Welcome to Understanding Link Analysis. The purpose of my site is to discuss the methods behind leveraging visual analytics to discover answers and patterns buried within data sets.

Visual analytics provides a proactive response to threats and risks by holistically examining information. As opposed to traditional data mining, by visualizing information, patterns of activity that run contrary to normal activity surface within very few occurances.

We can dive into thousands of insurance fraud claims to discover clusters of interrelated parties involved in a staged accident ring.

We can examine months of burglary reports to find a pattern leading back to a suspect.

With the new generation of visualization software our team is developing, we can dive into massive data sets and visually find new trends, patterns and threats that would take hours or days using conventional data mining.

The eye processes information much more rapidly when information is presented as images, this has been true since children started learning to read. As our instinct develops over time so does our ability to process complex concepts through visual identification. This is the power of visual analysis that I focus on in my site.

All information and data used in articles on this site is randomly generated with no relation to actual individuals or companies.

Leveraging Outsourcing To Increase Fraud and Compliance Screening Ability

For those charged with fraud and compliance operations, it's always walking a tightrope between setting fraud and compliance rules and scoring to ensure suspicious transactions reach manual screening while ensuring the number queued for manual review do not overwhelm your fraud review teams.

There was a time that considering outsourcing fraud and compliance screening was unthinkable, but it is perhaps time to take another look. These are sensitive positions which require specific training and skills, however the availability of human resources, particularly in the Philippines, has risen considerably over the years making the recruitment, training and management of an outsourced fraud and compliance review unit very feasible and cost efficient.

Over the past two months I have deployed an outsourced fraud and compliance unit for an international financial transaction business and would like to share the planning, training, implementation and management process that took place and some of the lessons learned along the way.

Evaluating The Outsourcing Option

Like most financial institutions, our fraud and compliance review team had been handled for the most part in house for many years. It was a very effective unit with a high productivity rate and low loss rate, well below industry standards. So why did I consider outsourcing this manual review role when the old system was so effective?

First was flexibility of manpower, I had a very competent and able team, but with an in-house staff, growing the unit would always pose a challenge in terms of recruitment, space, resources and training. With the rate of growth the company was experiencing I found that the Fraud and Compliance Unit tended to lean towards adjusting fraud and compliance scoring models and rules to decrease the number of transactions coming in for manual review as opposed to adding staff due to the challenges involved.

The next thing I quickly learned after interacting with my in-house fraud and compliance staff, is that through years of reviewing transactions, they had become true fraud and compliance experts in our company and were working far below their abilities. I wanted to provide my in house team with new tools, training and opportunities so I could evolve the team from reactive review to a world class proactive fraud analysis and investigation unit. I looked at my in-house staff as a group who could drive, define and manage fraud proactively, making a huge impact in our fraud and compliance losses. Of course, before I could evolve this group of exceptional people, I had to migrate the day to day review process somewhere.

Our company, like most had outsourced customer service a couple of years ago. Because fraud and compliance manual review is so interlaced with customer service contacts, there was always a disconnect between customer service and the manual review team adding friction to the customer's experience. As there was no way to hand off fraud or compliance escalations which came into customer service, the process always involved at a minimum, two separate contact point with each customer. This was time consuming, costly and most important, really didn't provide a positive experience to a customer looking for resolution.

I was presented with three distinct issues, lack of staffing flexibility, a highly skilled fraud and compliance team working below their abilities with no clear way of elevating them and a high friction customer experience when interacting with my group. I needed a solution that would incorporate a global solution to all of these problems with minimal impact on the teams fraud and compliance outstanding productivity and accuracy.

Planning The Outsourcing Solution

Planning is everything when it comes to migrating the fraud and compliance manual review process to an outsourced environment. This isn't an operation with a large ramp up time to get to full speed, anything short of full speed means losses and violations which are unacceptable.

When you bring in new fraud and compliance reviewers in house, you get complacent around the process as a manager, because there is a built in knowledge transfer from experienced reviewer to new member making the transition seamless. If your company hasn't ever migrated your manual review team you can be sure there is no process documentation or training programs developed because you have always leveraged your in-house experts to train up any new personnel. Because this method of training is so intensive and hands on, the new reviewer is usually up to speed in short order with very few training related error issues.

