What is Fraud Detection?


What is fraud detection?

What is Fraud Detection? is the process of identifying suspicious activity that might be fraudulent, like unauthorized charges on a credit card, identity theft and account takeover. By implementing fraud detection policies, businesses can prevent fraud and avoid the financial losses that occur as a result of these types of activities.

Detecting fraud is important because bad actors are collectively resourceful and constantly changing their tactics to get around security measures. Fraud detection can help businesses and consumers mitigate the risks of fraud by increasing the thresholds for bad actors to make it through – deterring bad behavior before it even happens and empowering ongoing deny capabilities for repeat offenders.

Demystifying Fraud Detection: A Comprehensive Overview

Banks, for example, use fraud detection systems to prevent a range of fraudulent activities such as money laundering, money remittance and terrorist financing. They deploy a variety of security measures including rules-based logic and machine learning, to identify patterns in behavior that might be indicative of fraud. By analyzing historical data, these systems can identify a customer’s typical transaction habits and establish a profile of the type of merchants they usually frequent, the average transaction amount and the time of day when they typically conduct transactions. Any deviations from this profile can trigger an alert that flags the suspicious activity for further investigation.

In addition, banks implement fraud detection measures to adhere to regulatory perimeters and to protect customer data. This is because, if a bank is found to not have adequate fraud prevention measures in place, they are likely to face heavy fines and reputational damage. Fraud detection also helps them manage their risk exposure and stay within compliance with various regulations such as the EU’s PSD2 and The General Data Protection Regulation (GDPR).