I often provide fraud analyses to clients, whereby they identify fraudsters that have somehow gotten through the system. We then go in and see what kinds of conditions exist in the fraudulent population that exist to a much lesser degree in the overall population. We typically do this with indicators, flags, match codes, and other conditions that we have available on the Experian end of things.
But that is not to say there aren’t things on your side of the fence that could be effective indicators of fraud risk as well!
One simple example could be geography. If 50% of your known frauds are coming from a state that only sees 5% of your overall population, then that state sounds like a great indicator of fraud risk! What action you take based on this knowledge is up to you (and, I suppose, government regulation). One option would be to route the risky customers through a more onerous authentication procedure. For example, they might have to come into a branch in person to validate their identity.
Geography is certainly not the only potential indicator of fraud risk. Be creative! There might be previously untapped indicators of fraud risk lurking in your customer databases. Do not limit yourself to intuition either. Oftentimes the best indicators of fraud risk that I find are counterintuitive. Just compare the percentage of time a condition occurs in your fraud population to the percentage of time it occurs in the overall population. It might be that you have a fraud ring that is leaving some telltale fingerprint on their behavior–one that is actionable in ways that will jumpstart your fraud prevention practices and minimize fraud losses!
