“The Aite Group recently authored a report entitled ‘Internal Fraud: The Devil Within.’ After surveying 35 fraud and product executives at financial institutions across the U.S. and Canada, they concluded that internal fraud is a severe and growing problem that often goes undetected and almost always flies under the radar of public scrutiny.”
“The second type of identity resolution is similar but different. The classic example is in police work. Here you want to know that some particular criminal has fifteen different aliases, say. Moreover, under each of those identities he or she will have multiple contacts and you may want to do social network analysis against those contacts to see who else might have criminal tendencies.”
“In October, the Chicago Police Department’s new crime-forecasting unit was analyzing 911 calls for service and produced an intelligence report predicting a shooting would happen soon on a particular block on the South Side. Three minutes later, it did, police officials say. That got police Supt. Jody Weis thinking. He wondered if the department could produce intelligence reports even quicker. Next time, officers might have an hour’s notice before a shooting — instead of just a few minutes.”
“The indictment alleges that, from approximately January 2004 to September 2007, the defendants perpetrated a scheme to defraud mortgage lenders by submitting fraudulent loan applications with material misrepresentations, including misrepresentations concerning the borrower’s income, assets, employment status, and intent to use the home as the borrower’s primary residence… The scheme involved more than $20 million in losses to lenders.”
The Aite Group recently authored a report entitled “Internal Fraud: The Devil Within.” After surveying 35 fraud and product executives at financial institutions across the U.S. and Canada, they concluded that internal fraud is a severe and growing problem that often goes undetected and almost always flies under the radar of public scrutiny.
On the customer relationship side of the business, many financial institutions have increased what they know about external actors by making their systems smarter, e.g. enhancing existing software with identity resolution:
“By incorporating identity resolution technology, they enhance existing historical data systems with information drawn from a wide variety of dynamic data sources (e.g., social media). Providing a real-time ‘360 view’ of an individual and his/her associations is improving daily business decisions at many leading companies.”
However, most have not yet incorporated the same technology to catch fraud. This survey suggests that insider collusion and individual fraudulent acts are on the upswing, representing a significant and growing percentage of monetary fraud losses. Furthermore, the report suggests that fraud problems are often swept under the rug:
“Most financial services firms are not keen to discuss the issue; institutions that build their brands on trust and reliability do not want it widely known that insider fraud is a problem. As a result, 35% of survey respondents reported prosecuting 10% or less of their confirmed internal fraud cases.”
Effective solutions (e.g., Infoglide’s Anti-Fraud Solution Suite) are proven and available. By not actively identifying internal fraud problems and pursuing effective solutions, financial services firms open themselves up to huge financial and public relations risk. Equally important, they enable competitors who move proactively to gain competitive advantage.
As report co-author Julie Conroy McNelley says, “Financial services firms must examine their current internal fraud prevention environment and determine how to bolster it. As competitors develop more robust defenses, fraudsters will migrate to the path of least resistance.”
We have a new Congress and a new House majority leader as of this week’s swearing in ceremony. The current House majority party (R) plans to pass a bill to repeal the “Obamacare” bill passed during the last session by the former House majority party (D). Both parties make “fact based” arguments about why killing or keeping the bill will reduce the deficit, yet both can’t be right.
This isn’t a political blog, and I’m not going to take a side on this issue. What struck me is how often we use “facts” to bolster our argument, with “facts” defined as any real data that can be massaged or misinterpreted to suggest that our desired outcome appears to be the best one. Actual data is often plentiful but our preference for one alternative keeps us from embracing and promoting reality.
So mishandling the truth when you have all the facts you need is a conscious action. What happens when you think you have the data needed to make a rational decision but you aren’t conscious of important information that could totally change your perception? For example, we may have access to what look like sufficient pieces of information to reach a rational business decision, such as a driver’s license with a photo ID or a computed credit score based on the person’s history of business transactions.
However, what’s often missing from the decision process is knowledge about relationships between people. Understanding these relationships – who’s who, who knows who, and other non-obvious connections – can increase beneficial decisions in a colossal way, yet awareness of these relationships is rarely incorporated into the process.
Since entity resolution can increase the accuracy of business processes by an order of magnitude, our New Year’s resolution here at Infoglide is to introduce as many people as possible to its benefits.
“Professional analysts and law enforcement officers from more than 15 different agencies including the FBI, ATF, DEA, US Marshall’s, Homeland Security, and state and county partners work from one large room to put out intelligence products in a truly collaborative environment that defines New Jersey’s fusion center. Products include crime mapping with predictive analysis to help local departments know when and where crimes are likely to occur in the future.”
