business value for enterprise-wide protection.

·         Target Operating Model: Design organizational constructs, operational governance, and technology architecture to better detect to fraud, and respond and investigate exposures.       

·         Scale and Manage: Fast implementation of strategies and technological dimensions to customize and run counter fraud programs tailored for each client. 

Fraud discovery assets:  A portfolio of customizable, research-developed assets that use analytics to discover fraud, waste, abuse, and errors in data intensive industries and functions. These assets analyze an organization’s internal data to measure behavior, and then compare the results within specific peer groups to identify anomalies that indicate suspicious activity. Based on the results, an investigation recommendation is made. The assets are available across industries for enterprise-wide discovery. The fraud discovery assets will be available in the cloud, enabled by IBM SoftLayer, with focus on the following areas: 

·         Medical Fraud:  Discovers fraud during provider, beneficiary, and internal employee profiling using IBM’s Fraud Asset Management System (FAMS).

·         Insurance Claim Fraud:  Enables insurers to detect suspicious activity for claims submitted by vendors, brokers, and individuals using IBM’s Loss Analysis and Warning System (LAWS).

·         Public Tax Fraud: Empowers governments to address tax gaps by uncovering tax evasion activities and filing inaccuracies using IBM’s Tax and Audit Compliance System (TACS).

·         Occupational Fraud: Helps organizations discover fraud for accounts payable, travel, and expense claims, and other fraud committed by employees.  

Counter fraud as a service:  IBM will offer four levels of counter fraud capabilities as a service – including Hosting, Application Management, Behavior Modeling & Scoring, and Analytics & Referral Generation – that use a subscription-based model to give clients flexible choices that match their business needs and technical requirements. IBM’s Counter Fraud Center of Competency gives clients global access to expertise including fraud industry experts, advanced analytic capabilities, and technical implementation services. 

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