Fraud Detection

What is Fraud Detection?

Fraud detection is the process of identifying unauthorized activity.

This includes data theft, financial scams, or unauthorized transactions.

Fraud detection is commonly used in retail, banking, medical, insurance, and public sectors.

The goal is to prevent fraud by monitoring transactions, applications, and user behavior.

In 2023, almost 60% of banks, fintechs, and credit unions lost over $500K due to fraud.

Fraud detection protects businesses from financial losses and reputational harm.

It also improves operational efficiency by reducing post-fraud recovery costs.

It prevents chargebacks, lowers recovery efforts, and regulatory fines by identifying fraud early.

Finally, there are also positive secondary effects.

Effective fraud detection reinforces customer trust.

When customers trust your organization, they do more business with you.

Fraud detection software can detect various forms of fraud. Some common examples include:

Stolen Credentials: login credentials stolen via stealer logs, 3rd party breaches, combo lists, or phishing attacks.
Phishing: Phishing emails requesting sensitive information.
Social Media Fraud: Social media fraud includes creating fake accounts or malicious links on social media platforms.
Impersonation Attacks: Impersonation attacks occur when attackers pretend to be a trusted contact.
Brand Abuse: Brand abuse involves unauthorized use of company assets.
Business Email Compromise (BEC): BEC scams target executives and employees to steal funds or data.

Fraud detection uses several technologies including:

AI & Machine Learning: Recognize patterns, anomalies, and deviations from usual behavior.
Behavioral Analysis: Identify changes in normal user behavior. These include unusual login locations or transaction frequency.
Threat Intelligence: Combines data from dark web sources, 3rd party breaches, and internet chatter. The data is then used to force password resets, terminate sessions, or require secondary identification before performing sensitive actions.

Fraud prevention is critical to protecting your business from financial loss. Here are six strategies to help you protect against fraud:

Continuous Dark Web Monitoring: Continuously monitor the dark web for compromised company data and credentials. This includes vendor and customer credentials as well. Early detection enables you to take preventive actions before the data is exploited.
Implement Strong Authentication: Multi-factor authentication (MFA) requires multiple forms of identification before granting access to sensitive systems or data.
Use Password Managers: A password manager generates strong, unique passwords for each account. It also helps users manage and store passwords securely, reducing the risk of password-related breaches.
Attack Surface Management: Monitor your external attack surface to identify shadow IT resources that may not be properly secured. Ensure these servers are properly patched and locked down. This minimizes vulnerabilities and reduces the risk of exploitation.
Use Fraud Detection Tools: Leverage AI, behavioral analytics, and machine learning tools to identify suspicious transactions and fraudulent behavior.
Monitor and Control Access: Configure role-based access control (RBAC) to reduce potential fraud. This ensures employees have access only to the information required for their roles.