1. © 2015 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
Fraud is the cost of doing business
– why bother chasing the bad guys?
Richard Hill
Client Services - Partner
FICO
24th March 2015

2. Agenda
© 2015 Fair Isaac Corporation. Confidential.2
► Too much fraud, crime & deception
► Should we care?
► What can we do about it?

3. © 2015 Fair Isaac Corporation. Confidential.3
Too much fraud, crime & deception

4. 4 © 2015 Fair Isaac Corporation. Confidential.
Not being 100% honest isn't always a crime…
► “I think the blue dress is better than the red one”
► “That was such a delicious meal…”
► “I love listening to the junior school concert”
► “Ha ha that joke was hilarious Boss…”
► “Have you lost weight? You look great!”
► “It was already like that when I got here…”
Oxford Dictionary definition of fraud:
Wrongful or criminal deception intended to result in financial or personal gain

5. 5 © 2015 Fair Isaac Corporation. Confidential.
Famous criminals – known & revered through the ages
► Convicted murderers are more easily remembered & recognised
►Al Capone
►Fred & Rosemary West
►Dr Harold Shipman
►Ian Brady & Myra Hindley
► However financial fraudsters
are less well known/recognised
►For example, who is this?

6. 6 © 2015 Fair Isaac Corporation. Confidential.
Bernie Madoff – King of Financial Crime
► Former Non-Exec Chairman of NASDAQ – a respectable chap…
► Founded Bernard L Madoff Investment Securities in 1960
► Became one of the top market maker businesses on Wall Street
► 10/12/2008 his son told authorities his father had confessed to
running a Ponzi Scheme
► 12/02/2009 Madoff pleased guilty to 11 felonies going back to 1970’s
► Amounts missing from client accounts valued at $65 Billion
► Estimated actual losses to investors was $18 Billion
► Sentenced to maximum 150 years in prison
► BUT HE WAS ONLY CAUGHT AFTER HIS SON BLEW THE
WHISTLE - NOT BY REGULATORS, CLIENTS OR POLICE

7. 7 © 2015 Fair Isaac Corporation. Confidential.
► "Year-on-year, impersonation fraud
continues to grow. Since 1999,
impersonation fraud has risen by
163% and is one of the fastest
growing fraud types in the UK"
- CIFAS
► False identity/impersonation fraud
remains the most rapidly growing type
of fraud in the United Kingdom."
- CIFAS
► "An annual figure of £1.3 billion pa is
the minimum quantifiable cost to the
economy arising from identity fraud"
- Identity Fraud: A Study, Cabinet
Office
► "Identity theft is Britain's fastest-
growing white-collar crime, increasing
at nearly 500% a year."
- BBC TV's Money Programme
And when you don’t know who is actually committing
the crime it is even more difficult…
► "A recent report on identity theft warned that there
is likely to be "mass victimisation" of consumers
within the next two years. The report said
consumers should be extra careful to monitor all
their financial transactions for unexplained account
activity, withdrawals, or fund transfers."
- The Gartner Group, a technology research group
► "More than £1.6 million worth of card fraud occurs
on UK plastic cards every day. A fraudulent
transaction takes place every eight seconds"
- APACS
► "Experts report that a victim can spend anywhere
from six months to two years recovering from
identity theft."
- CNNfn.com
► "Most people don't find out they have been a victim
of a stolen identity until they are turned down for a
loan or credit card. A copy of their credit report
explaining the denial may unveil weeks or months
of fraud."
- CNNfn.com

8. © 2015 Fair Isaac Corporation. Confidential.8
Should we care?

