Fraud Prevention

Fraud Detection and Prevention in Banks

April 6, 20239 min Read

Prevent Banking Fraud with Advanced Detection Technology

Bank fraud detection and prevention is a set of techniques used by financial institutions to reduce risk and protect assets, systems, and customers. These techniques may rely on forensic and statistical analysis, pattern recognition, or anomaly detection.

Bad actors have a variety of tools at their disposal to commit cybercrime. They can try to take over accounts, use malicious apps or fake identities, launder money, commit credit card fraud, and more. Detection and prevention techniques are focused on identifying and preventing these fraud attempts to mitigate risk for the institution and improve customer satisfaction.

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2023 Cybercrime Prevention Playbook
2023 Cybercrime Prevention Playbook

Typical digital banking fraud scenarios

Digital banking cybercrime is increasingly frequent and can leave victims with serious financial consequences. Phishing is the most typical fraud tactic, in which bad actors send fake emails to unwitting victims in order to obtain their banking information. Additionally, fraudsters may use bots to gain illegal access to bank accounts.

Bad actors may take advantage of people who don't know enough about online banking security or who use the same login information on multiple sites. All users should regularly monitor their account activity, never share their personal information with anyone, and always keep their passwords secure.

Account opening fraud/fake account creation

Account opening fraud, or fake account creation, is a frequent technique that cybercriminals use to open an account in someone else's name without their consent. This type of fraud involves the use of false identities or stolen identities to obtain credit. One of the most well-known fintech companies recently shut down 4.5 million fake accounts, which happened in the wake of its strategy of giving customers incentives to sign up.

Account takeovers

Account takeovers (ATOs), in which a criminal gains unauthorized access to a victim's bank account, are achieved through various methods such as phishing, malware, or SIM swapping. ATOs can result in various types of downstream fraud, such as card-not-present fraud, unauthorized transactions, and counterfeit fraud. Financial services companies can implement measures such as two-factor authentication to prevent ATOs. Customers and cardholders should create strong passwords and regularly monitor their accounts for any suspicious activity.

Credential theft

One of the biggest challenges in detecting and preventing banking fraud is credential theft, which involves cybercriminals accessing account information through stolen usernames and passwords. These credentials can be purchased easily on the dark web, making it difficult for banks to identify and prevent fraudulent activity. Fraudsters are also using more sophisticated social engineering attacks, such as spear-phishing or whale phishing, to gain access to high-priority accounts or assets. To prevent credential theft and other types of fraud, banks must be diligent when reviewing customer accounts for suspicious activity, such as unusual currency amounts, categories, or merchant names.

Bank fraud detection and prevention

A multi-layered security approach can help detect and prevent bank fraud and reduce the risk of attacks. This might include two-factor authentication, robust cybercrime detection solutions, and strict authentication and authorization processes, among others.

Regular monitoring of banking activity and awareness of bank fraud patterns and trends can also help detect potential cybercrime. Encryption and other physical security measures can further protect sensitive data. Ultimately, user awareness and proactive risk management are critical in preventing banking fraud from occurring in the first place.

1. Look for internal fraud

Internal fraud is often perpetrated by employees who sell customer data on the dark web. To prevent internal fraud, banks must conduct thorough background checks on new hires and have strict security protocols in place.

2. Educate customers & employees

Preventing bank fraud takes more than one approach, and educating customers and employees is an important part of this. Customers should be informed about fraud risk, how to identify phishing emails, and how to report suspicious activity. They should be aware of best practices when using mobile banking apps and accessing banking websites on the internet. By taking these steps, businesses and customers can work together to detect and prevent banking fraud.

3. Monitor transactions

Banks use artificial intelligence (AI) and machine learning (ML) to look for patterns in transaction data. They should also use reports of suspicious activity, transaction monitoring, and data analytics to spot possible fraud.

