Let's look at how we can use SNA to detect fraud. With humans being social animals, human behavior is said to be affected by the people that you are surrounded by. The word homophily has been coined to represent the effect their social network has on a person. Extending this concept, a homophilic network is a group of people who are likely to be associated with each other due to some common factor; for example, having the same origin or hobbies, being part of the same gang or the same university, or some combination of other factors.
If we want to analyze fraud in a homophilic network, we can take advantage of the relationships between the person under investigation and other people in the network, whose risk of involvement in fraud has already been carefully calculated. Flagging a person due to their company is sometimes also...
