Operational Aspects of Cyber Crimes | Fraud Risk Management in Cyber Tech | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE C: BANKING TECHNOLOGY
Operational Aspects of Cyber Crimes/Fraud Risk Management in Cyber Tech
Cyber Crimes are illegal activities conducted through digital means, such as the internet or computer networks. These can range from data breaches and identity theft to phishing and malware attacks. As the world becomes more digitized, the operational aspects of cybercrime prevention and fraud risk management are crucial for ensuring the security and integrity of information systems.
Fraud vs Crime
In the context of cyber security:
- Fraud: Refers to deliberate deception for financial gain or personal advantage, such as credit card fraud, online scams, and phishing attacks.
- Crime: A broader term encompassing illegal actions, including cyber crimes such as hacking, cyber espionage, and denial-of-service attacks.
Phases of an Effective Incident Response Plan
An Incident Response Plan (IRP) is a critical component for managing and mitigating the impact of a cyber security incident. It typically includes the following phases:
- Preparation: Involves setting up policies, tools, and teams to handle incidents effectively. It includes educating employees about cyber threats and establishing monitoring systems.
- Identification: Detecting and identifying potential incidents or threats using alerts, intrusion detection systems, and other monitoring tools.
- Containment: Once an incident is identified, it is crucial to contain it to prevent further damage or spread. This can include isolating affected systems or networks.
- Eradication: After containment, the root cause of the incident (e.g., malware) must be removed from the systems or networks.
- Recovery: Systems are restored to normal operation while ensuring that security is reinforced. The recovery process includes restoring data and applying patches or updates to prevent recurrence.
- Lessons Learned: After the incident is resolved, a post-mortem analysis is conducted to understand what went wrong, how it was handled, and to improve future responses.
Mathematical Illustration: Fraud Detection Model
In cyber fraud detection, mathematical models such as statistical methods or machine learning algorithms are used to identify fraudulent activities. For instance, a logistic regression model can be applied to predict whether a transaction is fraudulent or not based on certain features such as transaction amount, time, and location.
Logistic Regression Formula:
P(Y=1|X) = 1 / (1 + e^-(b0 + b1X1 + b2X2 + ... + bnXn))
Where:
- P(Y=1|X) is the probability that the transaction is fraudulent (Y=1).
- X1, X2, ..., Xn are the features (e.g., transaction amount, time, etc.).
- b0, b1, ..., bn are the coefficients determined by training the model.
Example: If we have the following transaction features:
- Transaction Amount (X1) = $500
- Time (X2) = 12:00 AM (coded as 0 for midnight)
Suppose the model has the coefficients:
- b0 = -1.5
- b1 = 0.002
- b2 = 0.5
The probability of fraud P(Y=1|X) is calculated as:
P(Y=1|X) = 1 / (1 + e^-( -1.5 + 0.002 * 500 + 0.5 * 0 ))
= 1 / (1 + e^-( -1.5 + 1 ))
= 1 / (1 + e^-(-0.5))
= 1 / (1 + 0.6065)
= 0.6225 or 62.25%
Thus, the model predicts a 62.25% chance that the transaction is fraudulent.
MCQs on Cyber Crimes/Fraud Risk Management
- What is the main difference between fraud and cyber crime?
- A) Fraud is only about financial loss, while cyber crime involves a broader range of illegal activities.
- B) Fraud involves illegal activities over the internet, while cyber crime only refers to financial loss.
- C) Fraud involves hacking, while cyber crime involves fraud schemes.
- D) There is no difference between fraud and cyber crime.
Answer: A
- Which of the following is not a phase in an Incident Response Plan?
- A) Preparation
- B) Containment
- C) Recovery
- D) Prevention
Answer: D
- What is the primary goal of the containment phase of an Incident Response Plan?
- A) To identify the threat actor
- B) To restore affected systems to normal operation
- C) To isolate affected systems and prevent further damage
- D) To conduct a post-mortem analysis
Answer: C
- In a fraud detection model using logistic regression, what does the output P(Y=1|X) represent?
- A) The probability that the transaction is legitimate
- B) The probability that the transaction is fraudulent
- C) The probability that the model is accurate
- D) The transaction amount
Answer: B
- What is one of the most important actions during the 'Lessons Learned' phase?
- A) Eradicate the threat from all affected systems
- B) Perform a root cause analysis to improve future responses
- C) Identify all potential vulnerabilities in the system
- D) Recover all lost data
Answer: B
- Which of the following is considered a cyber crime?
- A) Identity theft
- B) Hacking
- C) Phishing
- D) All of the above
Answer: D
- Which phase of an Incident Response Plan involves removing malware from affected systems?
- A) Containment
- B) Recovery
- C) Eradication
- D) Preparation
Answer: C
- What is one of the key responsibilities during the identification phase of an incident?
- A) Restoring systems
- B) Monitoring network traffic for potential threats
- C) Informing the public about the incident
- D) Isolating infected systems
Answer: B
- Which of the following is not a common type of cyber fraud?
- A) Phishing
- B) Denial-of-service attack
- C) Credit card fraud
- D) Online scam
Answer: B
- Which mathematical technique is commonly used to detect fraud in transactions?
- A) Linear regression
- B) Logistic regression
- C) K-means clustering
- D) Neural networks
Answer: B
Comments