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In his article, Rabinowitz said several start-

ups “use the systems [developed by Unit 8200].” An example is Riskified, which he said helped retailers recoup millions in revenue from fraud loss. “The company closed 2015 on a run rate of US$3 billion in approved transaction volume for global retailers including Burberry, Wish and Viagogo, and just announced a new funding round of US$25 million.” Another recent startup is Forter, founded in Tel Aviv in 2012

by the three men who had founded Fraud Sciences. Forter came into the marketplace with a radical concept in the world of fraud prevention: a 100% chargeback protection guarantee. “Forter delivers a simple, real-time ‘approve’ or ‘decline’ recom- mendation on every transaction,” noted, “and if it’s wrong, the merchant is not responsible for paying the fees asso- ciated with the ensuing chargeback.” The bold innovation caught the attention of the American

Business Awards. In July 2015, it awarded Forter a Silver Stevie (the name is derived from the Greek for “crowned”), “one of the most prestigious awards in the business world, for taking a lead in the e-commerce and fraud prevention industries,” the Times of Israel reported. The Stevie is given only to companies with “fascinating and inspiring stories of success,” Stevie Awards president and founder Michael Gallagher said. Forter, the paper said, “is the only fraud prevention company

that’s willing to put its money where its mouth is — refunding money to customers if they make an incorrect call about a sale that a retail website loses money on.” Forter chief marketing officer Bill Zielke told the paper that

his company, which sells a made-in-Israel technology, offers “a real-time automated decision service for web retailers that pro- tects them from fraudsters. Using our behavior detection algo- rithms, retailers can quickly determine what transactions are legitimate and which ones are fraudulent. We remove the entire decision-making burden from the retailer. They don’t have to analyze metrics and make an educated guess, as our competitors require. If we approve a transaction that is fraudu- lent, we take the hit, paying the site 100% of the failed transac- tion.” He said Forter’s accuracy rate is about 99%. Forter’s system draws on a large database of user behaviour

on a site to see whether a specific user’s activities fit a legitimate pattern — or if the customer is a likely fraudster, the Times said. “There are many data points that can indicate this, like the

type of products they are looking at as compared to previous purchases, information about their personal life based on reg- istration information or location, and much more,” Zielke said. The system also considers the login location, IP address and the billing and shipping information. Almost as important as catching fraudsters, however, is determining when a legitimate purchase, although perhaps suspicious looking, should be approved. “We recently had a

case where a user logged into a site with an African IP address, and a billing and shipping address in Washington, DC,” Zielke said. “That is the kind of transaction most other fraud preven- tion systems would have immediately banned. We approved it, because the customer’s behavior online was in line with accept- able patterns. And it turned out we were right. Aſter checking the shipping address, we realized it was a diplomatic mission of an African country, and the customer was a diplomat who was ordering products he was planning to bring home.” In his article, Rabinowitz lists several other Israeli startups

that have taken advantage of the expertise many young tech- savvy investigators acquired during their tenure (usually three years) at Unit 8200. The unit, he said, recruited intelligent, highly motivated, out-of-the-box thinkers. “Just as Silicon Valley has famously aggregated technical talent in other areas, Israel is the capital of the world for talent

“Israel is the capital of the world for talent who specialize in algorithmic thinking about risk”

who specialize in algorithmic thinking about risk,” he wrote. “For Israeli startups in the field, this means a ready pool of spe- cialists in each layer of fraud detection, from detecting proxies at a low level to automation with machine learning at the highest levels, developing algorithms that are border agnostic.” That Israel would emerge as a world leader in the develop-

ment of highly sophisticated fraud prevention and detection systems may not be well known but it should come as no sur- prise, considering the level of sophistication it applies to inter- nal security. Daniel Wagner, CEO of Country Risk Solutions, a crossborder advisory firm based in Connecticut, says Israel “has been the gold standard for establishing and maintaining security in all its forms.” It only makes sense that many graduates of Unit 8200 would

look to apply what they learned there to the growing problem of national and international fraud attacks on legitimate compa- nies. Considering the success Israel has had at preventing and detecting terrorist threats at its airports, perhaps it will soon be called the land of milk, honey and antifraud startups.

DAVID MALAMED, CPA, CA•IFA, CPA (ILL.), CCF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto


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