When starting down the road on an outsourced option, you clearly realize you will not have the luxury of hands on, in house mentoring to get the team trained and productive. Even worse, because you are placing the team remotely with everyone having the same level of knowledge in your fraud and compliance review process, you have no supervisors, team leaders or managers on site who can assist with the coaching and mentoring process. Everyone is starting off in the same place and that is an uncomfortable place for a manager to be.

The most important partner you have in the outsource planning process is your customer service executive or manager. The customer service department has an established process documentation, knowledge base and training program in place. If you are integrating your fraud and compliance manual review team within the same site as customer service, which is highly recommended, you will want to format your departments process documentation and training programs to integrate completely with customer service.

The customer service management team is also going to have valuable information regarding which location would provide the best manpower, cost, facilities and management for integrating in the fraud and compliance review process. Without this partnership, the job of deploying an outsourced fraud and compliance team will be considerably more difficult.

One of the biggest advantages from a fraud and compliance management standpoint when outsourcing fraud and compliance review is, if selected properly, you have just gained a team with a unique geographic and cultural understanding of fraud and compliance scenarios in a region in the world where you do business.

I have discussed in previous articles about the distinct advantage in regionalizing your fraud and compliance analysis and investigation assets. A fraud reviewer in the Philippines is going to have enhanced knowledge of the types of fraud schemes in that country, adversely, a fraud reviewer placed in a country with a low level of fraud activity is going to have a hard time conceptualizing fraud as an act. You will be able to train that individual the review process and provide the necessary tools and information to calculate a decision but without life experience or cultural exposure to fraud and related activity, you will loose 30% of the fraud reviewing decision process which is completely based on intuitiveness.

This is by no means meant to be derogatory against Japan and from a cultural standpoint its a complement, Japan experiences very little fraud. Placing a fraud and compliance team in Japan tasked with reviewing transactions from countries with a highly developed system of organized fraud would be a monumental disaster. You will loose 30% of your fraud detection ability from a lack of reviewer intuition to discreet fraud patterns.

This does not mean when planning where to place your fraud and compliance, you only consider the countries with the highest risk in these areas, however, I am saying that wherever you do decide to place your resources, you need to ensure the people you are employing for the task can understand the concept of fraud in 360 degrees, meaning, why they do it, how they do it and what is the objective. If you happen to choose the specific country which carries the highest fraud and compliance risk for your country, more the better.

Keep in mind, you have the option to disburse your outsourced manual review teams to as many countries as you like. From a personal perspective, if you are in the business of reviewing international transactions, you should seriously consider separate Latin America and Asia Pacific teams. The regional awareness that you, as a risk manager, will gain is extremely valuable.

The next important factor in determining location for your fraud and compliance review team is to choose a place that has a manpower pool of individuals who have had exposure and experience in fraud and compliance screening. One of the reasons I selected the Philippines for our first location, other then we had a large customer service presence in that country, was an ample supply of individuals with previous fraud and compliance screening experience at other companies.

For my first outsourced fraud and compliance team, I was actually looking for a mix of experience, some with a fraud screening background and some with a customer service background and a good intuition for fraud. I have found that having people with no formal fraud or compliance screening background, incorporated with experienced individuals is a fantastic combination.

Armed with an understanding of the process documentation and training process from your customer service leadership and a location in mind which will allow you to leverage regional awareness of fraud and compliance and lend it self to recruiting experienced individuals you are ready to begin planning the transition.

Integrating The Outsourced Team

By the time you have selected the location(s) for your outsourced fraud and compliance team and have started compiling the training program and process documentation you will utilize to get the team up and running, your ready to begin the integration process between your in-house team and your new outsourced fraud and compliance team. There are actually a large number of items to ready the integration of the two teams but I will outline the primary steps from a learning perspective.

We talked earlier about your in-house fraud and compliance experts, this is where you get to leverage those years of experience to ensure the success of your teams deployment. When we were recruiting and interviewing potential candidates for the new team, I utilized our in-house team during the entire selection process. There were two main reasons, first there is no one more qualified to identify a qualified fraud and compliance reviewer with the right mindset and ambition, then someone who has done the job for years. Second, it was very important from a team perspective, that everyone feel involved and vested in the development of the new team.

