WHITE PAPER

Fraud Protection & Compliance

Enterprise Payments Fraud

5 essentials to look for in a

platform to fight fraud and
financial crime

© 2021 Fair Isaac Corporation. All rights reserved.

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

What does a digital decisioning platform have to do with fighting fraud and financial crime? Well, it turns out, a lot. A platform approach
springboards digital transformation and enables you to operationalize data-driven decisions across your organization and across
the customer lifecycle, allowing you to leverage a common system across multiple use cases. To combat ever-escalating crime,
financial institutions require the effective, unified technology for detecting and investigating fraud, ensuring regulatory compliance and
centralized decision making. This paper outlines the five essential considerations to ensure your organization chooses an approach
that will protect your customers and your assets, while being efficient and effective.

1. Unbridled data ingestion Unconstrained data

ingestion in action
With the proliferation of payment schemes — like P2P transfers, mobile wallets, real-time Fraud protection and compliance
payments, and even digital currencies — there is more data than ever. Managing large models benefit from the
quantities of data frequently presents a series of challenges. Data often sits in different experience gained by a large
places in a variety of formats, vastly increasing the time it takes to make the data number of examples, consisting
of both legitimate and illegitimate
ingestible and consistent — resulting in increased costs. Additionally, when data sits in
transactions and non-financial
silos, it prevents other parts of the business from maximizing relevant insights.
activity. Whether using supervised
techniques to target known
The right decisioning platform should give you the power to access all your data,
bads or leveraging unsupervised
regardless of the location or format — whether you need internal, external, streaming, machine learning to discover
or batch data. This enables you to access the right data at the right time for new outlier behavior, analyzing
orchestration, resulting in cost reductions stemming from only needing to buy data an abundance of data enables
when you need it or when it brings value. For more accurate decisions that account for you to effectively understand
vast data volume and velocity, financial institutions must digest diverse data streams behavior and assess risk, leading
and inputs without restrictions. to superior detection.

With many institutions struggling

When choosing a platform with this capability, here are the capabilities you should look for: to keep up with the quickly
changing consumer and fraud
• Ingest data without having to move, • Offer a robust set of third-party data
patterns in the last year, feeding
cleanse, or convert it connectors
real-time data from a variety
• Access data at rest or instream to be • Bring together data from various kinds of sources into your rules and
able to derive real, meaningful insights of streams — including at rest, in motion, models has never been more
and responses and streaming — into one stream. important. Additionally, banks
have been investing heavily into
• Share data and other decision assets their data science teams and
across the business units need the ability to empower them
with the right tools.
The latter capability is especially important as it ensures you maximize what is
The FICO® Platform enables you
consumed downstream by your platform. While an increasingly significant feature, to ingest the exact data you need
many platforms only provide access to one type of data stream, limiting what can be when you need it. This allows
distributed across other parts of the system. you to keep up with the pace of
change, enabling you to keep
your customers secure, reduce
false positive, and identify the bad
actors more quickly.

© 2021 Fair Isaac Corporation. All rights reserved. 2

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

2. Shared characteristic libraries

Enriched data such as attributes, variables, and features are pivotal in your goal
to spot anomalies in your customer data. Traditionally, the creation of customized
characteristics — including calculations, profiles of normal and abnormal activity, feature
generation, and real-time statistics — requires the help of data scientists, which prevents
business end users from exploring the data directly.

A best-in-class solution provides an unconstrained environment to create real-time

aggregations and calculate derived variables that can feed any fraud or financial crime
detection strategy, while providing all users across the organization access to them, thus
removing the need to rely on those with a data science background. This fosters better
collaboration among data scientists and business users while also greatly deceasing
time to value.

Characteristic libraries in action

Features in your characteristic library fuel your machine learning models used
to spot anomalous behavior indicative of fraud or money laundering. The
attributes help infer patterns and relationships in the data. There are several
characteristic types: calculations, profiles, features, and real-time statistics.

One way these characteristic libraries can be harnessed is in the identification

of application fraud. The categorical variables typically associated with an
application, such as occupation or employment status, can be enhanced
through the development of velocity variables to extract the maximum
information from the data. Fuzzy matching can also be used against previous
applications and then included within models as additional features.

The FICO® Platform extends the boundaries of financial crime detection by

enabling users to easily map data to create aggregations, derived variables,
and other contextual data services, giving your team the ability to harness
data in exactly the ways they need.