10. 10 © 2015 Fair Isaac Corporation. Confidential.
► Private Sector fraud
► Fraud losses as a proportion of turnover
estimated in the region of 0.54 per cent, with
0.18 per cent lost to detected fraud and 0.36
per cent lost to hidden or undetected fraud.
► This is approximately equivalent to £15.9
billion per annum
► Financial Services fraud
► The Department for Business, Innovation and
Skills (BIS) has indicated that turnover data for
Financial and Insurance activities were not
comparable with other private sector turnover
data.
► To overcome this, the business survey has
been supplemented by an analysis of identified
fraud losses and an estimate of possible
undetected fraud loss from Financial and
Insurance activities using the relative
percentages of gross domestic product (GDP)
for the sectors.
Estimated UK Fraud Losses – it’s a lot…
- Source: National Fraud Authority –Annual Fraud Indicator 2013
► If Financial and Insurance activities represent
11 per cent of all GDP, compared to 67% for the
rest of the private sector, hidden or undetected
losses would equate to £1.8 billion.
► In conjunction with other identified fraud loss
estimates we have a combined figure for fraud
in the Financial and Insurance activities of £5.4
billion
► The identified fraud losses in the Financial and
Insurance activities include:
► £2.1 billion of insurance fraud
► £1 billion mortgage fraud
► £475 million of retail banking fraud.
► This is clearly an under-estimate as it does
not include unknown fraud losses that have
not been identified.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206552/nfa-annual-fraud-indicator-2013.pdf

11. 11 © 2015 Fair Isaac Corporation. Confidential.
Fraud is where there is a financial benefit involved
Opportunistic Premeditated Organized
Fraud schemes cross a wide range of perpetrator intention, potential impact and
planning
► Eric’s home is broken
into. How does it hurt if
he claims he had an 80”
television?
► Marissa knows most
insurers will give her
easy money for whiplash
to settle a claim quickly
before it escalates to
higher payments. She
slams on her brakes in
front of a tailgating
policyholder.
► Michael takes his job
seriously. He knows the
more people he can pack
into the two junk vehicles
he is staging a crash
with, the higher the
payout.

12. 12 © 2015 Fair Isaac Corporation. Confidential.
The Impact of Not Managing Fraud
► Direct financial loss
► Act as a magnet for MORE fraudsters
when identified as a “soft touch”
► Increased policy costs encourage
“claim inflation” by customers
► Reputational damage to your corporate
brand
►Instant 24hour news
►Permanence of the internet

13. © 2015 Fair Isaac Corporation. Confidential.13
What can we do about it?

14. 14 © 2015 Fair Isaac Corporation. Confidential.
► “Veteran fraud management company FICO
lives up to its reputation,” the report stated.
► “FICO is one of the most long-standing
fraud management companies; its product
provides robust real-time, cross-channel
interdiction and easy configuration of case
management fields.
► It offers easy alert aggregation as well as
integration with third-party reporting and
analytical solutions using a published
database schema.
► The company has a differentiated mobile
and cloud partnering and extensive
behavioural analytics strategy. FICO has a
large vertical footprint in financial
services/banking, insurance, retail,
government, and telecom verticals.”
Talk to FICO - Analysts rank us Leaders in Enterprise Fraud
► Forrester’s report cited the need for stronger
defence systems in the face of staggering worldwide
losses. “Forrester estimates that globally …
banks and financial services organizations are
losing between $12 billion and $15 billion
annually,” the report said. Companies struggle to
balance tougher antifraud efforts with a positive
customer experience, the report noted.
► Companies reviewed included 41st Parameter, ACI
Worldwide, CA Technologies, CyberSource, Fair
Isaac Corporation (FICO), FIS, NICE Actimize, and
SAS.
► Companies invited to be reviewed but declined were
Accertify, Detica, Fiserv, and Retail Decisions
Source: The Forrester Wave™: Enterprise Fraud
Management, Q1 2013.
FICO was among the select companies that Forrester invited
to participate in this Q1 2013 report.

