Advanced Finance

Prepared for Dr. Doaa Salman

Is Artificial Intelligence Ready to Assess an Enterprise’s Financial Security?

  Sherif Khalifa
Prepared by  Hassan Zaki
 Waleed El-Nady
  Introduction.
 Definition of artificial intelligence
 Stages and Types of AI
 Is SAI dangerous?
 Using AI in different enterprise activities
Content ..
 AI and enhancing fraud detection
 How AI helps banks to fight frauds.
 References.
Definition of artificial (AI
Artificial Intelligence intelligence
as symbol) is the ability of
a computer, or a robot controlled by another
computer for doing tasks usually assigned for
humans’ execution as it requires some
intelligence.
Its algorithms, using techniques such as machine
learning, deep learning and rules, power artificial
intelligence systems. Machine learning algorithms
Introduction
feed computer data to AI systems, using statistical
techniques to enable AI systems to learn. Through
machine learning, AI systems get progressively
better at tasks, without having to be specifically
programmed to do so.
 Stages and Types of AI

There are three type of AI

1st stage: Artificial Narrow intelligence (ANI)

Is type depends on machine learning only specialized in one area
and solve problems for example Siri, Alexa, Cortano

2nd stage: Artificial general intelligence (AGI)

Machine intelligence to be smart thinking as humans, in analyzing
problems and take decision according to these analyses and human
probabilities inputs

3rd stage: Artificial super intelligence (ASI)

Machine consciousness, its much smarter than human brain limits,
and this is considered the most sophisticated technology, as machine
or computer take its inputs from external sensors, analyze then take
decision to be executed
 IsASI dangerous?

AI’s rapid growth and powerful capabilities have made many people paranoid
about the “inevitability” and proximity of an AI takeover.
Most researchers agree that super intelligent AI is unlikely to exhibit human
emotions, and we have no reason to expect ASI will become malevolent. When
considering how AI might become a risk, two key scenarios have been
determined as most likely.
1st way:
AI could be programmed to do something harmful to others or something
devastating.
2nd way:
AI could be programmed to do a beneficial task, but it could develop a
destructive method for achieving its goal.
 AI in different enterprise activities

 Using Ai in payments industry

Artificial intelligence has been used in banking and credit card systems to detect and spot fraud
activity. Now, AI is making its way into other areas of the payments and financial services
industries. AI in payments industry is helping enhance customer service, provide hyper personalized
credit scores and offers, and drive new forms of transactions like stores with no cashiers.
AI and enhancing fraud detection
Bank transactions fraud

Global Fraud losses incurred by payment card issuers, merchants, acquirers of card transactions from
merchants, and acquirers of card transactions at ATMs on all credit, debit, and prepaid general purpose
and private label payment cards worldwide.
AI and enhancing fraud detection
Bank transactions fraud
How bank using Ai for fraud detection
Building purchase profiles:
Using a machine learning techniques, financial institutions must first understand what typical customer
behavior looks like, this is in order to help in unusual behavior

Know Your Customer (KYC)

verify ID and documentation, match fingerprints and even perform facial recognition almost
instantaneously. 

Fraud investigation:
Helping investigators to navigate uncertainty, Investigators will usually start with the transaction data
and look for likely indicators of fraud. Time stamps, location data, IP addresses, and other elements can
be used to prove whether the cardholder was involved in the transaction.
How bank using Ai for fraud detection
Developing fraud scores:

All transactions can be assigned a fraud score by using data from past legal transactions and
calculated by feeding user data through risk rules. The total score should fall within a range that
let you know whether you should accept, decline, or review the action.
The Score Model provides a risk score of 1-99 to every transaction. This score indicates the

relative risk of fraud.

Very Low Risk (0 – 9): Lowest possibility of fraud.
Low Risk (10 – 49): Low possibility of fraud, but may include false negatives (risk).
Medium Risk (50 – 69): No strong indication of positive or negative outcome.
High Risk (70 – 89): High possibility of fraud, but may include false positives.
Very High Risk (90 – 99): Highest possibility of fraud.
Most common fraud techniques

Sniffing is the process of monitoring and capturing all data packets passing through given network, and
is illegal to be done by an unauthorized party. This stolen information can be used for fraud and
obtaining other significant data from users. Network/system administrators to monitor and troubleshoot
network traffic use sniffers. Attackers use sniffers to capture data packets containing sensitive
information such as password, account information etc
 Type of identity theft Number of reports Percent of total top five
Government benefits applied 394,324 32.0%
for/received

Credit card fraud—new accounts 365,597 29.7%

Miscellaneous identity theft (2) 281,434 22.9%

Business/personal loan 99,667 8.1%

Tax fraud 89,391 7.3%

Total, top five 1,230,413 100.0%

AI and enhancing fraud detection

Bank transactions fraud

Global Fraud losses incurred by payment card issuers, merchants, acquirers of card transactions from
merchants, and acquirers of card transactions at ATMs on all credit, debit, and prepaid general purpose
and private label payment cards worldwide.

Financial services industry has undergone an impressive evolution in the last 60 years. From the
traditional paper-based institutions requiring in-person transactions, to the introduction of Automated
Telling Machines (ATM), to the adoption of online and mobile banking.
Types of banking fraud
• Unauthorized transactions:
Banking or credit card transactions that an account holder didn't make or approve continue to be a
nuisance to both banks and consumers alike

• Phishing scams: 
Phishing is a type of social engineering where an attacker sends a fraudulent message designed to trick
a person into revealing sensitive information to the attacker or to deploy malicious software on the
victim's infrastructure like ransomware
In its 2020 Internet Crime Report, the FBI reported that Americans lost more than $54 million in
phishing scams that year. Both consumers and corporate employees can fall victim to phishing scams
that can lead to unauthorized transactions, account takeovers

. Identity theft: 
Reported as the most common type of complaint lodged by consumers by the FTC, identity theft has a
major impact on both consumers and financial institutions. In 2020 alone, total financial losses from
identity fraud were around $13 billion, according to results from Javelin's 2021 Identity Fraud Survey.
Thank you