Cutting-edge research fights fraud before it happens

Criminal profiling has long been used by police to identify the perpetrators of violent crime. Investigators work to understand the personality and behavioral characteristics of the offender through analysis of the crime committed. Now cutting-edge research at Royal Roads University School of Business is helping financial investigators and government regulators develop profiles of the potential victims and perpetrators of financial fraud.

Assoc. Prof. Mark Lokanan and his team are developing new tools and techniques to identify the signature behaviour patterns, systemic pressure points and likeliest offenders of monetary crime. Highlights of their work at can be explored in a new digital exhibit, Fight Against Financial Crime.

“Just as we want to give individual investors the tools to protect themselves from con artists out to swindle them of their life savings, our investigative and regulatory systems need tools to help fight the financial offences that harm Canadians and our economy,” says Lokanan, one of the few financial crimes and investigations experts in Canada.

Lokanan’s multi-faceted work brings new dimensionality to the “fraud triangle” of opportunity, pressure and rationalization that typically underpin forensic investigations. Using algorithms being developed in his department through machine-learning and artificial intelligence, the researchers are looking at a huge range of data sources to build a behavioural profile alongside the traditional financial profile used.

His team takes a multi-disciplinary approach to inform their research. Data science, behavioural science and computer science all combine to provide new knowledge in uncovering illegal activity and its costs to society.

“By applying machine learning in creative ways, we can help recognize when large organizations are doing things like laundering money into housing markets or falsifying financial statements, or luring million-dollar investments,” Lokanan says. “It’s criminal behaviour that affects all of us and it’s a huge public interest issue.”

The ability to apply his research to real-world scenarios is what appeals most about RRU to Lokanan.

“Royal Roads is one of the few institutions in Canada that allows us to move our research beyond academia and into industry; here we are able to develop–and bring—revolutionary resources to the battle.”

Lokanan’s interest in fraud investigation stems from his early experience as a young graduate working in the Ontario Ministry of the Attorney General, investigating fraud and money laundering by charitable organizations.

“I had two fantastic mentors [at the AG office] who were absolutely passionate about protecting the public interest. I realized then our public institutions had very few tools to unmask these crimes; at that time there were very limited ways we could access or analyze the data we needed to get a clear picture of what was happening.”

Today, the work of Lokanan and his team is providing new insights that can help agencies and institutions act more proactively.

“Our algorithms help to identify suspicious behaviour and predict where fraud is likely to happen. When you can apply this technical and behavioural understanding to huge organizations such as banks, corporations, and even governments to uncover potential criminal behaviour, the implications are enormous. We can help these organizations to detect and expose red flags of fraud before it happens.”

Learn more about the Fight Against Financial Crime, a digital exhibit presented by Royal Roads Library Showcase.