15. 15 © 2015 Fair Isaac Corporation. Confidential.
Marketing Policy Underwriting Loss Ratio
Solution
Development
Fraud
Profit per account
through cross
marketing and selling
Straight-thru
processing
Decrease in loss ratio Decrease in systems
development time
Decrease in fraud
losses through early
identification
30% 99% 35%
Sample Client Results within Insurance
8 % 50%
FICO bring benefits to the insurance industry
► FICO has engaged with a large number of insurance clients to improve their business’
functions and profitability
► FICO has driven performance improvements in core business functions through Decision
Management led initiatives based around business rules, analytics and optimisation
► We work with insurers around the world and can share “global best practice”

16. 16 © 2015 Fair Isaac Corporation. Confidential.
Case Management
Analytics Social Network Analysis
Business Rules / Model
Authoring Tools
FICO Fraud Solutions for the Insurance Industry
FICO provides the expertise, the analytics and the
environment for insurance fraud within the following portfolios:
MOTOR / PROPERTY / HEALTHCARE / INSIDER FRAUD
with immediate bottom line impact
An end-to-end fraud management solution
Business Consulting
Professional Services
Operationalize:

17. 17 © 2015 Fair Isaac Corporation. Confidential.
FICO Analytic capabilities – use your data effectively
Fraud trained Outlier detection
Use tags to
differentiate the
innocent from the
guilty
Learn patterns and
identify aberrance
Fraud
SNA
Connects fraud rings across
seemingly unconnected data by
detecting and linking identity
information
 Learn complex relations from
identified fraud in historical
data, then leverage this to
predict fraud
 Uncover new types of
fraud by identifying
outlier and aberrant
claims
 Social Network Analysis for
identity and entity resolution
FICO uses multiple detection methodologies to improve detection rates and reduce false positives

18. 18 © 2015 Fair Isaac Corporation. Confidential.
“Organizations should continue with business analytics projects that
can help reduce costs or retain customers. There is growing evidence
that higher business analytics competency and pervasiveness
have a direct impact on competitiveness.”
—Worldwide Business Analytics Software 2009-2013 Forecast and 2008 Vendor Shares, August
2009, IDC #219383
“Through 2015, analytic applications will remain one of the fastest-
growing categories of BI and business applications..”
— Gartner: Predicts 2010: the Top Five Concerns in the Analytic Applications Space for the Coming Year,
12/14/2009, G00173384
“The chaos in the markets…should be a boon to firms that evaluate
portfolio risk. Buying in companies like these is a bet that in a world
awash in data and complexity, the firms that crunch the data will
become more valuable.” — Forbes, May 7, 2010
Today’s Top Businesses Compete AnalyticallyToday’s Top Businesses Compete Analytically

19. 19 © 2015 Fair Isaac Corporation. Confidential.
“FICO is growing its presence in and beyond financial services by extending the
precision of analytics across all decision areas and by bringing more advanced
decision modeling and mathematical optimization within the reach of decision
management professionals.”
— The Forrester Wave: Predictive Analytics and Data Mining Solutions, Q1 2010 (February 4, 2010)
“FICO continues to lead the services operations analytic applications segment
of the market.”
—Worldwide Business Analytics Software 2009-2013 Forecast and 2008 Vendor Shares, August 2009, IDC
#219383
“FICO is notable among analytic application providers in its extensive experience in
delivering high value in industry-specific, decision-centric applications.”
— Henry Morris, Senior Vice President , Worldwide Software and Services IDC
.”
FICO is the Leader in Analytics for Decision Management

20. 20 © 2015 Fair Isaac Corporation. Confidential.
FICO Identity Resolution Engine
Federated Search
Search across
disparate data –
BIG data and
SMALL data - in
real time, or in
batch, to see where
entities match
across records
Discover
Real time
visualization of
linking from known
attributes and their
related entities
SNA
Pre-built
visualization and
inquiry of smart
networks to promote
proactive analysis,
and facilitate
reactive review
Reactive Review Proactive Analysis

