Fraud Detection and Prevention (FDP)

Fraud prevention is a system that is designed to reduce the risk of fraud and prevent fraudulent activities within an organization. 

Similar to fraud detection, prevention tactics include security measures that help:

• Set up clear internal fraud prevention policies and procedures in place
• Carrying out background checks on vendors and all third parties
• Monitoring employee activity and conducting training to keep up with all emerging fraud trends

Fraud has all sorts of types and various forms, but the intention remains the same: to steal or gain financial benefits, sometimes conducting further financial crimes. Fraud can be carried out by a single individual or a criminal group, depending on the severity of the crime. 

Common examples of fraud include:

• Identity theft 
• Romance scams
• Loan fraud 
• Credit card and payment fraud
• Insurance fraud
• Marketplace fraud
• Crypto scams
• Ponzi schemes
• Corporate fraud
• Tax fraud

The 4 Ps of fraud is a systematic guide presented by the Social Security Administration (SSA)  that helps people identify fraudulent activities through four “Ps”, which work like warning signs:

1. Pretend. Scammers impersonate trusted organizations or authorities, like the IRS, Medicare, or known financial companies.
2. Problem. Bad actors claim there is an urgent issue on purpose to build up fear. 
3. Pressure. Fraudsters push for immediate action, using threats sometimes to trick the victim into giving them money or personal information. 
4. Pay. Scammers demand payment through unusual methods, such as gift cards, wire transfers, crypto, and similar means, which are less likely to leave a trace. 

This method helps detect common fraudulent tactics like faking an emergency, such as an account problem, a family issue, or tax debt, which are often scams associated with quick schemes to earn payments. 

Anomalies and suspicious signs trigger further investigation, allowing analysts to determine if the alert and flagged case is real or just a false positive. This is important in processes linked to fraud detection and prevention, such as identifying changes in customer behavior or usage patterns, as well as issues that require immediate action, like SAR filing.