How AI is Improving Fraud Detection
Fraud is a pervasive affliction. There is – quite literally – no industry, sector, market or part of the world untouched by fraud. It has been around as long as there have been legal rights to ownership, and until recently, experts assumed that it would continue to be a part of society indefinitely.
That is until AI showed up. Artificial intelligence might be the silver bullet solution to ending fraud, according to big financial institutions and governmental organizations. Regan McGee, the CEO and founder of Nobul, sees big things for AI in real estate as well. He shared with Medium that“it’s exciting to see how AI technology is improving detection for Title Fraud, Mortgage Fraud.”
If artificial intelligence doesn’t end fraud outright, the emerging technology can at least severely minimize its occurrences. This should come as good news to consumers and investors, who may share concerns about fraud in the digital age.
How does it all work? This article aims to answer your questions about the intersection between fraud and AI.
How AI Works
In this section and the next, let’s begin by explaining artificial intelligence and fraud independently before delving into how the former mitigates the latter.
Artificial intelligence combines computer science and big data analysis to simulate the problem-solving we typically associate with human intelligence. Only, unlike humans, computers have access to much larger data sets and a much more robust capacity for analysis.
Consequently, AI is exceptionally good at recognizing patterns – even the patterns of some malicious actors doing their best to cover their tracks. And machine learning (ML), an off-shoot of AI, is adept at learning emerging patterns, including potential patterns.
How Fraud Works
Fraud is not a monolithic concept or process. Instead, it’s a category of a crime involving financial deception. Among the most common types of fraud are credit card fraud, title fraud and mortgage fraud (the latter two being grouped as “real estate fraud”).
Fraud involves a perpetrator willfully misrepresenting themselves in order to deprive a victim of funds, property or legal rights. Often, fraudsters will falsify documents, forge signatures, duplicate materials or pose as some they aren’t. In each of these cases, the fraud requires a material lie of some kind.
Why AI/ML Is a Substantial Weapon in the Fight Against Fraud
As you might deduce from the two sections above, AI works to improve fraud detection by looking at trends. When fraudsters falsify documents, duplicate materials or forge signatures, they leave behind small, almost imperceptible remnants of their deception.
This aberrant behavior might go undetected by human fraud detectors, many of whom look for significant deviations as red flags for fraud. But AI can pick up on even the most minute indications of fraud. And as fraudsters evolve, machine learning can evolve to be one step ahead constantly, learning new fraud patterns as they emerge – or even before.
In that same medium interview linked above, Regan McGee admits that “much of AI-driven fraud detection technology is still in its infancy,” expressing concern over its current vulnerability. Still, the emerging technology represents a glimmer of hope in a battle against fraud that spans centuries of human history in virtually all parts of the world.
Review How AI is Improving Fraud Detection.