AI and Fraud - Coming Soon to a Small Business Near You

 

I have seen more and more articles about AI and fraud detection (e.g., here, here, here, here and here). AI has been helping large companies like BOA, Chase, CITI, etc. detect fraud for some time. But it appears that the technology is coming to assist small businesses. And that's exciting.

AI Disclaimer

I'm not specifically talking about large language models of AI, though those are progressing at an unbelievable rate. For the purpose of this article, I'm specifically talking about machine learning algorithms colloquially referred to as AI. That can be something looking at entries in an accounting system to something as complex as understanding that theft is occurring when someone puts a case of beer in their pants at a convenience store on video.

Why is this a big deal?

There are three (3) reasons: 1) fraud (in its many forms) is becoming more common; 2) fraud has become "scalable" in many circumstances as a result of automation; and, finally 3) fraud costs have exploded.

What is the advantage of using AI?

Like other AI uses, AI doesn't sleep, eat, get distracted, look away, or miss anything. It continuously collects data, highlights anomalies, and report potential issues. It is consistent. It learns from itself, so it doesn't make the same mistake twice.

It doesn't trust Carol in accounting because it knows her family. It doesn't overlook checkbook errors by Frank. It isn't on vacation in Mexico when the business is running.

Again, it doesn't miss anything.

AI isn't perfect ... yet

All AI models have deficiencies and biases inherent in each system. It starts off in the most rough state that it will ever be in. So, it's not where you will want it to be ... at first. But it relentlessly refines its work by setting dynamic rules that change with the circumstances. And it does all of its work in real time for very low cost! Well, the cost may be substantial to the user, but it's not costly for the producer. But I suspect that costs will come down due to competition and availability.

Get ready! AI is coming to YOUR BUSINESS!

The good news is that tools to catch misappropriation and fraud will soon be available for small businesses soon. Hopefully that will reduce those instances where employees steal over months and years.

 

This post originally appeared on LinkedIn.