As digitisation improves the banking experience for customers, it also invites fraudsters to use technology to cheat businesses and customers in novel ways. The Association of Certified Fraud Examiners (ACFE) estimates in its 2026 Report to the Nations that organisations lose 5% of their revenue to fraud each year, and banking and financial services is the industry most represented in its cases. Online fraud keeps growing too: the FBI’s Internet Crime Complaint Center (IC3) received more than one million complaints in 2025, with reported losses of nearly $21 billion.Thankfully, multi-layered banking frauds are preventable using modern technology, awareness, and proactive approaches to industryfraud prevention in banks.
What are the most common types of bank fraud?
Bank fraud is any scheme that uses deception to obtain money or assets held by a bank, or to use a bank to move stolen funds. Sophisticated and ever-changing frauds require banks to deploy fraud management solutions that offer better defence against various types of fraud in the sector. The most common types, with examples, include:
- Wire fraud involves using various communication modes to convince the bank that large sums of money have been transferred from legitimate sources while covering up with a fake identity.
- Identity theft or credential stealing is often carried out through emails or SMSes, commonly called phishing. Fraudsters dig for sensitive information from legitimate customers by posing as government authorities or banks.
- Account takeover is a worse form of identity theft where fraudsters use sensitive customer data to completely take over the account for siphoning funds and carrying out transfers.
- Authorised push payment (APP) fraud tricks customers into sending money themselves, for example when a fraudster poses as the bank’s fraud team and asks them to move funds to a "safe" account. Because the customer approves the transfer, it can pass standard checks.
- First-party fraud is committed by the account holder, for example by building a good credit record and then drawing down credit lines with no intention to repay, known as bust-out fraud, or by falsely disputing genuine transactions.
- Cheque fraud involves altering, counterfeiting or stealing cheques to withdraw funds. Read more about how to tackle cheque fraud.
- Insider fraud happens when employees misuse their access to customer accounts or internal systems, for example by creating fictitious loans or diverting funds.
- Money laundering involves ‘cleaning’ the illegally obtained money using the banking route by carrying out a bank transfer from one account to another.
- Accounting fraud is enabled by fraudsters by setting up accounts with banks to apply for loans using false statements of ghost businesses. On securing the funds, the fraudsters disappear, leaving the bank to deal with the loss.
What are the best practices for fraud prevention in banks?
A proactive approach to fraud detection and prevention is imperative to ensure customer trust, employee compliance, and overall improvement in operational efficiency.
Monitor transactions:
Set monitoring rules for unusual amounts, new payees, rapid movement of funds between accounts and logins from new devices, and review the alerts promptly. Monitoring regular customers’ web and app activity can nip the nuisance in the bud.
Verify customers at onboarding and beyond
Know your customer (KYC) checks and ongoing customer due diligence confirm that customers are who they claim to be and flag changes in risk, such as sudden activity on a dormant account or a new device paired with a large transfer.
Use dual approval for high-risk payments
Educating customers can reduce fraudulent activities such as phishing and identity theft. Businesses should educate their customers about safe transaction tips to reduce frauds.
Check internal threats
Banks should address internal threats by educating employees and providing them with a confidential hotline to provide tips on fraudulent activities. They can mitigate internal threats by deploying workforce analytics and behaviour profiling to sift through large data of inactive accounts. Regular internal audits and employee profiling at the HR level are other ways to minimise the risk of internal threats.
Educate customers
Educating customers can reduce fraudulent activities such as phishing and identity theft. Businesses should educate their customers about safe transaction tips to reduce frauds. Our guide to fraud awareness programs covers how to build customer and employee training.
Use real-time data
Enrich your database with real-time data from other sources, digital services, and social networks. This creates a more comprehensive customer profile for predictive analytics. Real-time email domain verification, IP address checks, and device recognition methods can alert customers in case of suspicious activities.
Deploy machine learning
Machine learning (ML) algorithms are at the heart of automated fraud analytics, which use large amounts of data to predict behaviour patterns, content anomalies, bot clicks, and other suspicious activities. ML can also detect loopholes in cybersecurity, check for system weaknesses, and help fix them.
Prepare an incident response plan
Agree in advance who freezes accounts, contacts affected customers, files suspicious activity reports and informs regulators, so the bank can act within hours when fraud is found.
How does technology support fraud prevention in banks?
We are aware that the identifiable classifications of fraud do not exist exclusively. Technology works best alongside people: the ACFE found that 43% of frauds were detected through a tip, and more than half of those tips came from employees. More advanced methods based on technology can empower the banking sector.
Biometrics:
Biometrics is the answer to verification issues and preventing credential theft. It adds another layer of protection for account security as biometric data is hard to crack and duplicate. Certain biometric techniques such as fingerprint and facial recognition software are already widely used. Voice cadence also carries a unique signature and is used by banks to add an additional security layer to prevent fraud.
Artificial intelligence:
Manual verification of a large volume of transactions is an error-prone and time-consuming activity. Robotic process automation (RPA) speeds up routine transaction checks, while AI models flag suspicious activity for review.
Data integration:
Consortium data within the sector provides collective intelligence on fraudulent activities. Moreover, data integration can avoid silos within the organisation and create a clear picture of customer profiles and transactions to flag risky activity. For a closer look at how AI and machine learning detect fraud, see our guide to AI-powered fraud detection in banking.
How can Infosys BPM help with fraud prevention in banks?
Infosys BPM’s fraud management services help banks put these practices into operation, from assessing where fraud losses occur to improving the precision of fraud alerts so investigators spend less time on genuine customers. The team also identifies previously unknown fraud patterns, integrates data across platforms and gives investigators clear case visualisation to speed up decisions.[
Frequently asked questions
Which fraud prevention tools do most banks use?
Most banks layer several tools rather than relying on one: transaction monitoring systems that combine rules with machine learning risk scores, multi-factor and biometric authentication, device and IP intelligence, identity verification at onboarding and case management software for investigators. The mix matters more than any single tool, because each one covers a different stage of an attack.
What are the warning signs of internal fraud in a bank?
Common red flags include employees who refuse to take leave or hand over their work, frequent overrides of system controls, access to customer accounts unrelated to their role and unexplained changes to customer contact details. Mandatory leave, job rotation and regular reviews of system access make these patterns easier to spot.
Who is responsible for fraud prevention in a bank?
Most banks run a dedicated fraud risk or fraud control unit that sets fraud policy, owns the monitoring rules and investigates cases, usually reporting to the chief risk officer. Frontline, operations and compliance teams apply controls within their own processes, and internal audit tests whether those controls work as intended.
What should banks look for in a fraud prevention partner?
Look for coverage across the fraud types the bank actually faces, a track record of improving alert precision so fewer genuine customers are blocked, round-the-clock monitoring capacity, the ability to work with the bank's own transaction and customer data and support for regulatory reporting. The bank should keep ownership of its risk appetite and policies while the partner runs day-to-day operations.
