Detecting and preventing fraud is when a business or individual puts certain practices in place in order to stop certain items, money or even properties from being obtained under a false pretense. While organizations may use a combination of techniques to protect themselves and the data of their customers, individuals can also take steps to ensure they’re safe online.
In this guide, we reveal some of the most common detection and protection practices and highlight the difference between the two phrases.
A brief introduction
Unfortunately, as per research from Legal Jobs, one in ten adults in the US will be the victim of a fraud or scam every single year. Not just that but the total cost of online theft, exploitation and fraud totals billions of dollars in financial losses. Some common examples of fraud include using stolen credit cards, faking an identity or forging cheques. However, causing an accident with the aim of getting a payout or exaggerating your losses in order to gain are other examples of fraud.
For this reason, many industries and organizations implement a number of processes in order to prevent these attacks from happening. Plus, there’s plenty of best practice advice out there for individuals who want to take action too. Despite this, fraudsters and scammers are becoming more mature in their tactics, which can make detection very difficult. That’s before we mention issues within the organizations themselves that reduce their ability to detect and protect against attacks.
Detection techniques
We’ve already mentioned that World Today News’ report shows that fraudsters are becoming more innovative when it comes to attacks. However, internal business decisions can also heighten the risk of these attacks. This includes downsizing, moving to new IT systems, or being involved in a cyber security breach. Not to mention, a lack of common sense between employees and password sharing schemes.
Of course, there are security programs out there that can protect a business’s data and information, and that of their customers, but it’s important to take the necessary precautions before this to ensure that any potential threats and fraudulent activities are spotted in advance. Some of those most common tactics include:
Verification and authentication
One of the most common fraudulent activities is a stolen credit card being used to purchase things online. Often, the fraudsters will only have account details or the credit card itself but won’t have access to address details or other means of identity.
This makes techniques like two-factor authentication and addresses verification systems (AVS) very popular. The former is when additional information is required to approve a transaction. In some cases, facial recognition, an eye scan, or a fingerprint is used. AVS is when the card owner’s address needs to be inserted for the payment to go through. Both are effective ways to prevent fraudulent transactions from being approved.
Artificial intelligence (AI)
Another way to prevent these fraudulent behaviors is to use AI and algorithms to track certain patterns of activity and highlight any anomalies. This is sometimes called pattern recognition. AI can also be used to automatically detect certain characteristics in fraud and alert account holders (machine learning) or it can even learn certain patterns commonly used in suspicious behavior and use these patterns to detect even more suspicious behavior. These are called neural networks. Data mining also uses AI which is when data is classified, grouped, and segmented whilst searching for patterns in transactions.
Statistical data analysis
This type of tactic is when the data from transactions is quantified and analyzed. Common practices include regression analysis, which highlights certain patterns that have an impact and those that don’t, and data matching which is when two sets of data are compared to see if there is a duplicate. There is also what’s called statistical parameter calculations which look at averages and performance metrics, and probability distributions and models.
Real-time monitoring
The most common fraudulent activities consist of repeated methods and regular patterns of behaviors. For this reason, experts suggest that individuals and organizations should manually search through records in search of unusual or suspicious activity. This includes large financial transactions, sign-ins from devices and locations that aren’t common, and failed authentication attempts.
That’s not the only manual technique that organizations and individuals can use to prevent their data from being hacked, though. Updating passwords regularly, using password managers and being vigilant with links and thoroughly checking domains are all ways that you make it harder for any potential hackers or fraudsters to get their hands on your information. SEON’s guide on account takeover fraud goes one step further too and explains how to protect data and information from scams as well as what you should do if you think your data has been compromised.
Prevention vs detection
Being safe online isn’t just about detecting the attacks but also preventing them from happening in the first place. These two phrases are often confused but prevention is when techniques are put in place to stop the fraud before it happens, and detection focuses on identifying the fraud as it happens. While prevention is proactive, detection is reactive.
Prevention typically involves the process of analyzing data available in order to determine how it was transferred, where from, when it was created and who by. Detection searches for patterns and then aims to put a stop to it. While they mean different things, and can be used together or separately, both are essential when it comes to safety online.
Taking steps to protect
The above is an overview of how fraud can be protected against online. The tactic that best suits an organization or individual will depend on a few different things. One thing’s for sure though, fraud costs organizations and individuals billions of dollars every year. In 2020 alone, this number was estimated to be nearly $3.4 billion and that’s before we look at the $400 billion worth of unemployment benefits that were taken in the same year.
For businesses, fraud can be expensive, time-consuming and also do a lot of damage for the brand and reputation. This in itself is a big enough reason to spend some time on protection and detection.
