Simulation is our telescope to unveiling the fraud in the financial universe

Two years ago, I once said: “Simulation is my telescope to explore the universe of financial fraud” just a few days ago, this comparison came back to my mind when the first ever picture of a black hole was achieved through a coordinated effort of more than 200 scientists and observatories all around the globe.

“I can think of myself as an astronomer, eager to learn more about the universe, but without a proper tool or telescope, it would be hard to learn more than I can see with my eyes. Simulation is my telescope to explore the universe of financial fraud.” Dr Edgar Lopez-Rojas (interview at Kaggle 2017).

Some years ago, I published a synthetic dataset in Kaggle that contained a generated scenario from a real dataset sample for a Mobile Money Payments system in an African country. The PaySim dataset was the first synthetic transactional dataset shared openly and released in a known data scientist community platform. This fact led Kaggle to name the PaySim dataset as the “dataset of the week”, and during a short interview, I compared the use of simulation with the development of a telescope. Today, two years after, the PaySim dataset has acquired great popularity, with more than 120k views so far, and has been widely used by several students for their thesis, practitioners, enthusiasts and recognised institutions such as Databricks and IBM-MIT Watson lab.

The war against crime requires similar effort and coordinated actions from all parties to significantly improve and move the odds to win on our side. I believe Simulation is the key to unveiling a new universe of hidden fraud in our financial services.

The modern world and new technologies possess challenges that limit our efficiency and efficacy against criminal activities. But at the same time bring new opportunities for the soldiers against fraud.

Using simulation and generated synthetic datasets, researchers and financial services can communicate results under the strict confidentiality agreements that represent the handling of personal data and the new GDPR regulations. Regulators have the task of funding and incentivising the efforts of academia and the financial sector. At the same time, use simulation models to create better policies that are up to the task of efficiently reducing crime profit.

Galileo didn’t build the Everest Horizon Virtual Telescope on his first attempt, but he laid the foundation for others to incrementally build more and better telescopes every day. Simulation has been among us for several years. Today, we have the technology, the computational power and the knowledge to use it as a powerful weapon in the fight against financial fraud.

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