21. 21 © 2015 Fair Isaac Corporation. Confidential.
Federated Search – Unique linkage across data sets
Search Request
• Full Name John Smythe
• Address 325 Mast Ct
• City Midland
• State MI
• Country USA
• DOB 9/22/1966
• Passport 981347823
Match Results
Match Full Name Address Passport Ref #
99% Jon Smythe 325 Mast Ct 981347823 345333
96% John Smythe 335 Mast Apt 202 981347820 656966
95% Jonathan Smith 202 – 325 Mast 981347820 965233
92% John Smith 352 Mast Ct 981347832 966898
• Connects to any data source – internal or external
• Utilizes more than 50 proprietary similarity search algorithms that can be tuned to the nuances of your
data and your appetite for fuzzy matching
• Avoids privacy issues and exposition of sensitive data via the privacy mode
• Does not require data cleansing, ETL or warehousing thereby eliminating problems associated with data
normalization and protecting the forensic integrity of data
• Leverages standards-based architecture utilizing technologies like SOAP web services, Java Script, XML,
LDAP and JDBC
• Easily tunable and extensible to scale to your needs

22. 22 © 2015 Fair Isaac Corporation. Confidential.
Discover (link analysis)
Expensive
• Valid identity info (phone
numbers, addresses, etc)
must be obtained and
managed
Physical limitations
• People are limited to how
many cell phones they can
carry with them or number of
addresses that they can have
access to
Mental limitations
• There are only so many
fictitious details a person can
remember
Re-use or recycling of information
Relationships between seemingly unconnected data can be found
Extending the single entity view to visualize where attributes
are shared between these entities, in real-time

23. 23 © 2015 Fair Isaac Corporation. Confidential.
Link Analysis
Social
Network
Analysis
SNA is link analysis on steroids
Social Network Analysis (SNA) delivers 2 core functions:
► Analytics to drive detections of undesirable behavior
► Visual user interface to guides analysts to the
connections that matter
While Link Analysis is an investigative tool that starts with a lead,
such as a customer whose connections you want to explore,
Social Network Analysis starts by building all the connections in the
data so that we can use analytics to inform where we investigate.

24. 24 © 2015 Fair Isaac Corporation. Confidential.
General Usage Models – Bi directional analysisBatchFraud
Detection
Broad Search
Analytically
Prioritized Results New Suspects
Transactional
Investigation
Known Suspect Targeted Search Specific Output

25. 25 © 2015 Fair Isaac Corporation. Confidential.
FICO Analytical capabilities – the best fraud defense
Description Claim Level Network Level
Association with
Known Bads
Using known bad data such as
hot addresses and existing
case data to find more fraud
Individual on a hot list
appears as a claimant
Multiple cases with fraud
outcomes and recoveries
exist on this network
Domain Specific
Rules
Using known footprints /
patterns of fraudsters, business
rules are written to identify for
review
Delayed claim report date
Incident date is close to
policy inception
This network shares injured
third party claimants across
otherwise unconnected
incidents
Statistical
Outliers
Using profiles of grouped claim
characteristics to identify
aberrant patterns
Medical billing is unusually
high given typical claim type
profile
High velocity of claims on
this network compared to
most networks
Predictive
Analytics
Using statistical models to
understand if and how
predictive varying indicators
and attributes are of future fraud
Claims containing a high
number of soft tissue injuries
is correlated with a fraud
outcome
Networks which contain
repeated incident
descriptions across claims
are correlated with fraud
outcomes
Fraud
Analytic capabilities

26. 26 © 2015 Fair Isaac Corporation. Confidential.
Conclusion
► However good you think your fraud defences are, you
are under attack.
► Your data plus FICO’s expertise and analytic tools can
help the fight back
► Don’t leave it till another day to talk to us…
► FICO can uniquely offer consultancy, software, data
and analytic tools plus the associated training to make
you self sufficient.
► Cloud hosted options reduce delay in obtaining IT
resources
► All FICO fraud prevention investments pay for
themselves within 6 months

27. © 2015 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
Thank you.
Richard Hill
Client Services – Partner
E: richardhill@fico.com
T: +44 7930 451758
Find me on Linked In.