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SAS offers new fraud framework featuring SAS® Social Network Analysis

As stocks and housing prices fall and consumer confidence sinks in today’s economic turmoil, one area of growth has been – sadly – crime and fraud. Banks, insurance companies, and government entities are all seeing an increase in both the number and sophistication of fraudulent activities. To fight fraud effectively, organisations must continually improve the monitoring of customer behavior across multiple accounts and systems. SAS, the leader in business analytics software and services, is helping meet this need with the new SAS Fraud Framework. This framework includes components that support detection and alert generation, alert management and case management, and includes the new SAS Social Network Analysis solution. Industry-specific business rules, models and other capabilities will help banking, insurance and government organisations to prevent and detect various types of fraudulent activities and manage efforts against them.

"In our research of the drivers, strategies and technologies for the global banking industry in 2009, we see analytics to manage fraud and other risk as a prioritised technology initiative for organisations to address the global economic climate," said Jim Eckenrode, Banking & Payments Research Executive with TowerGroup. "With the combined elements of increased regulation and rapidly evolving, cross-channel fraud, we project that banks will need to invest in broader, more firm wide fraud and risk solutions."

To provide a comprehensive view of fraud risk, the SAS Fraud Framework offers detection and alert and case management to help reduce fraud loss and prosecute fraudsters. The framework includes many technologies to prevent, detect and investigate fraud including business rules, anomaly detection, predictive models and social network analysis. Designed to help detect and prevent both line-of-business fraud and cross-channel enterprise fraud, organisations can use the framework to help increase fraud detection rates, reduce false positives and streamline investigative resources. At the core of the framework is a profiling engine that scores individuals, accounts, products and networks based on rules, fraud scores and links to known fraudsters. An enterprise view of fraud exposure and risk is provided by consolidating alerts from multiple systems.

Health Care Service Corporation (HCSC) has been using SAS® Enterprise Miner™ for data mining and analytics within its anti-fraud program for years. “We mine years and terabytes of data relating to claims, providers, members, groups, accounts and products from all four of our Blue Cross and Blue Shield plans,” said Kyle Cheek, Director of Enterprise Informatics for HCSC. “Our integrated platform, which includes SAS, helps us to succeed in proactively identifying fraud. We’re always looking for more inventive and effective ways to fight fraud.”

Introducing SAS® Social Network Analysis

SAS Social Network Analysis, new software featured in the framework, helps investigators detect and prevent fraud by going beyond transaction and customer views to analyse all related activities and relationships within a network, such as shared address, telephone numbers, employment, account ownership and other key transactional data. SAS Social Network Analysis provides an interface that enables fast access to full customer details and all related parties and networks, resulting in quicker case assessments and better dossier production.

The unique network visualisation interface helps investigators actually see network connections more clearly so they can uncover previously unknown relationships and conduct more effective and efficient investigations. In addition to detection and risk scoring, investigation teams can review visualisations of relationships that include individuals flagged by existing rules, anomaly detection or predictive modeling.

“With SAS Social Network Analysis, it is possible to find previously unknown relationships that by themselves seem innocuous, but in concert are clearly fraudulent,” said Dr. John Brocklebank, Vice President of SAS Solutions OnDemand. “In addition, the software has many uses beyond fraud detection and prevention. Businesses such as telecommunications companies and banks can use network analysis to better understand customer behavior and target relevant offerings to new and existing customers. The ability to differentiate between influencers and followers helps to generate revenue and build customer loyalty.”

Alert- and case-management capabilities

The alert- and case-management components of the SAS Fraud Framework can be considered the framework’s central nervous system, linking generated alerts to the right place at the right time.

The alert-management solution is responsible for accepting the results of the detection/alert generation process and managing the alerts to a short-term resolution. This component assembles alerts from multiple monitoring systems, associates them with common entities (claimants, providers, etc.), and provides an investigator with a more complete perspective on the risk of a particular beneficiary. Additional functionality includes:

• Calculation of a risk score: For each generated alert, the alert management system assigns a risk score based on the specific characteristics of the activity.

• Prioritisation of alerts: These risk scores provide the investigator with the ability to prioritise higher risk activity resulting in greater efficiency, increased detection and lower losses.

• Work assignment: Organisations can appoint automated alert assignments to various investigators or analysts based on rules and requirements set by the user.

In late 2009, the SAS Fraud Framework will enhance its case-management component to better manage activities that have been deemed fraudulent or resulted in losses by an organisation. Case management provides information about an organisation’s overall fraud exposure – fraud losses plus fraud detected or prevented.
Case management helps investigators manage their fraud investigations. It is a repository for all information regarding the fraudulent activity, interview notes and evidence needed for criminal or civil prosecution, restitution and collections. It provides the ability to create and assign cases to investigators and includes a configurable workflow for the management and resolution of these cases.

Addressing specific industry pains

Available March 2009, the SAS Fraud Framework can be tailored to address the different types of fraud faced by specific industries including banking, insurance and government. The framework, like using SAS to fight money laundering and for fraud management, represents the latest investment SAS has made in helping customers fight fraud and financial crime.

• Banking: For the banking industry, the SAS Fraud Framework provides enhanced fraud detection, greater insight into managing Suspicious Activity Reports (SAR), and improved operational efficiency with decreased fraud losses. By properly identifying and classifying fraud losses with SAS, banks can take steps to prevent subsequent losses. The SAS framework can be applied to many types of bank fraud including: internal, first-party, third-party, wires, checking, payments, cards, ATM and mortgage. The integrated, automated processes and controls help banks achieve better and quicker insight into their fraud exposure, and identify steps they can take to reduce this risk and prevent loss.

• Insurance: For the insurance industry, the SAS Fraud Framework detects and prevents opportunistic and organised claims fraud across all lines of business. The anti-fraud analytical engine uses a combination of techniques to assign each claim a fraud score – measuring the likelihood that the claim is fraudulent – at each stage of the claims process. Alerts are created for suspicious claims and routed to special investigation units. Through this consolidated view of fraud risk, insurers can decrease fraud losses, lower loss adjustment expenses and improve their competitive position.

• Government: The SAS Fraud Framework can be applied to many areas of government – from detecting collusive patterns in entitlement programs such as Medicare and Medicaid to purchase-card fraud, bid-rigging and terrorist financing. SAS can help governments detect fraud faster by identifying difficult-to-detect patterns or anomalies in claims processing systems and identifying questionable claims before they are paid, thus avoiding the expensive process of recovery. In the area of tax and revenue, the SAS Fraud Framework can help to recover unpaid taxes and greatly increase auditor efficiency by identifying tax audit targets and under-filers.

The healthcare industry will also benefit from integration of new and existing capabilities within the framework. With an estimated $100 billion annually lost to healthcare fraud in the US alone, the SAS Fraud Framework will combat the increasing activity in fraud and abuse in healthcare. SAS Analytics have long been used to uncover previously unknown fraud and abuse schemes, prioritise claims for investigation, and reduce false-positive rates. The introduction of social networking and alert management capabilities by SAS in 2009, combined with robust analytics, now means that single transactions with low dollar amounts can be visualised in the context of a network of fraudsters that work together to defraud the healthcare system. These schemes can be uncovered and investigated with extreme efficiency. The framework will help identify improper medical, surgical, pharmacy and medical equipment claims on an individual basis and uncover networks of patients, physicians and facilities that have collaboratively billed for falsified or unnecessary services. For the healthcare industry, certain fraud components are now available with additional updates to be released later in 2009.