Fraud Management

powered by SAP HANA

Gerhard Hafner, SAP AG

© 2011 SAP AG. All rights reserved. 1

Disclaimer

This presentation outlines our general product direction and should not be relied on
in making a purchase decision. This presentation is not subject to your license
agreement or any other agreement with SAP.

SAP has no obligation to pursue any course of business outlined in this

presentation or to develop or release any functionality mentioned in this
presentation. This presentation and SAP’s strategy and possible future
developments are subject to change and may be changed by SAP at any time for
any reason without notice.

This document is provided without a warranty of any kind, either express or implied,
including but not limited to, the implied warranties of merchantability, fitness for a
particular purpose, or noninfringement. SAP assumes no responsibility for errors or
omissions in this document, except if such damages were caused by SAP
intentionally or grossly negligent.

© 2011 SAP AG. All rights reserved. 2

Agenda

1. Why does Fraud Management matter?

2. Fraud Management powered by HANA

a) Prevention
b) Detection
c) Investigation
d) Monitoring

3. What’s in it for partners?

© 2011 SAP AG. All rights reserved. 3

Damage by Fraud per Year

$ 3,500,000,000,000,000,000
=
$ 3.5 trillion
“Survey participants estimated that the typical organization loses 5%
of its revenues to fraud each year. Applied to the 2011 Gross World
Product, this figure translates to a potential projected annual fraud loss
of more than $3.5 trillion”

REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AND ABUSE 2012, ACFE

© 2011 SAP AG. All rights reserved. 4

Fraud, Waste, and Abuse @ Public Sector

Fraud Waste and Abuse costs government billions of Dollars per annum

The United States Government Accountability Office (GOA)

estimates $125.4 billion in improper payments.
In Australia fraud is the most expensive crime category estimated
to be $5,880 m
The UK National Fraud Authority (NFA) estimates the public sector
fraud at £38.4b
½ Trillion
Fraud prevention / detection important in government spending Dollar Fraud
US: President Obama made the elimination of fraud, waste and abuse Challenge!
a top priority
• The US Department of Labor awarded $191 million to 40 states, the District of Columbia
and Puerto Rico to modernize unemployment insurance systems (Sep 11)
• U.S. Department of Health and Human Services budget includes a request of $581
million in funding to reduce Medicare and Medicaid fraud

© 2011 SAP AG. All rights reserved. 5

Fraud, Waste, and Abuse @ Insurances

Fraud Investigation is time consuming

“Total cost in the US of insurance fraud (non-health)
is estimated to be more than $40 billion per year”
(Source: Federal Bureau of Investigation, US)

“Insurance fraud has risen by 23% in the last 12

Month…. as a result, insurance fraud is estimated to
now cost £2.1 billion per year. ”
(Source: Experian Fraud Report 2012)

“According to the Association of British Insurers, the

sector is detecting more than 2,500 fraudulent claims
worth £18 million every week”.
(Source: Experian Fraud Report 2012)

Source: Accenture global claims study (3000 personnel interviews)

Historical fraud detection methods identify only 10% of fraud cases. In combination with post-payment identification
only 5% of detected frauds are recovered.

© 2011 SAP AG. All rights reserved. 6

Mechanics of Bank Fraud Against Banks

 Cheques (Stolen Checks, Cheque kiting, Forgery and altered cheques)

 Accounting Fraud (Uninsured Deposits & Demand draft fraud
 Rogue traders
 Fraudulent loans and loan applications
 Forged or fraudulent documents
 Wire transfer fraud
 Bill discounting fraud
 Payment card fraud (Booster cheques, stolen payment cards, Duplication or
skimming of card information
 Empty ATM envelope deposits
 Impersonation
 Prime bank fraud
 Phishing and Internet Fraud
 Money laundering

Source: Wikipedia
© 2011 SAP AG. All rights reserved. 7
Why Does Fraud Management Matter for SAP & Partners?

 There is fraud!
 HANA redefines the capabilities to screen
huge data volumes

 Linked to core processes

 Works with SAP data and Non-SAP data
 Simple business case calculation

 Shipment in Q1 / 2013
 Co-innovation partnerships possible

© 2011 SAP AG. All rights reserved. 8

Agenda

1. Why does Fraud Management matter?

2. Fraud Management powered by HANA

a) Prevention
b) Detection
c) Investigation
d) Monitoring

3. What’s in it for partners?

© 2011 SAP AG. All rights reserved. 9

What Does This Mean for Your Business?

