Australian businesses and individuals lost a record $3.1 billion to scams in 2022, a sharp increase of 80% on total losses recorded in 2021. Scamwatch noted that even though the number of reported scams fell by 16.5%, average losses per scam soared by 224%, “due, in part, to scammers using new technology to lure and deceive victims.”
Clearly, Australian organisations are in a technological race against scammers and fraudsters.
We spoke with Marlene Sadhai, Senior Manager, Enterprise Financial Crime at Aware Super and Jason Moffat, Senior Risk Specialist at Customer Owned Banking Association for their tips on the effective deployment of anti-fraud technology.
What are some emerging technologies that organisations are using to combat fraud?
“Technology has the potential to detect, prevent, counter and investigate fraudulent schemes,” says Sadhai. “AI-enabled data analytics and Machine Learning algorithms can swiftly identify suspicious patterns and behaviours to launch timely intervention before substantial harm is done. Real-time monitoring of transactions and user interactions empowers organisations to proactively tackle emerging threats head-on.”
“One of the key strengths of technology lies in its ability to fortify authentication processes,” continues Sadhai. “Features like biometrics, two-factor authentication, and encryption techniques add multiple layers of security, making it significantly more challenging for fraudsters to breach systems or assume false identities.”
Moffat agrees: “The use of biometrics, geo, and behavioural data at a device level is providing some encouraging results in combatting financial crimes,” he says. “But the changing threat posed to us by the development of AI is only starting to be understood, so whatever answer I give to this question will surely be redundant in record time!”
Sadhai also points to the crucial role played by digital forensics in investigating and collecting evidence related to fraudulent activities. “Digital forensic experts employ specialised tools and techniques to analyse digital devices, networks, and data trails left behind by perpetrators,” she explains. “This investigative approach aids in identifying the root causes of fraud, tracing the flow of illicit funds, and establishing a solid basis for legal action.”
What pitfalls should organisations watch out for when implementing fraud prevention technology?
“This is a great question and really is at the nub of what we should take out of the Fraud Mitigation Summit,” says Moffat. “You must understand your risks, but more importantly, you must have a feeling for how much you practically care about each one. Once you have your key problems or threats identified, you need to identify which solution in the market is right for your specific business. The questions you ask can sometimes be more important than the answers you get.”
Integration of technology also needs to be as smooth as possible for the organisation. “Integration issues can be a major pitfall when attempting to implement fraud prevention technology,” says Sadhai. “Efforts can also be hampered by budget restrictions and poor data quality that will prevent the effective use of analytics and other tools.”
What are your tips for buyers looking to choose a fraud prevention technology provider?
“The security, integrity and effectiveness of fraud prevention technology should be evaluated against the organisations’ framework requirements and relevant regulations and standards in the industry they operate within,” advises Sadhai. “Fit-for-purpose and ease of ongoing management should both be high on the list.”
For Moffat, the key for buyers is to have a clear understanding and concentration on the threat they are trying to solve. He also stresses the importance of focusing on the essentials rather than extra features: “If you were to be dropped on a desert island for a year and you had a day to pack, I guarantee the priorities of food, water, clothes and a satellite phone would come to mind pretty quickly. What colour socks to take and which book you like more becomes secondary pretty fast!”, he says. “Talk to the vendors, in depth, in person. Ask for referrals to their similar existing clients, share the information, and ask ‘what if?’ as much as possible. Work together openly and frankly. Reputable vendors will tell you what they can do, but they will also tell you what they can’t do, which is often more important.”
As fraud prevention tech adoption accelerates, where do you believe human expertise and judgement will continue to be needed?
Both Sadhai and Moffat believe human skillsets will remain essential as fraud prevention automation and other technology accelerates.
“While AI can undertake impressive data analysis, assessment of the outputs will require expert [human] skills and judgement,” Sadhai notes. “Revision, updates and new inputs into the model will require subject-matter expertise, while the case management of results will also continue to require human expertise and judgement.”
According to Moffat, humans will always be needed for critical decision-making. “AI and machine learning cannot replicate the sort of critical thinking, deliberation and hypothesising that comes with the use of experience, cynicism and logic,” he says. “In a 50/50 situation, AI should get it right 50% of the time, right? But humans tend to get it right 80% or 90% of the time. Human intuition is a critical skill invariably responsible for the right 50/50 decision – we call it intuition because there is no objective data behind it. It’s about feel, not data.”
Marlene Sadhai and Jason Moffat will present at the 2023 Fraud Mitigation Summit in Sydney on 4-6 September.
The Fraud Mitigation Summit 2023 will arm businesses and the public sector with the latest tools and strategies necessary to counter the growing threat of fraud. Business leaders, government decision makers, and fraud experts will gather to share how you can protect your organisation from fraud and avoid becoming the next cautionary tale of an organisation struggling through a debilitating crisis.