“Morgan’s prison sentence will be followed by three years of supervised release. Morgan was ordered to pay restitution of $2,804,462. Morgan, 64, was convicted in October 2008, of 69 counts of health care fraud, following a two-week jury trial in Albany. Michael J. Moore, U.S. attorney for the Middle District of Georgia, said the indictment charged that for a period of several years ending in August 2007, Morgan, a registered pharmacist and the owner of Thrift Center Pharmacy in Camilla, executed a scheme to defraud the Georgia Medicaid program, which is jointly funded with state and federal funds.
“TCSPs are often involved in some way in the establishment and administration of most legal persons and arrangements; and accordingly in many jurisdictions they play a key role as the gatekeepers for the financial sector. This report provides a number of case studies which demonstrate that TCSPs have often been used, wittingly or unwittingly, in the conduct of money laundering activities.”
Immediately after the Christmas bomber incident in 2009, we highlighted the positive role that broader deployment of (id)entity resolution software could play in preventing terrorist actions. That thought was seconded this week in a piece published by the Canadian Broadcasting Company (CBC) entitled “Better data analysis for a safer world”:
The technology to connect the dots from disparate data sources already exists, and has done for quite some time. It’s called “entity resolution,” and corporations have been using it for years to compile and ensure accuracy in consumer data. Entity resolution can help avoid many of the mistakes that led to the attempted Christmas bombing: it can overcome spelling errors in databases, alert the right people to a threat in real time, and correlate literally billions of records on an ongoing basis.
… some technologies rely on strategies that actually destroy the forensic integrity of the data. Not all identity resolution technologies are the same. Ours can be configured using a number of strategies to fit particular customer performance requirements, sensitivity to false positives or false negatives, and Similarity Search behaviors, including specialized name algorithms that catch misspellings, nicknames, and ordering variations.
The CBC article suggests how expanding the current uses of entity resolution software could bring added benefits:
If the agencies that held these disparate pieces of information were connected and running entity resolution software, red flags would be raised automatically, and those warnings quickly transmitted to the people who make decisions. The same level of intelligent technology and data analysis is important in business, where entity resolution originated.
That last statement supports our January post where we mentioned other uses for the technology:
Although the consequences are grimmer in homeland security situations, the challenges are the same for financial, healthcare, gaming, state and local government, and marketing applications.
The CBC article delineates how businesses benefit from entity resolution:
Knowing who your customers are, where they live, and what they are interested in gives your business a serious advantage - but for large organizations, that requires processing massive amounts of information. The potential for inaccuracies, duplication, and mistaken identity means that companies may be led into poor decisions by misrepresentative data. Entity resolution software was developed to mitigate these risks, and automatically format and clean up the available information.
CEO Mike Shultz has pointed out that our specific technology is “used more times every day for terrorist matching” than any other entity resolution software. Thankfully, the worlds of both business and government seem to be getting the message about the critical importance of this technology.
“Today, everything seems to be moving into the cloud. In 2005, investment in cloud computing was about $26 million. But in 2009, the investment grew to $370 million, more than 10 times of what was invested in 2005.”
“Some of the nation’s largest banks are exiting or scaling back their dealings with foreign embassies and missions in the U.S. because of the burden of complying with money-laundering regulations… ‘It’s a commercial decision, but clearly it has ramifications for diplomatic relations,’ said Mark Toner, acting deputy spokesman for the State Department. ‘We want these foreign missions to be able to carry out their normal diplomatic functions here in the U.S.’”
“There are an estimated 50 million patient records, with 20 to 200 records per patient, resulting in billions of individual pieces of information, all of which need entity resolution: in other words, which records belong to her, him or somebody else.”
“Now that I have finished the four-part series on linking methods, I would like to talk about one of my pet projects, OYSTER. It stands for Open sYSTem Entity Resolution, a project to build a configurable, open-source entity resolution. Although I am somewhat hesitant to announce a system that is not yet available to readers, it does exist and has been a valuable teaching tool in my ER class. A run-time version (Java JAR file) will available soon on the ERIQ website, and the source code should be available on Source Forge by the end of the year.”
“Madan Sheina, author of the report and an Ovum lead analyst, said: ‘Bad data is a growing problem for businesses due to the sheer volume and pace at which it is now moved between organisations. We now estimate that bad data costs US companies 30 per cent of their revenues – a massive $700 billion per year and a figure that is set to increase.’”
