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6 views4 pages

Untitled Design

Uploaded by

Arya Vardhan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Data Mining as a Tool for Fraud Detection

Essay

Introductory statement

Fraud detection is an essential aspect of


ensuring both internal integrity and trust
toward banking systems, e-commerce
portals, and other industries. Large
organizations can then apply data mining-
the computation technique to mine huge
amounts of data in order to find
embedded or latent patterns,
correlations, or anomalies that could be
possibly connected to fraudulent activity.
This paper will assess data mining for
fraud detection-so that methodologies,
applications, and challenges can be
discussed.

Importance of Data-mining Fraud


Detection

Data mining tools that include


classification, clustering, regression, and
outlier/anomaly detection are used by
data miners to label activities as
fraudulent. Thus, if classification
algorithms classify them into their
respective categories to classify their
transactions as legitimate, or, suspicious,
for clustering some methods group
various data just to find out the unusual
patterns going in with the help of widely
used anomalous detection methodology.
Given that slide, applications of data
mining in the financial area include credit
card fraud, money laundering, and insider
trading analysis on transactional data. In
the e-commerce area, fake reviews,
fraudulent transactions, and bot activity
are detected. Using historical data,
predictive models can predict the
chances of fraudulent activities to take
proactive actions.

Advantages and Benefits

Data mining reduces the time and


accuracy of fraud detection in contrast to
manual methods. An automated system
can perform processing operations on
veritably high datasets in real time to
raise alerts regarding suspicious
activities. Moreover, data mining also
reduces false positives because it refines
detection models with the help of
machine learning and artificial
intelligence. Thus here businesses are
enabled to-

Release the Error Suspected Transactions

into the Finacial System

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