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How Technology is Helping in the Fight Against Fraud

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There’s a good and a more evil side regarding technology. With such powerful innovations as artificial intelligence comes great responsibility. Unfortunately, some choose to use technology for the wrong reasons. This is partly because cyber fraud is committed using computers and other smart devices, making hacking and stealing private information a tempting project for cybercriminals.


One thing’s clear: the widespread use of technology and the internet opens new opportunities for fraudsters. But let’s not forget that technology is primarily used for the good. It has set grounds for the fraud prevention landscape, which is why we can’t imagine having any other effective way to fight fraud and financial crime.


Keep on reading the article to dig deeper into the wonderful world of technology and fraud prevention. 


What is Cyber Fraud?


When it comes to fraud, many different words come to mind, for example, swindle, scam, hoax, extortion, etc. You can say that cyber fraud is today’s most dangerous and the most popular type of fraud, occurring all over the world. Fraud numbers continue to rise, making fraudulent activities the number one issue of the 21st century.


If previously we talked about fraud when we mentioned money laundering or terrorist financing, it’s now turned into a larger spectrum of fraudulent activities. Phishing, social engineering attacks, hacking devices, data breach, identity theft, and other schemes that help hack victims’ data are the perfect examples of what fraud has come to today.


Technology vs. Fraud


Minimizing fraud risks and learning how to detect and prevent cybercrime is vital. The large amounts of data and the growing user base make it hard for humans to manage all the information independently. That is why we utilize technology to help make screening and monitoring jobs easier. In general, businesses that demonstrate efforts to reduce fraud have higher chances of becoming better suppliers and also have more partners and investors. 


That’s why it’s no secret that we must learn how to protect ourselves against fraud using the most effective techniques and technological solutions due to cyber crime’s consequences to organizations and individuals. Many startups and businesses operating in a risky field, such as financial institutions where the possibilities of money laundering are naturally higher, are using bigger fraud prevention budgets.


Modern companies aren’t afraid to invest in advanced analytics. For instance, artificial intelligence (AI) and machine learning (ML) are the most common techniques to detect fraud in the modern age. 


How to Utilize Artificial Intelligence? 


A new report by AARP shows that more than 40 million people became victims of identity fraud last year, resulting in losses worth $52 billion. Compliance and fraud prevention specialists view these numbers as a serious threat to businesses


On top of that, according to Juniper Research, losses to online payment fraud will exceed $206 billion cumulatively from now until 2055. Having that in mind, companies use various technologies to detect and prevent fraud. As we’ve discussed earlier, AI-powered tools are storming into many industries, such as Fintech, Crypto, or E-Commerce.


It’s no surprise you’ve probably already heard of biometric technology, blockchain, and virtual reality. These technologies are linked to AI techniques utilized to detect fraud. For example: 


  • Data mining: This practice classifies, groups, and analyzes large databases to generate new information and detect suspicious transactions. This way, AI helps to find new fraud patterns that make detecting fraudulent activity easier. 


  • Neutral networks: This concept has roots in AI and is used to develop trading systems. Neutral networks can also adapt and learn suspicious patterns by mimicking how the human brain operates. 


Not only small enterprises but also large-scale institutions are at risk when it comes to fraud and criminal financial activity. In other words, if there’s money flowing, there’s a chance of money laundering. 


Why Technology Can Win Against Money Laundering 


Placement, layering, and integration. These are the stages of many banks’ worst nightmare, money laundering, or the process of illegally making large sums of dirty money. In general, criminals’ goal is to make it look like the illicit funds were obtained from legit sources. Despite that, money laundering is closely tied with sex trafficking or terrorist funding in bad scenarios. 


Many financial institutions choose technological solutions to prevent money laundering since it’s a more efficient way to battle fraud and avoid human error when handling large amounts of data. Banks use special Anti-Money Laundering (AML) tools to detect potential money laundering or sanctions violations.


The most common AI-powered services that help prevent fraud are: 


  • AI-powered Screening and Monitoring: Such software is usually based on the obligatory AML policy that many financial institutions must stick to by law.


Automated screening services help detect fraud and flag suspicious transactions, preventing money laundering and other fraudulent activities from spreading in the banking sector. Thanks to AI, the technology is able to monitor data in real-time, disguising the true origin of funds that might be linked to illegal schemes. 


  • Digital Business Verification: Becoming a money laundering channel without knowing it is an actual possibility when it comes to business transactions


That’s why it’s important to check your partners, assess the risks, and not only screen transitions but also check and review your partners’ social media accounts and the whole ownership structure, like screening against the Sanctions list and preventing unwanted reputational loss or losing large sums of money. With special technological solutions, such as Business Verification services, that’s all possible. 


To Sum Up 


You can’t imagine effective fraud prevention and security strategy without mentioning technology. Innovative solutions are the key components that help avoid human error and save time for many businesses, not to mention saving money and preventing fines for non-compliance. Of course, technology has its cons, but without it, reviewing data and detecting fraud patterns in the digital world would be a lot harder. 

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