“‘FINTRAC anticipates that the FATF will publish a public report on this work later in 2010,’ it said. Over the past few years, prepaid cards and Internet payment services have only been identified in a minority of domestic money laundering and terrorist financing cases. In 2008-2009, for instance, Internet-based payment services were involved in roughly 4 per cent of all disclosed cases, FINTRAC said in its report.”
Several years ago, identity resolution was almost exclusively tied to detecting fraud. Over time, the “identity” of identity resolution has continued to evolve and broaden. Many areas of commerce are discovering that efficiency can be improved dramatically when you have a clear picture of the individuals you’re dealing with and their social network.
Of course, identity resolution is not the only way to gain that efficiency. Another method, called preference profiling, self-learns by monitoring the actions of an individual or client. One example is Google News. The kind of preference profiling that Google captures and saves, for instance, is based on my behavior. That information is then used to improve my online experience and make better use of my time by employing search techniques that “know” what topics I’m interested in based on my past behavior. In my case, for example, Google News is more likely serve up sports stories than fashion articles when I ask for the latest news.
For the most part, preference profiling and other techniques besides identity resolution operate on the premise that individuals will continue to act as they have acted in the past. If this weren’t true, companies like Google wouldn’t be in business, but we’re discovering the limitations of working only with historical data. Sometimes people change and sometimes they aren’t forthcoming about their associations for various reasons.
Commercial systems, including those employed in financial services industries, are becoming “smarter.” By incorporating identity resolution technology, they enhance existing historical data systems with information drawn from a wide variety of dynamic data sources (e.g., social media). Providing a real-time “360 view” of an individual and his/her associations is improving daily business decisions at many leading companies.
International companies, particularly those in the financial services markets, have long struggled to comply with the varying data privacy laws of the countries in which they operate. Simple data analysis practices in one region of the world may or may not be acceptable in another, and the penalties of non-compliance can be harsh to say the least. This leads to inefficiencies in areas such as AML, Compliance and Fraud Investigation.
For most companies, the data to identify and catch fraudsters already exists within the organization; however, because data is distributed across various data silos in different countries, resolving identities and non-obvious relationships requires rapidly accessing multiple data sources with different structures and access methods.
Consider then the requirement to comply with data privacy laws, which make it essential that the analyst returns only the calculated probability of a match in a foreign database, instead of the actual data associated with that match. Businesses have spent massive amounts of money trying to tip-toe through the minefield of privacy laws and acceptable practices. Determining “who’s who” and “who’s working with whom” has proven difficult where data privacy laws prohibit individual analysts from ‘seeing’ the results of a search into a database in another country.
Infoglide’s Identity Resolution Engine is uniquely capable of solving these requirements by searching into disparate data – irrespective of where it resides – and returning only the percentage likelihood that a match or relationship was found. The software then returns contact information of the appropriate data steward, if desired.
Taking the weight of data privacy concerns off analysts increases productivity and helps them focus on the cases that truly matter to your organization. For more information, contact sales@infoglide.com.
“A recent article in Bank Systems & Technology says that financial services institutions are discovering increasingly sophisticated attempts to defraud their customers – more sophisticated in how they gather information and employ it in their criminal schemes. ‘As fraudsters increasingly seek to exploit weaknesses in consumers’ defenses through social engineering schemes rather than hack vulnerabilities in banks’ security systems, the need for enterprisewide solutions to detect fraud across channels is greater than ever.’”
“Buying rather than building speeds up the process of filling gaps in (or simply improving) functionality, and so is a logical step, and Experian itself has plenty of acquisition experience (including of course QAS itself). It opens up the intriguing possibility that Experian QAS may be looking in the future to spread its wings beyond its historically tight market of contact data management. If so then this may not be the last acquisition that it makes.”
“Effective November 1, 2010, if you do not accurately provide the TSA with your full legal name as it appears on your government issued identification within 72 hours of a flight, your reservation could be canceled, at will, by the Transportation Security Administration (TSA). Why are they doing this? To enhance the security of commercial air travel, the TSA has developed Secure Flight, a program that compares airline passenger information against U.S. government watch lists.”
“‘You need the ability to migrate data from one cloud service provider to another, and there are cloud interoperability scenarios that need to be addressed as well,’ notes Matt Edwards, director of the cloud services initiative at TM Forum, a communications industry association. ‘There are multiple things that need to be addressed to avoid vendor lock-in and to remove the barriers for the adoption of cloud services.’”
Infoglide Software provides entity resolution and analysis solutions for retail, banking, insurance, government, and law enforcement. Without the need for data cleansing or warehousing, Infoglide Software's Identity Resolution Engine™ (IRE) analyzes all of the information relating to individuals and/or entities from multiple sources of data and then applies...
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