How AI and data enrichment may safeguard the disadvantaged during a recession


The looming global recession is a cause for concern for businesses and consumers alike. Even if it is not yet a certainty, a global recession is increasingly likely over the coming years. A recent Hanover Research poll indicated that 85% of financial executives are prepared for an imminent recession and another executive poll by E&Y made similar findings. Moreover, according to a Morgan Stanley strategist, the world’s biggest economies are already experiencing a recession, even though they might not know it yet. In short, difficult financial times are looming.

With fraud rates positively correlated with recessions and financial shocks, the risk of financial fraud increases in difficult financial times. During the global financial crisis and the first year of the Covid-19 epidemic, data showed a significant increase in certain forms of financial fraud, particularly impersonation schemes with fraudsters posing as trusted organizations.

In light of the impending recession, it is important for businesses and consumers to take proactive measures to mitigate the risks posed by financial fraud. Businesses can implement robust internal controls, such as conducting regular risk assessments and audits, to detect and prevent financial fraud. They can also educate their employees on the signs of financial fraud and the importance of reporting suspicious activity.

Consumers can also take steps to protect themselves from financial fraud. It is important for them to stay informed about potential scams and to be wary of unsolicited phone calls, emails, or messages from individuals claiming to represent a trusted organization. Consumers can also protect their personal information by regularly monitoring their financial accounts and reporting any suspicious activity to their financial institution.

In addition to traditional methods, technology and the wise use of data can play a crucial role in mitigating the risks of financial fraud. By leveraging data and advanced analytics tools, businesses can detect financial fraud more quickly and effectively, while consumers can educate themselves on potential scams and stay informed about the latest fraud trends.

This begs the twin questions of what businesses can do to further safeguard their vulnerable clients and the broader community and what consumers can do to safeguard themselves.

To try to answer these questions it might be insightful to examine how fraudsters set about defrauding the vulnerable during times of crisis.

Exploring the Tactics of Fraudsters Preying on Vulnerable Populations

In recent times, impersonation schemes have become a concerning trend, with the Covid-19 epidemic amplifying the problem. For example, scammers have posed as health officials coordinating vaccinations to phish for personal and financial information, as well as government departments responsible for granting financial aid.

Cons target vulnerable populations, who are often more susceptible to scams during times of crisis and economic uncertainty. The Covid-19 pandemic saw individuals and businesses rapidly act on emails and text messages that promised to remedy the challenges they faced, such as scheduling vaccinations and securing funds.

Experian, a leading provider of credit services, has noted that during a recession, fraudsters tend to target the poor and financially disadvantaged. These individuals may be more likely to fall for discounts, deals, and returns that promise quick earnings, as well as phoney job offers and mass marketing scams.

It is crucial to understand that during times of need, people may let their defences down, making them more vulnerable to scams. Fraudsters use tactics such as social engineering, phishing, and account takeovers to exploit this desperation. The current financial environment only adds to the already heightened level of desperation, making it even easier for fraudsters to take advantage.

Protecting the Weak from Fraud

Corporations must adopt a two-pronged approach to protect the vulnerable from fraud.

The first step is to educate clients and equip them with the knowledge to recognise and avoid fraudulent activities as much as possible. The second step is to establish systems to detect identity theft, credit card fraud, and other forms of exploitation. In this aspect, technology and data can serve as a secondary line of defence.

Effective Communication

The success of fraudsters often depends on exploiting human error and inexperience. Unfortunately, people are more likely to make mistakes during stressful times, such as a recession.

According to the AARP National Fraud Frontier study, “certain environmental and emotional conditions” can make individuals more susceptible to fraud, including experiencing difficult life events and lacking sufficient social and familial support.

With this in mind, organisations can target their advice to the most vulnerable individuals. For example, those with high levels of personal debt would benefit from not only financial assistance, but also counselling on how to avoid fraud.

A good example of customer communication that can warn individuals about potential frauds is the Fraud Fighting Tips document from Virgin Media. Every client who avoids clicking on a suspicious link, responding to a text message, or providing personal information in response to a fraudster’s phone call reduces the number of successful scams.

Data-Driven Engineering

Despite efforts to educate clients and prevent human error, con artists may still be able to obtain sensitive information and credit card data from their victims. As thieves constantly find new social networks and digital channels to exploit, organizations must also strengthen their technical defences.

AI, data enrichment, and other technical solutions can be effective in detecting and preventing fraud. By maximizing the likelihood of capturing fraudsters in the act, organizations can better protect the vulnerable from exploitation.

Instances of Fraud Protection

Digital and Hardware Fingerprinting: Device fingerprinting compiles various easily accessible information when a user connects to a website, including browser settings, operating system, installed plugins, TCP/IP data, time zone, and screen size. Analysis of this fingerprint can help a company detect if a fraudster tries to log into a user’s account, even if they have obtained a password or other credentials through phishing or other means. The system can prompt manual checks or further authentication if the fingerprint doesn’t match the typical fingerprint seen for the user.

Data Enrichment: Data enrichment involves cross-referencing a basic data element, such as a Mobile Station Integrated Services Digital Network (MSISDN) number (which usually takes the form of a phone number) or email address, with multiple associated information. Analysis of a MSISDN number, for example, can reveal the network it is associated with and determine if it is a legitimate number or a disposable virtual number.

A fraud prevention solution that uses data enrichment can examine the social networks and online accounts linked to an email address. It can also determine how long the address has been active and if it has been compromised in previous data breaches. Most well-established email addresses are linked to multiple internet accounts and have been compromised in the past. Addresses that don’t match this profile are flagged as suspicious.

By automating these and other similar checks within online systems, digital fingerprinting with data enrichment can help detect fraudsters using disposable phones and accounts.

Artificial Intelligence (AI) and Machine Learning (ML): AI and ML are widely used in fraud prevention. ML can identify patterns of fraudulent behaviour that humans might miss and share these patterns across multiple businesses. It can be extremely useful for monitoring login activity, helping detect account takeover fraud, and detecting popular items scammers commonly purchase.

All these techniques can serve as a secondary line of defence when susceptible individuals unwittingly provide criminals with personal information to exploit.

Looking to the Future

With fraud continuing to rise, and the concomitant increase in criminals targeting those who are vulnerable and unprotected, it is worth noting that the impact of fraud is far-reaching and extends beyond just financial loss. A recent study by Which UK found that 63% of fraud victims reported “harmful effects on their mental health,” with 39% also reporting negative physical health impacts. In these challenging times, it is crucial to provide protection to those who are vulnerable.

While technology alone cannot provide a complete solution, it can play a significant role in reducing financial losses not only for individual victims, but also for the companies that serve them.

Final Thoughts

In times of economic hardship, desperation breeds desperation. Fraudsters are well-versed in exploiting emotional triggers that make potential victims more susceptible to their schemes. The promise of a loan, reward, return or any other financial assistance can be tempting to someone who is struggling financially.

Raising awareness about the dangers of fraud is important, but fraudsters are skilled at making their tactics appear authentic and convincing through phishing emails, impersonation and other means. The use of technology and careful analysis of data can go a long way in identifying cybercriminals and their activities but it can also, in fraudsters’ hands, make it more difficult to discover and prevent.

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Bernard Mallia

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