CS490D: Introduction to Data Mining Prof. Chris Clifton. April 14, 2004 Fraud and Misuse Detection. What is Fraud Detection?. Identify wrongful actions Is right and wrong universal? If so, why not just prevent wrong actions Identify actions by the wrong people Identify suspect actions
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April 14, 2004
Fraud and Misuse Detection
ProfileSolution: Differential Profiling
Regression algorithms (predict numeric outcome): neural networks, CART, Regression, GLM
Classification algorithms (predict symbolic outcome): CART, C5.0, logistic regression
Group and Find Associations
Clustering/Grouping algorithms: K-means, Kohonen, 2Step, Factor analysis
Association algorithms: apriori, GRI, Capri, SequenceTechniques used to identify fraud
Decision Trees and Rules
Clustering and Associations
The US Health Care Finance Administration needed to isolate the likely causes of payment error by developing a profile of acceptable billing practices and...
…used this information to focus their auditing effort
The US Defense Finance and Accounting Service needed to
find fraud in millions of Dept of
Defense transactions and...
Identified suspicious cases to focus investigations
The Washington State Department of Revenue needed to detect erroneous tax returns and...
Focused audit investigations on cases with the highest likely adjustments