Author(s)

Harrison Obiora Amuji^1*, Etus Chukwuemeka², Emeka Maxwel Ogbuagu³

¹Department of Statistics, Federal University of Technology, Owerri, Nigeria.
²Department of Information Management Technology, Federal University of Technology, Owerri, Nigeria.
³Department of Math/Statistics/Computer, University of Agriculture, Makurdi, Nigeria.

Fraud is a major challenge facing telecommunication industry. A huge amount of revenues are lost to these fraudsters who have developed different techniques and strategies to defraud the service providers. For any service provider to remain in the industry, the expected loss from the activities of these fraudsters should be highly minimized if not eliminated completely. But due to the nature of huge data and millions of subscribers involved, it becomes very difficult to detect this group of people. For this purpose, there is a need for optimal classifier and predictive probability model that can capture both the present and past history of the subscribers and classify them accordingly. In this paper, we have developed some predictive models and an optimal classifier. We simulated a sample of eighty (80) subscribers: their number of calls and the duration of the calls and categorized it into four sub-samples with sample size of twenty (20) each. We obtained the prior and posterior probabilities of the groups. We group these posterior probability distributions into two sample multivariate data with two variates each. We develop linear classifier that discriminates between the genuine subscribers and fraudulent subscribers. The optimal classifier (β_A+B) has a posterior probability of 0.7368, and we classify the subscribers based on this optimal point. This paper focused on domestic subscribers and the parameters of interest were the number of calls per hour and the duration of the calls.

Fraud Detection, Telecommunication, Optimal Classifier, Prior Probability, Posterior Probability

Amuji, H. , Chukwuemeka, E. and Ogbuagu, E. (2019) Optimal Classifier for Fraud Detection in Telecommunication Industry. Open Journal of Optimization, 8, 15-31. doi: 10.4236/ojop.2019.81002.