FRAUD

Listening for Clues

Banks that offer stock trading services have been recording phone calls between customers and agents for quality assurance purposes for years, but few have routinely analyzed the tapes to hunt for fraud.

"What's amazing to us is that there are piles of hard drives and tapes with these recordings and nothing was being done with it," says Amir Orad, evp of product management and CMO at Actimize Inc. "There's this gold mine waiting to be uncovered."

The New York-based provider of transactional risk management software seized upon that opportunity last December ('08) when it introduced its Trading Interaction Surveillance Solution, a system that applies analytics to transactional data and combines that with voice analytics to sift through phone recordings and help banks catch insider trading and other market abuses.

The software is designed "to understand the context of a discussion and what was said" between, say, an agent and a customer, says Ido Ophir, vp of strategic account management for the company.

The soul of the system is a risk scoring engine which helps to conduct what Ophir refers to as "interaction analytics" to flag suspicious activities between the transactional and voice analytics.

The risk scoring engine "really performs well on real-time transactions" using predictive scoring models, says Avivah Litan, vp and distinguished analyst at Gartner.

One of the other strengths of the Actimize system, which is priced in the high six-figures to low seven-figures for an annual license, is its real-time fraud detection capabilities, says Litan. The system, which customers generally run on Linux servers, comes pre-loaded with lexicons of different phrases. Once customers have deployed the software, alerts can be sent to bank analysts in a matter of seconds or minutes, depending on how the system has been configured, says Ophir. In some instances, analysts are able to receive alerts about fraudsters while the call is still in session, he adds.

Still, Ophir says many banking customers tend to configure the software so that analysts and investigators see their alerts when they boot up their computers each morning since banks have three days to cancel a trade under industry regulations if they suspect any wrongdoing.

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