© 2021 Fair Isaac Corporation. All rights reserved. 3

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

3. Efficient workflows
Efficient workflows
Workflows execute business operations by identifying specific events and the actions in action
that occur when those events take place. This removes much of the burden created by With the FICO® Platform, you
manual, recurring tasks by automating them and leaving your employees to focus on can configure variables, rules,
higher value activities that require human intervention. and models to create fraud and
financial crime workflows with
Industry-leading workflow capabilities put power in the hands of business users to the click of a button, without the
author decision logic using business terms, eliminating the need to wait in line for IT to need for any custom integration.
implement their requests or abandoning the idea altogether due to a lack of resources. For example, increase productivity
Users should be able to leverage a variety of innovative insights based on decision through the use of streamlined
currency transaction report (CTR)
logic and turn it into action based on business strategy, analytic models, link analysis,
and suspicious activity report
scorecards, and events, among several other plug-in options.
(SAR) filings with regulatory
agencies while intelligent
When reviewing a platform with workflow functions, ensure that the capability is open
robots enable risk-based alert
and extensible. Many offerings are limited in their ability to ingest a multitude of models prioritization, auto closing of alerts
and then execute them on their platform. The best platforms give users the ability to use and cases, and the automated
their own logic, algorithms from a third party, and time-tested intellectual property from dispatch of alerts to different
their own organization. types of investigators according to
your own organizational structure.

© 2021 Fair Isaac Corporation. All rights reserved. 4

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

4. Network analytics
Network analytics enables you to proactively identify fraud and non-compliance among complicated relationships and mountains of data.
Also known as social network analytics (SNA), it is an advanced analytics capability used to correlate people and entities and determine
the often-hidden relationships between them. SNA identifies and analyzes common information among entities, including individuals or
businesses, utilizing phone numbers, addresses, email addresses, bank accounts, and credit cards in addition to many other connections
that can be found. Using this information, it scores every entity in your network and uses these features in predictive models and rules to
improve decisions. This can also be combined with a graphical interface, known as link analysis, to further help investigators.

It is essential for your decisioning platform to seamlessly process data across disparate third-party and internal data sources to make use
of patterns concealed within the data. After intaking the breadth and depth of data, the system must then analyze it in real time to keep up
with the speed of bad actors. A score could then be shared summarizing the risk of the entity and establishing its priority for investigators.

Network analytics in action

Network analytics uses algorithms to enhance real-time detection across
accounts, both pre-book and post-book, of stolen identity data used to
commit mass fraud attacks and money laundering schemes. SNA prevents
application fraud through the analysis of relationships across existing
customers, previous applicants, historical applications, known frauds, bureau
records, and other third-party data sources to improve the understanding of
an applicant and provide enhanced risk analysis. Additionally, you can spot
sleeper fraud by screening your account portfolio to detect connections
between an account that has bust out or has been identified as suspicious at
application and other accounts within your portfolio. Finally, you can leverage
SNA to prevent money laundering by uncovering common data points that
indicate the presence of money mule networks.

The use of network analytics on the FICO® Platform enables investigators

to use advanced models to identify entities that may be related to fraud
rings, saving both time and effort. Recently, a regional bank in North America
identified extensive exposure to first-party fraud across multiple products
in its unsecured lending portfolio. Using FICO’s network analytics, the
organization uncovered more than $15 million in potential fraud savings. Out
of a pool of more than 2 million active customers in the unsecured consumer
lending portfolio, 13,000 networks contained known frauds or charge-offs. In
the top 1% of the highest scoring networks, FICO’s model achieved a 75% hit
rate. On average, these networks had at least two open unsecured accounts
with exposures approaching $8,000 each. The technology empowered the
bank to automate loss mitigation across the customer lifecycle by leveraging
SNA both pre-book and post book, facilitating considerable operational cost
savings and exponentially mitigating fraud losses.