 How can we identify fraud before a damage

occurs?
 How can we improve the fraud investigation
efficiency?
 How can we keep track with changing fraud
behaviors?
 How can we reduce the false positive signals?
 What is the best approach to automate the fraud
detection process and predict the likelihood of
fraud?
 How do we manage to check all transactions for
fraud but ensure no business impact?

© 2011 SAP AG. All rights reserved. 10

SAP Fraud Management
Prevent – Detect – Investigate – Monitor

Prevent fraud with hybrid fraud strategies as a combination of rules and

predictive methods

Detect frauds online at any point and as often as needed within

transactional process & high-speed mass detection due to SAP´s HANA
technology

Investigate fraudulent transactions in most efficient way with fully integrated

investigation capabilities

Monitor complete fraud process and results including real-time calibration

and simulation

powered by SAP HANA – high performing, configurable and scalable

standard solution

© 2011 SAP AG. All rights reserved. 11

Aligning Stakeholders to Achieve
Excellence in Closed-loop Fraud Management
Head of Fraud
Investigation
How can I ensure to
investigate on most
valuable cases in the
most efficient and
effective way?
 Fraud processing
performance
 Monitor and
optimize quality of
investigation
 React on changing
situation
© 2011 SAP AG. All rights reserved.
Business Analyst
Fraud Investigator Head of Payments CIO
Fraud Investigation
How do I get all How can I set-up and How do I ensure to How can I respond
information I need for optimize best fitting check for fraud quick rapidly to business
investigation- fast, fraud detection with immediate results needs while keeping
accurate and always strategies without IT to avoid payment in costs under control?
up-to date? Support? case of fraud?
 Investigate more  Predictive Analytics  Speed up claim  Integration
fraud cases  Real-Time Analysis processing  Scalability &
 Improved  Optimization of  Detect fraud before Configuration
investigation results strategies payment  One strategic Fraud
 Intuitive to handle  Reduce manual solution across
 Reduce false
 Detect fraudulent positive hand over to SIU functions and LoB´s
networks  Reduce TCO
12
Fraud Management
A Closed-loop, Cross-Functional Process

Monitoring Fraud Monitoring & Performance Optimization

Fraud Rules & Fraud

Calibration &
Prevention Pattern Predictive Detection
Simulation
Analysis Analysis Strategy

Configuration
Integration

Platform
Detection Online Mass
Detection Detection

Alert Inquire & Evaluation &

Investigation Investigation
Notification Analyze Decision

Payment Handling
From Notification to Payment Settlement
& Settlement

Head of Fraud Fraud Business Head of

CIO
Investigation Investigator Analyst Payments

© 2011 SAP AG. All rights reserved. 13

Fraud Prevention
Objectives, Issues, Capabilities, and Benefits

Objective: Define high effective fraud strategies based all relevant data in an easy way without IT-Involvement

Best practice solution: Real time fraud pattern analysis and advanced, easy to use capabilities to set up hybrid
fraud detection strategies.

Issues Key business capabilities Benefits

 Unknown fraud patterns often not  Hybrid combination of rules and  Identify unknown patterns and react
identified predictive methods to identify fraud quickly on changing fraud behaviors

 Time consuming process and high
effort to change existing rules
 No system support to simulate impact
of detection methods
 Business users are enabled to define
fraud detection strategies incl.
optimization based on weight factors
and thresholds
 Real-time simulation and calibration of
fraud detection strategies
 Reduced effort without IT-involvement
to set up and calibrate fraud detection
strategies
 Transparent, real time information of
impact on new / changed strategies

 Pattern analysis and fraud rule testing
limited to sample data from only a few
data sources
 Limited capabilities for LoB specific
fraud criteria
 All data from different source (SAP and  No misinterpretations of fraud behaviors
non-SAP) can be incorporated due to sample data
 Determination of detection strategies  Reduced false positive and streamlined
based on fine granular criteria fraud detection

© 2011 SAP AG. All rights reserved. 14

Fraud Prevention
Detailed capabilities

Define fraud detection strategies in combination of rules and predictive analytical methods including real-time simulation and
calibration of these strategies.
Provides an intuitive, easy-to-use environment for designing predictive models and visualizing data, which allows to uncover
hidden and untapped fraud patterns including a broad range of data and model visualization capabilities to gain higher insight