In addition to my in-house team's involvement in recruitment, interviewing and selecting candidates, I began the process of elevating their experience by having each be responsible for the mentoring and coaching of the new team members. The primary problem with building an outsourced team from scratch, where no one on the team has any experience in my company specific way of performing fraud and compliance reviews, is that I lost the on-the-job knowledge transfer that used to occur with new members to the in-house team.

What I needed to establish was a virtual mentor, with the new fraud and compliance review team working in tandem with the experienced fraud and review team to facilitate and expedite the new team's abilities and proficiency just as fast as the new in-house team members.

Training the new team involved being on-site for two weeks. The first week was spent in a classroom environment with extensive training on the company's fraud and compliance screening procedures, tools and policies. With a complete understanding of the process and tool set, the team spent the next week doing hands on manual review of transaction in tandem with the in-house team. During the hands on process, each of the new team members were in constant contact with the in-house team through email, phone and instant messenger. This allowed for a virtual hands on mentor-ship and knowledge transfer that accelerated the understanding of the review process for the new team.

The mentor-ship continued for six weeks, with the mentors on the in-house team, providing QA of reviewed transactions, coaching and assistance to the new team members on a daily basis. By tracking the QA scores we were able to establish when the team was ready to be independent of the mentors.

It is important to remember that you never completely hand off the fraud and compliance process to anyone outside your company. Continuous quality assurance, metrics and management is essential for the company's fraud operations team to maintain with the outsourced review team. I make quarterly on-site visits, continually plan refresher training and updates and monitor results on a daily basis.

Elevating The Legacy Team

With the manual review process handed off to the outsourced review team, transitioning from partial to full coverage over time, the in-house team was ready to begin the transition to fraud and compliance management.

The biggest gain I received was being able to transition the talented group of experienced in-house fraud and compliance experts to world class proactive fraud analysts, investigators and managers.

As this sites name is "Understanding Link Analysis", this is when visual analysis comes into play in the project. The first step was to deploy i2 Analyst Notebook and iBase to each of the in-house fraud review team members enabling them to visualize and detect patterns of organized fraud. Each team member was also trained on SQL data mining and the concepts behind the fraud and compliance scoring models and rules.

Armed with i2 for proactive visual analysis of transactions to detect fraud, anti-money laundering and funding of illegal activity, the team is able to visually review transactions which occurred over a period of time to isolate clusters of interrelated activity indicative of fraud and compliance violations.

Once the team identifies a cluster of activity, they can utilize betweeness and closeness to determine the attributes being used by the individuals and write rules into the fraud and compliance scoring models ensuring that transactions sharing those attributes are brought in for review by the new fraud and compliance review team. Now that the team has additional fraud and compliance screening resources, we have the ability to ensure more transactions, with a higher probability of fraud, are brought in for screening.

Because we are utilizing data mining and visual analysis to detect trends and patterns, the attributes we are identifying and scoring have a much lower false positive rate. We are bringing in twice the number of transactions for screening with half the false positive rate While we haven't arrived at a point for an accurate measurement of reduced or avoided fraud versus productivity due to the newness of the team, I have high expectation in significant fraud and compliance violation reductions.

Points To Remember

There are several important items to always to keep in mind when planning on transitioning your fraud and compliance manual review process:

1. Ensure that your in-house fraud and compliance team is integrated well with your outsourced team. Even though you are outsourcing your fraud and compliance review, they are part of your fraud and compliance team and each group should communicate and interact as much as possible. Remember, the biggest benefit you gain is additional insight and understanding of fraud and compliance trends, do not ignore it, every member of the team is just as important as the other.

2. Have a complete plan to elevate your existing team to enhance your groups ability to proactively identify and investigate fraud and compliance trends. Outsourcing fraud and compliance review should never be done as a replacement to in-house review. It should be done to allow you greater access to resources and manpower allowing you to take your team to the next level.

3. Plan and acquire the tools you will need to take your in-house team from reactive to proactive fraud and compliance identification as quickly as possible. Just adding reactive fraud and compliance review to your fraud department is only half the objective. While you are planning the transitioning of manual fraud and compliance review, you need to be planning the elevation of your corporate team to proactive review. With both in place, you have just dramatically increased the value of the fraud and compliance department to your company.

4. Plan on spending plenty of time on-site with your manual fraud and compliance screening unit. For a company with large volume and over 30 review personnel, you should give real consideration to having a full time on-site presence to ensure accuracy, quality and productivity with the team.