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Fraud Analytics: Strategies and Methods for Detection and Prevention


Praise for Fraud Analytics

"In Fraud Analytics, Delena Spann meticulously reminds us that technology has redesigned the world for the good guys and the crooks. If law enforcement is to keep up, then we must utilize the best tools to thwart the efforts of white-collar criminals whose impact devastates our economy. She articulately and technically apprises the good guys on how to detect the practices of America's most prolific criminals. This is a must-have book."

—Dr. Jeffrey Dean Swain, JD, PhD, Criminal and Constitutional Law, Florida Memorial University

"As a professor of audit and forensic accounting, Fraud Analytics is the reference book I have been waiting for. Clear, no-nonsense instructions will allow me to use this text in my graduate and undergraduate fraud detection courses as the one guide to forensic tools and fraud-fighting strategies."
—Peg Berezewski, CFE, CGMA, CPA, Professor, Robert Morris University, Illinois

"At last! We finally we have a definitive, understandable book written about the technical subject of fraud analytics. Delena Spann shares her expertise with us through clear explanations and case studies. Having been associated with Ms. Spann for fifteen years, I am pleased that her insights are communicated with this valuable book for fraud examiners, auditors, and financial investigators. We are utilizing her analyses with our clients and in our seminars."
—David S. Marshall, MBA, CFE, CISA, Principal, Infotech Global Audit and Security, Inc., and Corporate Compliance Seminars; President, Greater Chicago Chapter, Association of Certified Fraud Examiners

"This book is an outstanding primer in the area of fraud analytics. It provides a significant overview of the threats and impact that fraud has on the private and public sectors as well as identifies and describes current solutions and analytic techniques to address this. Fraud Analytics is a terrific contribution to the national security community and more specifically to anyone interested in fighting fraud."
—Jill D. Rhodes, JD, LLM, Vice President and Chief Information Security Officer, Trustmark Companies; former executive, Senior National Intelligence Service

DELENA D. SPANN, MSc, CFE, is employed with the United States Secret Service, Chicago Field Office, where she is assigned to the Electronic and Financial Crimes Task Force.

Spann routinely serves on high-profile financial crimes investigations that include detecting red flags, trends, and anomalies in complex financial transactions. She is frequently called upon as a guest speaker on her expertise in fraud analytics and financial crimes. She is dedicated to the study of white-collar crime.

Spann holds a bachelor's degree in liberal studies from Barry University and a master of science degree in criminal justice administration from Florida International University. She is Board of Regent (Emeritus), an Advisory Board Member, and Higher Education Committee Member of the Association of Certified Fraud Examiners; a Board of Director of ASIS International Economic Crime Council; Education Task Force Member of the Association of Certified Anti-Money Laundering Specialists; Advisory Board Member at Robert Morris University; Executive Director of the Association of Certified Fraud Examiners, Greater Chicago Chapter; a Threat Finance Task Force Member of the Association of Certified Financial Crimes Specialists; and Board of Director (Emeritus), Step Women's Network of Chicago. Spann also serves as an adjunct professor at the university/college level.

Foreword xi

Preface xiii

Acknowledgments xv

Chapter 1: The Schematics of Fraud and Fraud Analytics 1

How Do We Define Fraud Analytics? 2

Mining the Field: Fraud Analytics in its New Phase 6

How Do We Use Fraud Analytics? 10

Fraud Detection 10

How Do We Define Fraud Analytics? 12

Fraud Analytics Refined 12

Notes 13

Chapter 2: The Evolution of Fraud Analytics 15

Why Use Fraud Analytics? 17

The Evolution Continues 19

Fraud Prevention and Detection in Fraud Analytics 19

Incentives, Pressures, and Opportunities 21

Notes 22

Chapter 3: The Analytical Process and the Fraud Analytical Approach 23

The Turn of The Analytical Wheel 23

It Takes More Than One Step 24

Probabilities of Fraud and Where it All Begins 28

What Should the Fraud Analytics Process Look Like? 29

Data Analytics Exposed 31

Notes 32

Chapter 4: Using ACL Analytics in the Face of Excel 33

The Devil Remains in the Details 50

Notes 55

Chapter 5: Fraud Analytics versus Predictive Analytics 57

Overview of Fraud Analysis and Predictive Analysis 58

Comparing and Contrasting Methodologies 60

13 Step Score Development versus Fraud Analysis 64

CRISP-DM versus Fraud Data Analysis 66

SAS/SEMMA versus Fraud Data Analysis 68

Conflicts within Methodologies 69

Composite Methodology 70

Comparing and Contrasting Predictive Modeling and Data Analysis 72

Notes 76

Chapter 6: CaseWare IDEA Data Analysis Software 77

Detecting Fraud with IDEA 79

Fraud Analysis Points of IDEA 82

Correlation, Trend Analysis, and Time Series Analysis 83

What is IDEA’s Purpose? 83

A Simple Scheme: The Purchase Fraud of an Employee as a Vendor 86

Stages of Using IDEA 87

Notes 89

Chapter 7: Centrifuge Analytics: Is Big Data Enough? 91

Sophisticated Link Analysis 92

The Challenge with Anti-Counterfeiting 93

Interactive Analytics: The Centrifuge Way 93

Fraud Analysis with Centrifuge VNA 95

The Fraud Management Process 100

Notes 105

Chapter 8: i2 Analyst's Notebook: The Best in Fraud Solutions 107

Rapid Investigation of Fraud and Fraudsters 108

i2 Analyst’s Notebook 109

i2 Analyst’s Notebook and Fraud Analytics 113

How to Use i2 Analyst’s Notebook: Fraud Financial Analytics 116

Using i2 Analyst’s Notebook in a Money-Laundering Scenario 121

Notes 125

Chapter 9: The Power to Know Big Data: SAS Visual Analytics and Actionable Intelligence Technologies’ Financial Investigative Software 127

The SAS Way 127

Actionable Intelligence Technologies’ Financial Investigative Software 130

A Case in Point 132

Notes 135

Chapter 10: New Trends in Fraud Analytics and Tools 137

The Many Faces of Fraud Analytics 137

The Paper Chase is Over 138

To Be or Not to Be 140

Raytheon’s VisuaLinks 143

FICO Insurance Fraud Manager 3.3 145

IBM i2 iBASE 146

Palantir Tech 147

Fiserv’s AML Manager 148

Notes 148

About the Author 151

Index 153