Our lives are becoming increasingly digital. However, like the physical world, the virtual world also has its fair share of criminals lurking in the shadows, hunting you. Cybercrime has become another headache for law enforcement agencies and for us common citizens. Apart from cybercops, we also have digital bodyguards to protect our assets. The Enterprise Fraud Management (EFM) solution can be counted among the most elite of them.

So, what are enterprise fraud management solutions?

These are software that screens transactions across users, channels, accounts, and processes in real-time to identify and stop fraud in an organization. The activity is aimed at stopping fraudsters both from perpetrators inside and outside the organization.

A sordid history

The crime of defrauding is very old. The Roman Praetorian guards had killed the emperor and then auctioned the now vacant post in 193 AD and made senator Didius Julianus king for all of nine weeks. Then the ruse came to light and Julianus was assassinated.
Another outrageously funny fraud would be by one Gregor MacGregor. MacGregor invented a fictitious Central American country named Cazique. He successfully fooled people into investing into the country’s government bonds and land certificates in around 1821 to 1837. The real floodgates of frauds, we can say, were opened in the 20th and 21st century. During this time, some of the biggest frauds like Enron, Charles Ponzi, Bernie Madoff, Charles Keating, and Harshad Mehtas were exposed. So were identity thieves like Frank Abagnale, whose story has been immortalized in ‘Catch Me If You Can’ by Steven Spielberg.

The rise of e-commerce has proved to be another jackpot for fraudsters.  Crooks can set up fake merchant IDs with stolen credit card data, gather the goods and vanish. Another favorite type of fraud is chargeback fraud. Here, the item is bought and paid for online. The ‘customer’ says he never got the item. Gets refund and sells the item elsewhere for more money.

Identity theft is also a big issue. Stolen IDs are used for various nefarious activities, entrapping innocent persons while the real crooks go scot free.

However, probes into all of these crimes typically proves to be the proverbial cases of bolting the door after the horse has bolted. There were no tools available to investigators for monitoring transactions and crime in real time. Data remains the mainstay of any such operation. However, in the era of paper spreadsheets and files, accessing and combining data was a herculean task. Incidentally, the task was named data matching. The introduction of databases made the process much less painful, but factors like unintentional human in documents can raise false alarms. However, automation, coupled with artificial intelligence and machine learning (AI-ML) have provided a new weapon to the investigators.

Beefing up the arsenal

There are a lot of benefits of having an EFM tool at your disposal. You are shielded from cybercrimes, as EFM solutions keep an eye on transactions for fraud in real-time, and protect you from external bad actors.  They also help you with regulations and compliance, and can detect vulnerabilities in the system which can be targeted by bad elements.

Although frauds are mainly associated with the banking sector, other sectors like insurance and health are also hackers’ favorite targets. The crooks are using ever-sophisticating methods, and as we all are painfully aware, no software is completely foolproof. The crooks can utilize the chinks to their ends. It’s not unlike the fictional terrorist organization Hydra from the Marvel movies: If a head is cut off, two more will take its place.

Hence, a multi-layered approach coupled with real time capabilities is generally favored. These layers include login, navigation, channel, cross-channel, and entity link. The layers cover entire process of login, user behavior after login, and user behavior across multiple communication channels, among others.

However, only layered security is not enough to stop and identify frauds. Various other steps are also necessary. These include monitoring all transactions, social networks, etc. and incorporating data from these to build analysis and assess risk. In other words, a complete analysis of user behavior across payment types, brands and interaction channels is needed to build a proper defense against fraud. The integration of various data streams is now easily available, and advancements in technology have made it agile and available for real-time information about critical inputs like authentication. However, it still has a lot of gauntlets to run.

Miles to go before reaching a safer world

Of course, one fact remains that it is an eternal race between the crooks and the good guys. Techniques for cyberattacks and frauds are constantly evolving, and the good guys cannot always keep up with the crooks. As the world goes increasingly digital, so does rise the crooks’ scope of targeting these dependencies.

Another gauntlet every fraud prevention software must run is of rules and regulations. These keep changing as per the country. The failure to comply with regulatory and anti-money laundering regulations can result in legal troubles and negative perception of the institution’s brand. Other trouble is of banking models. More modes for banking like crowdfunding, peer to peer lending are now emerging. The institutions have to differentiate between which businesses are legal as per the country’s laws, and which are not.

Of course, no road is easy if you want to reach a very lofty goal. Efforts are needed. We will see more about such efforts. Read on…