© 2021 Fair Isaac Corporation. All rights reserved. 5

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

Network Analytics (SNA)

Model Score = 875

5 High velocity of charge-offs

6
within the network
Count of
participants
Count of
charge-offs
Rapid growth
of network
12.56 Supervised
Graph growth Machine
Learning High number of open
velocity
investigations on the network

Persisted Link Analysis Derived Features Predictable Insight

Using Network Analytics to zero in on fraudsters

Every customer within and applicant to the bank
belongs to a network, but it is up to the bank to
determine whether the network has suspicious or
innocent and legitimate indicators. Network Analytics
allows for a precise, automated, mathematically derived
answer to that question, which will be reflected in the
individual’s fraud risk score, a number between 1 and
999, which is based on their association with suspicious
(or innocent) activity.
With this automation, banks realize significant fraud
loss mitigiation and operational cost savings as their
fraud teams are directed to the highest priority cases to
investigate using the link analysis visualization capability.
Cost savings will follow pre-book controls down the
line as the customer’s spectrum of fraud risk informs
automated credit risk mitigation policies and strategies,
e.g., CLI, marketing, or collections.

5. Integration across customer lifecycle management

Organizations need to be able to bridge all of the essential pieces — decision rules, analytics, strategy optimization, asset governance,
data visualization and exploration, rapid application development, and streaming real time and batch execution — into a complete and
agile decisioning process. The ability to bring all of these pieces together is priceless.

Many institutions are still fighting an uphill change management battle in part due to the cost in time, effort, available resources, and
dollars to rebuild applications that have been hard-coded and insulated.

A platform with the proper orchestration and integration capabilities can provide a graphical representation of decision processes and
their underlying logic, define the various decisions and their interrelationships, and enable various workflows to be invoked at the right
time in the right sequence.

© 2021 Fair Isaac Corporation. All rights reserved. 6

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

Fraud and financial crime decisioning shouldn’t be isolated functions. Keeping identity proofing independent from the wider
origination’s process risks not only increases fraud or financial crime risk but also impacts customer experience. Similarly,
authentication of customers accessing their accounts is needed to prevent fraud and is also an important aspect of a customer’s
experience of using their accounts. Ensuring there is consistency in approach and that processes aren’t duplicated can reduce
operational cost as well as improve customer experience and prevent criminal activity.

Understanding fraud in the wider context of the entire customer relationship can even drive profitable growth. Combining your
understanding of fraud risk and credit risk in a single decision point will better inform you about the customers you want to extend your
relationship with, helping you to better target your marketing. Removing the separation that typically exists between fraud and credit
risk can save on costs as an elevated fraud risk prevents you from spending on a credit check while a single decision point makes for a
more consistent customer experience.

Orchestration across the customer lifecycle in action

Identity and Authentication

Fraud Protection and Compliance Use Cases Fraud Transaction Monitoring

Compliance & Financial Crime

Pre-Book Prevention Post-Book Detection

• KYC Screening (Pre & • Transaction Embargo/ • AML Monitoring

Post Book) Multi Channel Sanction Screening (Transaction)

Know Your Sanctions Transaction

Customer Screening Monitoring

Automated
2-Way Alert Verification

Application Ongoing
Identity Identity Transaction Mass Card
Fraud Fraud Ring
Proofing Authentication Fraud Compromise
Prevention Monitoring

• ID verification during • Mitigate identity theft • Customer • Card fraud (credit, • Card fraud • Identify organized
onboarding (application fraud) authentication debit, prepaid, etc)* (credit, debit, fraud rings*
across the prepaid, etc)*
• Customer authentication • Identify organized • Deposits (ACH, Wire, • Detect synthetic
across the lifecycle* fraud rings* lifecycle*
P2P, RTP) and first party
• Detect synthetic and fraud*
• Alternative Payments
first party fraud* (P2P, square, Apple Pay)

* Use case occurs across multiple capabilities

© 2021 Fair Isaac Corporation. All rights reserved. 7

5 essentials to look for in a platform to fight fraud and financial crime Fraud Protection & Compliance
Enterprise Payments Fraud

Financial institutions must put in

place greater safeguards to protect
their customers and their assets from
organized and ever-changing fraud
and financial crime schemes. To be To learn more about how the FICO Platform can help you
prepared, organizations need an open efficiently detect and investigate fraud and financial crime, visit
and extensible platform that will allow www.fico.com/en/solutions/fraud-protection-and-compliance
them to take full advantage of data,
whether internal or external, and create
valuable insights that can be shared
across the lines of business. The only
way for financial institutions to beat the
fraudsters is to break down silos within
their walls and work collaboratively,
using a platform that provides all the
functionality required to efficiently
implement these strategies.

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