• Overview and basic concepts of AI, and Big data
• Relevance of AI and Analytics for CAs
• Overview of various types of Data Analytics
• Need for using pattern recognition in audit
• Practical examples of AI in Banking
• Road ahead for Audit using AI & tips on how CAs can leverage AI
2. SPEAKER PROFILE
Babu Jayendran has over 35 years’ experience in Information Systems Auditing and Controls.
Consults on SAP’s Governance, Risk & Compliance (GRC) suite, and covers the Security, Audit
and Control aspects for SAP customers, from a business and technical perspective. An Expert
Reviewer for ISACA’s 2nd, 3rd & 4th edition publication of ‘SAP R/3 Security, Audit and Control
Features – A Technical and Risk Management Reference Guide‘
Babu is also consulting in the area of pattern recognition software for forensic auditing in
banks, using neural networks and artificial intelligence
Qualifications
B.Sc (Hons) in Mathematics - IIT, Kharagpur India
FCA – Institute of Chartered Accountants of India
CISA - Certified Information Systems Auditor, USA.
17. PATTERN RECOGNITION
• A number of variables have to be considered in order to establish
whether a transaction or set of transactions is suspicious
• Eg. customer’s salaryaccount in a bank:
– Multiple credits in account other than salary credit
– Sizeable increase in Cash to Non-Cash Transaction Ratio - large cash
deposits and cash withdrawals
– Many transactions with a few related accounts
– Burst in Deposits - Number of Transactions
– Burst in Withdrawals - Number of Transactions
– Burst in Deposits - Amount
– Burst in Withdrawals - Amount
– Unusual applications for Demand Drafts against cash.
– Transactions that are too high or low in value in relation to customer’s
profile
• Computers will learn the past behavioral pattern of the customer
based on historicaltransactions and identifying unusualactivities
23. §Cash Deposits closer to the daily threshold limit
(50,000/-)
§Cash Deposits take place almost daily
§Some times the amount are transferred in less than
2 hours after the cash deposit
§Some times the amount is accumulated over a
period and a DD has been taken
§The balance is kept almost zero and no big
transactions after that
§Not a single non-cash Deposit transaction
Salary Account Decay
24. New Account – High Activity
§High Activity in a new account opened in March 2008
§Huge Cash Deposits accumulating to millions
§Burst in ATM Withdrawals accumulating to same
amount
§Account balance becomes to zero
§No transactions after funds are washed out
25. Static Change Event
§Static Change event occurs in an account through
internet banking channel
§Followed by adding a new beneficiary
§Burst in activity in terms of volume or value of
transactions
26. §Multiple Transactions using the
same card at different locations
§It is impossible to travel to these
locations in the short span of
time
Stolen/Duplicate Plastic
27. §Multiple Transactions with small amount
(<50) with same descriptions
§The amounts deposited has been
withdrawn as cash
§Some transactions referred to as GL
§There are very small value transactions
like Rs 1/-, Rs 2/- etc
Employee – Small Value Transactions
28. • KYC in one geography
• All ATM cash transactions in another geography
• A set of people following the same pattern
• All deposits are by Cash at the Home branch
• All withdrawals are by ATM with in 8 hours of
deposit in an unusual geography
• High frequency of ATM withdrawals
Anytime , Anywhere Banking