Saturday, February 9, 2013

EDITORIAL COMMENTARY: Fraud Prevention through Data Mining

Data mining is increasing part of our everyday life. There's just tons of data each of us generate every day, from credit card and debit card purchases to GPS coordinates, and all that data can be mined for crime prevention. Police already mine crime statistics to optimize law enforcement (find hotspots of crime and concentrate police on those hotspots). Medicare used computers to detect fraudulent claim patterns. Banks use them to detect strange spending patterns and halt credit card and debit card purchases.

Read more about how Medicare Anti-fraud program saved 100+ million dollars in first year. 

The next frontier is having law enforcement agencies mine their own complaint files for commonalities. And with cooperation of banks, mine their data for strange banking activities.

Zeek Rewards was attracting tons of attention from banks in the few months before it was closed by the SEC because it was using payment processors from across the globe, triggering a lot of "transaction denied" for tens of thousands of members. While banks often do report suspicious transactions to the appropriate agencies, such as the Interagency fraud task force, smaller amounts may never trigger the alert.

However, by now it was clear that Zeek basically was a disaster waiting to happen. When SEC finally closed them, they were sitting on tens of thousands of checks, UNCASHED, while they continue to have payment problems at eWallet companies, none of them based in the US. In other words, they are essentially doing banking activities outside the US, and supposedly Keith Laggos, their consultant, taught them all that. What their intentions were, I don't know, but one suspects they were trying to evade attention from the US financial regulatory agencies.

That is a pattern that should be exploited.

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1 comment:

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