1 2 3 4
Fraud Detection Simulation &
Pattern Analysis Predictive Analysis
Strategy Calibration

 High-speed pattern  Design mathematical  Combination of fraud  Real-time simulation of

analysis based on all modes to predict
available data likelihood of fraud
 Consolidated data from  Model design and the
SAP and non-SAP data visualization are
sources within SAP seamlessly together in
HANA
the same tool
 Drag-and-drop visual
interface for data
selection, preparation,
and processing
 Broad visualization
capabilities
rules and predictive
analytical methods
 Intuitive way of setting up
fraud detection strategies
 Define individual weight
factors and thresholds to
calculate risk score
 Fine granular
determination of fraud
detection strategy
defined strategies to
reduce false positive
 Optimize results of fraud
strategies with real-time
calibration
 Capability to compare
fraud detection strategies
for further optimization

© 2011 SAP AG. All rights reserved. 15

Pattern Analysis (1)

Lab Preview

Scatter Plot

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Pattern Analysis (2)

Age # of Children Fraudflag

Lab Preview

Parallel Coordinates
© 2011 SAP AG. All rights reserved. 17
Fraud Detection Strategy - Details

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Fraud Detection Method

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Simulation & Calibration

Lab Preview

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Fraud Detection
Objectives, Issues, Capabilities, and Benefits

Objective: Detect fraud situations as early and as precise as possible to avoid damages for fraudulent cases
without manual work
Best practice solution: Integrated fraud detection with online & mass detection capabilities incl. transparent
scoring results and seamless process integration

Issues Key business capabilities Benefits

 Fraud situation often identified after
transaction is closed
 No capabilities to check existing
transactions with updated fraud
strategies
 Online fraud detection at any point and
as often as needed within transaction
process
 High-speed mass detection due to
HANA technology
 Identify fraud as early as possible -
before transactions are further
processed and financial loss occurs
 Use online real-time detection or mass
detection without limitations

 Fraud detection based on expert  Provide business user with fraud  Early identification of potential fraud
experience; manual process to signals while capturing data based on situation to enable business user
overcome system boarders hybrid fraud detection strategies gathering more data

 Limited to no real-time process
integration into transaction handling
process
 Fully integrated bi-directional fraud
processing
 Apply automated fraud detection to
reduce manual work, ensure re-scoring
due to changes in transaction and
provide results of investigation back as
soon as possible

© 2011 SAP AG. All rights reserved. 21

Mass Detection (1)

Lab Preview

Mass Detection

© 2011 SAP AG. All rights reserved. 22

Mass Detection (2)

Lab Preview

Mass Detection

© 2011 SAP AG. All rights reserved. 23

Fraud Investigation
Objectives, Issues, Capabilities, and Benefits

Objective: Investigate on fraud cases with an environment for processing fraud cases more effective and efficiently.

Best practice solution: Closed loop fraud investigation processing, full insight into all relevant information, high-
speed in-memory analysis to identify fraudulent behaviors and advanced alert management capabilities

Issues Key business capabilities Benefits

 Significant work and effort spent on non  Up-to-date fraud scoring based on  Increase investigator ROI by focusing
value cases hybrid fraud detection strategies on high score / high value cases

 Time consuming data gathering due to
system boarders
 High effort due to insufficient
investigation capabilities
 High workload due to huge number of
false positive
 Updated transaction situation not visible
for Investigators
 Full insight into all relevant information
at the fingertip
 Advanced alert management
functionalities and capabilities
 Calibration of existing fraud strategies
with weight factors and threshold to
reduce false positive
 Fully integrated bi-directional fraud
processing
 Faster fraud processing to avoid
blocking a transaction longer than
needed
 Improve investigator efficiency and
reduced fraud processing expenses
 Improved accuracy of fraud detection
with reduced false positive and false
negative detections
 Investigation always on up-to-date
information to avoid double work

© 2011 SAP AG. All rights reserved. 24

Fraud Investigation
Detailed capabilities

Closed-loop fraud investigation processing to capture all findings of the fraud investigator up to the final
decision. Support streamlined processing due to full insight, high-speed in-memory analysis and social
network analysis to identify suspicious behaviors.

