Replacing feel with fact

Johannesburg, 14 Apr 2020
Read time 6min 10sec
Nick Feast, Fraud and Financial Crime Specialist, SAS
Nick Feast, Fraud and Financial Crime Specialist, SAS

Over recent years, the fraud landscape has changed considerably. Advances in technology and an increase in both the amount of data stored electronically and the number of services being delivered online has created opportunities for fraudsters and changed the way fraud is committed. This is particularly evident within the insurance industry, where fraudsters have evolved to operate across multiple channels and target insurance companies using a variety of modus operandi that span claims, underwriting and billing.

As a result, fraud detection has evolved significantly over the past few years. The amount of data available to organisations to assist in the fight against fraud has also grown and so too has the appetite of investigators who are now keen to access more and more data sources to help understand insurance fraud risk. Fraud detection and investigation, therefore, now utilises a number of different approaches that go well beyond simple red flags. Furthermore, some organisations have taken on more of a policing type approach with focus given to using intelligence to assist in detecting fraudulent activity.

The importance of intelligence gathering in helping to identify and disrupt fraud and financial crime was discussed at the 2020 Annual Insurance Crime Bureau Conference, in Midrand, in March by speaker Nick Feast, SAS Fraud and Financial Crime Specialist, Fraud and Security Intelligence for EMEA and AP.

“Different types of financial fraud exist in the insurance sector,” said Feast. “For example, fraud can range from acts of misrepresentation in insurance claims or at point of quote to internal fraud, such as employees taking data out of their workplace or brokers falsifying information.” Although these fraud typologies remain important and prevalent and are the usual focus for discussions around insurance fraud detection, Feast suggested SAS has seen an increase in the number of organisations that are focusing on the process of investigation and, in particular, intelligence management.

Feast acknowledged that historically there has been some confusion about the word intelligence, which has often derailed or diluted its impact. “Information is knowledge about a particular fact or circumstance. It can take many forms, including news, blogs, conversations, social media, fraud line tip-offs or information from an informant. However, at this point it is raw data and should therefore rarely be used to drive action,” explained Feast. “Intelligence, on the other hand, is not widely available. Rather, it’s privileged in that it’s intended for a particular audience. It’s also no longer raw, but rather information that has been processed to provide context and meaning, which in turn can be used to drive action and priorities.”

Feast described how an intelligence cycle is often used to transform information into intelligence, but also stressed that one of the most important factors is understanding what is being asked.

Feast also explained that although analysis is the major part of the process that adds context and understanding, there are still organisations struggling to analyse data and making knee-jerk decisions from poor and inaccurate information.

“There is a growing realisation that intelligence is very different to simple information, and analysis is the element which bridges the gap.”

“Then we need to think about collecting data,” he continued. “For intelligence to be effective, the more data sources we have the better, because this can paint a bigger and more comprehensive picture.

“Once information has been collected, it can be evaluated and collated. Information can then be analysed and hypotheses tested, allowing inferences and conclusions to be made. Findings are then disseminated back to the requestor.” The result of this could lead to a number of different outcomes, including further investigation. “Speed and agility are crucial here. If it takes a long time to disseminate intelligence, the risk may have moved on. Another essential issue for an investigator is feedback. Only through feedback do we know how effective the intelligence was and whether it answered the question being asked.”

According to Feast, intelligence allows agencies to be proactive rather than simply reactive in the way they approach risk. The intelligence cycle also ensures that there is a consistent approach to the way information is collected, analysed and disseminated. It also ensures no shortcuts are taken or mistakes are made and that decisions are based on facts and corroborated information, rather than opinions or assumptions.

Feast pointed out that intelligence is vital in helping organisations to identify potential risks and threats and understanding how best to respond to them. He stated that intelligence can highlight gaps in information and therefore help to prevent intelligence errors. Furthermore, intelligence facilitates informed and efficient investigations, which can ultimately prevent and disrupt criminal activity.

Feast explained: “Technology plays a vital role as organisations need an IT infrastructure that supports the entire intelligence cycle. As the data requirements of an organisation become more sophisticated with an increasing demand from investigators for more and more data, so, too, do the requirements for a system that will simplify rather than complicate the process.”

Effective data management processes can minimise data silos and restrictions and give investigators timely access to the data they need in a single platform. Accurate and complete information is key and data quality processes can ensure data is consistent and available for analysis. Entity resolution can be used to remove duplicates and ensure that information relating to an individual is consolidated, allowing for a 360-degree view and an accurate assessment of any linked risks and threats.

Feast explained: “The importance of data security cannot be stressed enough as intelligence is one of an organisation’s most valuable assets. Technology can assist here by ensuring that information is secure and auditing measures are in place, with user permissions set so that people only have access to data that is relevant to their role.”

Technology also plays a vital role in the way information is analysed. Analytics and data visualisations can provide significant insight into the underlying data by providing analytical evidence and helping to highlight patterns and trends that may have otherwise remained hidden. Feast continued: “Technology allows organisations to benefit from a very structured approach to their investigations and can cut through myriad manual tasks that would only delay or hinder the process.”

In conclusion, Feast suggested: “Organisations should ensure that there is a process in place to support the intelligence life cycle and close the loop. Every organisation has a responsibility to maintain a data standard that will support the efforts of investigators”. He also stressed that prioritising intelligence is vital if efforts to counter criminal activity are to be successful. “Intelligence is worth investing in, but you also need to ensure that people have the right systems, data, training and skills to do the job.”