4. Use a robust bot management solution

An advanced bot management solution, like Arkose Labs, can protect banks, fintechs, and other financial services from evolving attacks. The Arkose Labs platform analyzes data from user sessions to determine the context, behavior, and past reputation of every request. Traffic is classified and triaged based on its risk profile. Suspicious traffic is presented with MatchKey enforcement challenges that differentiate between true users and fraudsters. A continuous feedback loop slashes false positives and minimizes the impact on good users.

Arkose Labs' comprehensive approach uses device fingerprinting, IP reputation, and behavior biometrics, along with our MatchKey challenge solution, which sees and predicts bad actors. The detection and mitigation platform sits on all consumer flows, orchestrating dynamic responses tailored to the attack pattern.

Device fingerprinting works by collecting different data points, like the IP address, browser type, and screen resolution, to make a unique profile for the device. By doing so, device fingerprinting can be utilized to identify and authenticate devices that access online banking services.

IP reputation analysis can help detect potential fraud by analyzing IP addresses associated with transactions and identifying any unauthorized activity. IP analysis can also help identify phishing scams, sophisticated frauds like wire fraud and money laundering, and even suspicious activity that could lead to identity theft.

Behavior biometrics consider the way a user interacts with a device, like mouse motions, keystroke dynamics, or touch screen interactions. For account takeover fraud and fake account creation, the events collected from behavioral biometrics can help detect these attacks in a way that is independent of IP or device information, so when each dataset is combined, it leads to a much stronger detection signal.

By using device fingerprinting, IP analysis, and behavior biometrics, banks can reduce the risk of fraud losses and protect their customers' data. It's important to work with a robust bot management solution provider who can provide advanced security measures to help prevent fraud and protect your financial assets.

Fraud prevention checklist for customers

To help protect your customers, encourage them to take the initiative, where they can, to help detect and prevent bank fraud. You can encourage best-practices by using the guidelines below:

1. Update customer contact information

Frequent reminders to update phone numbers, email addresses, and physical addresses can help customers quickly respond to any suspicious account activity. Banks can require measures such as changing usernames and passwords, setting up a registered mobile device, and viewing login history and notifications.

2. Require strong passwords

One important way to prevent bank fraud is to require customers to use strong passwords for banking accounts. This means using a password that is unique and not easily guessed, with a combination of upper- and lower-case letters, numbers, and symbols. Customers should also be aware of the importance of not sharing their PIN numbers with anyone. Advising customers to change their passwords regularly and to use different passwords for different accounts can help prevent unauthorized access to their banking information.

3. Encourage mobile alerts

Mobile alerts provide customers with real-time notifications of suspicious activity on their accounts, allowing them to take action quickly to prevent any fraudulent activity. Setting up mobile alerts can also provide customers with safe transaction tips and help detect account takeovers quickly, minimizing associated losses.

4. Encourage customers to update devices

Banks should tell their customers to regularly update their devices, like computers and phones, to make sure that any security holes are closed. Hackers often take advantage of outdated software, so having the latest updates can reduce the risk of falling victim to fraud attacks.

5. Customers should be aware of red flags

Familiarize your customers with the red flags that indicate suspicious activity. Customers should be wary of suspicious links from unknown email addresses and should always confirm the email address is not a slight variation of someone they trust. Educating customers on the dangers of giving gift cards or money to people they don't know is also important. Once money is transferred, it cannot be recovered. Encourage your customers to be cautious when clicking on links or giving out financial information.

6. Customers should know what third-party accounts have their login information

One important step in the fraud prevention checklist is advising customers to know what third-party accounts have their login information. By keeping track of these accounts, customers can better protect themselves in case of a data breach or security threat.


Bank fraud detection is a critical part of a security strategy to protect against financial crimes like phishing, account takeovers, and credential theft. Banks can take a multifaceted approach that includes educating employees and customers, keeping an eye on transactions, and using an advanced bot management solution. Arkose Labs is the leading provider of bot management solutions that help financial institutions find and stop fraud. Our holistic approach includes device fingerprinting, IP reputation, and behavior biometrics, combined with our MatchKey challenge solution that perceives and anticipates bad actors, making it an effective tool in combating financial crimes.

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