1 2 3 4
Evaluation &
Alert Notification Inquiry & Analyze Investigation
Decision

 Online and mass detection
fully integrated into
transactional business
process
 Alert generation based on
individual thresholds
 Automated coverage
referrals set based on
identified fraud signal
 Risk score & value based
prioritization of work list
 Integrated insight into all
relevant information
 Google-like search across
data sources
 Social Network Analysis to
identify relationships and
networks
 Explorative Analysis and
ad-hoc queries to gain
complete perspective of
situation
 Fast and intuitive way to
capture of investigation
findings
 Collaboration with external
investigators in the field
 Comprehensive
Alert Management
capabilities
 Fast-decision support to
enable efficient fraud
investigation
 Based on decision
capturing further
transaction processing is
being triggered
accordingly

© 2011 SAP AG. All rights reserved. 25

Alert Notification – Alert Worklist

Lab Preview

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Alert Notification – Alert Worklist

Lab Preview

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Inquiry & Analyze – Alert Overview

Lab Preview

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Inquiry & Analyze – Alert Detection Log

Lab Preview

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Inquiry & Analyze – Network Analyzer

Lab Preview

220675-0001

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Evaluation & Decision – Alert Timeline

Lab Preview

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Evaluation & Decision – Alert Closure

Lab Preview

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Fraud Monitoring & Optimization
Objectives, Issues, Capabilities, and Benefits

Objective: Real-time performance analytics and management reporting to make informed decisions and take
appropriate, timely action

Best practice solution: User-centric dashboards provide users on all level with accurate and consistent data

Issues Key business capabilities Benefits

 Poor control over team workload
and overdue fraud signals
 Limited capabilities to measure fraud
investigation performance
 No Insight into effectiveness of fraud
rules and strategies
 Work and performance analysis incl.
operational reporting
 Monitor and optimize quality of
investigation
 Permanent analysis of results
including real-time calibration of
strategies
 Accurate, consistent and transparent
data for informed business decisions
- any time & anywhere
 React immediately on changing
situation to improve efficiency
 Optimized fraud strategies based on
real time data to react on changing
fraud behaviors

© 2011 SAP AG. All rights reserved. 33

Fraud Management Dashboard

Lab Preview

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Ad-hoc Calibration

Lab Preview

© 2011 SAP AG. All rights reserved. 35

Agenda

1. Why does Fraud Management matter?

2. Fraud Management powered by HANA

a) Prevention
b) Detection
c) Investigation
d) Monitoring

3. What’s in it for partners?

© 2011 SAP AG. All rights reserved. 36

Holistic End-to-End Fraud Management Solution

• Domain Expert Knowledge

Content Package for
SAP Fraud Management
by SAP & Partner
• Industry Standards
• Detection Rules and Predictive Models
Content
Package • Search Models
• User-Interface Extensions
• End-to-End Business Process Integration (SAP & non SAP)
• Reports & Dashboards

• Detection Strategy Management

• Real-time Detection Simulation & Calibration
• Alert Worklist Management
Application • Alert Investigation
• Social Network Analyzer & Explorative Reporting
• KPI Management
• Enterprise Services

• In-Memory Real-time Platform

Technology • Rapid Calculations and Analysis of Big Data
• Embedded Predictive Analytics
• Integrated On-Premise and Cloud-based Platform

© 2011 SAP AG. All rights reserved. 37

Fraud Management - Industry Specific Blades

Customer Specific Enhancements

Content Content Content

Content
Package Package Package
Package …
Insurance Public Sector Banking

SAP Fraud Management

© 2011 SAP AG. All rights reserved. 38

Fraud Management - Industry Specific Blades

Customer Specific
Enhancements Bank-specific…
• Detection Rules & Predictive Models
Content • Search Models
Package
Banking • UI Extensions
• Integration of Enterprise Services
• Reports & Dashboards

SAP Fraud Management

© 2011 SAP AG. All rights reserved. 39

What’s in it for Partners

 Significant services revenues

 Implementation and system integration
 Differentiation in the market thru early
involvement and co-innovation
 Implementations supported by SAP

Call for collaboration

 Identify prospects
 Joint customer meetings
 Involvement in test and development
 Product Validation
 Fraud Management in Q4/2012

© 2011 SAP AG. All rights reserved. 40