How Frauds are Combated by AI and Machine Learning in Times of COVID-19


Introduction

With the world battling COVID-19, a significant increase in fraud has been observed worldwide. As more and more people stay at home due to lockdown, they are becoming victims of multiple financial and material related frauds. People are spending a lot of time online and thus it becomes easier for hackers to carry on their phishing process. Staying at home is quite monotonous and it becomes easier for hackers to carry out their social engineering activities and get their bank vitals in exchange for some COVID 19 related details. Most people get paranoid around this subject and it never occurs to them that they are getting duped. People online and in the open Web sometimes find themselves visiting malicious sites that are veiled very intelligently by their official appearance. They eventually get tricked into giving their card details, pin, CVV, account number etc. Fraudsters sometimes offer exclusive promotional codes and other exciting offers to pull in a certain person visiting a very harmless looking website. They get bank credentials in exchange for providing appointments in hospitals or for investing in certain mutual trust funds or bonds.

Why are frauds happening?

The global economy is majorly affected by the pandemic and the countries are witnessing an economic downturn. Only digitized businesses are thriving under this pressure. Thus, the increasing cybercrime is majorly targeted towards businesses operating on various technology systems. Moreover, many businesses have grown to be digital just after the start of the pandemic. Although the business implements intelligent technology, it doesn’t have the necessary security policies and procedures which makes it an easy target for the criminals.

The increased online transactions have made it easier for fraudsters to investigate vulnerabilities in a system and exploit it. The tech companies including Mastercard, are leaning towards employing Artificial Intelligence to fight against crimes amidst the coronavirus pandemic. Tech companies like Microsoft are providing Artificial Intelligence bot services which are used for continuous vigilance of business transactions. Know Your Customer (KYC) and Anti-money Laundering (AML) compliance for financial purposes has always been crucial. However, it becomes difficult when everything starts happening online. Thus to monitor the business transactions and operations for keeping a check on suspicious activities, most businesses deploy Digital KYC & AML compliance systems.

What kinds of frauds are coming up?

Not just account takeover but also data breaches are a major concern when digital markets are being talked about. The world has seen major data breaches throughout the year. The HIPAA Breach Reporting Tool website of the Department of Health and Human Services lists a total of 105 breaches affecting more than 2.5 million individuals. The increase in online shopping, digital money transfers etc. during this pandemic has resulted in an increase in cybercrimes too. As per Foster’s fifth fraud attack index, ATO (Account TakeOver) frauds are recorded to be increased by 31% every year. Amid coronavirus, this percentage is expected to rise three times. According to financial institution executives, about 89% of the frauds in the digital channel corresponds to ATO frauds. PwC’s 2020 Global Economic Crime and Fraud Survey states that 47% of global organisations have experienced financial crime in the past two years and have encountered a loss of about $42 billion.

Another emerging threat in the digital world is identity threats. According to research by  IdentityForce, around 33% of US adults experience identity threats annually. This results in unauthorised and unlawful transactions. With hackers being so powerful with the ever-growing technology and having access to millions of data because of multiple data breaches, this is a problem that everyone should keep an eye out for. Money laundering also possesses a great threat to the digital world. With so many transactions happening online and so much data and money being on the web, money laundering is becoming a go-to attack for most hackers and fraudsters.

How are AI and ML used to counter these frauds?

To counter these problems, Artificial intelligence, Blockchain, Machine Learning are on the forefront. The algorithms are being trained to identify unusual activities and symptoms in systems and take the required measures to counter it. Machine learning is used to train the algorithms to find a pattern in the attacks and investigate further to find the backdoor of the attack and patch it. AI is also used through e-KYC to perform anti-money laundering screening so as to strengthen the validation process. Authorizations and password verifications no longer hold up against the state-of-the-art technology used by hackers. So, AI and ML are used on a real-time platform to counter the attacks. The algorithms or models are trained to understand the path of a transaction and realize when the path is going wrong so that it can backtrack and find the cause of the problem. The automation is also useful in detecting the transactions that come from questionable sources and they can filter them before they can enter the main system. More these models are used, the more data is accumulated and better they perform.

Organizations are also using AI for their biometric authentications to prevent identity frauds. Techniques like 3D depth perception, liveness detection, spoofing checks etc. are used to verify a person’s face real-time. Face matching algorithms are used and any changes in their facial structures or definitions etc. can be very easily caught by the model. This algorithm also detects cases of Photoshop and thus makes the process of authorization more secure. MasterCard was one of the first to deploy such a model and it is said to have effectively reduced the number of facial fraud by 80%.

With the world slowly becoming digitized as we move in the 21st century, the number of cybercrimes and cyber warfare is increasing significantly too. Because of the huge amount of data in the cloud, it is becoming a target for all hackers and fraudsters. Everything was made online and over the Web to make it easier for human beings to survive and but now the scaling cases of frauds put the responsibility of securing data on themselves. The terms cloud computing and big data are no longer restricted to the field of IT services. Manual service can provide a certain level of protection after which it becomes inevitable to rely on technologies. This is where Machine Learning and Artificial Intelligence comes into the picture and are considered to be the future.


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