70% of financial professionals anticipate a rise in fraud risks in the next 12 months! Headlines of fraud, identity theft, and financial crimes dominated 2023. Add the rapidly changing technological landscape to the mix — with advancements in AI, machine learning, and deepfakes.

Here’s how financial institutions are preparing: more than two-thirds are prioritizing technology investments to combat the looming risk of fraud.

In this blog, we’ll take a deeper look into how technology, specifically AI can help fintech, banks, and other financial institutions prevent fraud.

How does AI-driven fraud detection work?

AI-powered fraud detection models utilize your historical data and can proactively alert you on potential fraud attempts. Leading financial institutions are AI-powered identity verification solutions to combat the rising threat of identity fraud and deepfakes.

Let’s take a deeper look at how AI-driven fraud detection works:  

Data analysis

Machine Learning (ML) is a collection of AI algorithms that are trained with your historical data to suggest risk rules. Additionally, data mining analyzes enormous volumes of data to spot patterns and anticipate future occurrences.

Pattern recognition

AI algorithms then detect patterns indicating fraud such as unusual transaction volumes, atypical access times, or irregular account activity.

Predictive modeling

An AI model is only as good as its training! Predictive models leverage historical data to proactively recognize patterns of fraudulent behavior.

Anomaly detection

Real-time fraud detection systems also have the ability to alert you on the red flags whenever there’s suspected fraudulent activity. 

Biometric authentication

Modern fraud detection systems include biometric verification like facial recognition and liveness detection to ensure that the person is who they claim to be. AI-powered facial recognition is critical in preventing identity fraud and deepfakes.

Read more: Effective Fraud Detection and Prevention Strategies You Should Know

Types of fraud and how AI can help prevent

Fraudsters find loopholes and invent new ways to deceive financial institutions. Here are some commonly deployed financial fraud types and how you can combat each one with AI:


Phishing is an attempt to collect sensitive information, like usernames, passwords, and bank account details, by posing as a trustworthy entity. This can occur through emails, messages, or even fake websites.

How to leverage AI 💡

AI is a powerful ally in the fight against phishing. Advanced machine learning algorithms can analyze patterns in communication and identify phishing attempts. For eg, ML algorithms assess emails for suspicious subject lines or content and alert you for potential phishing attempts. 

Identity theft

Identity theft involves stealing someone’s personal information to commit fraudulent activities. This can range from opening unauthorized accounts to conducting financial transactions in the victim’s name.

In the case of synthetic identity fraud, fraudsters create a completely new “synthetic” identity to open an account or issue credit cards, after which they bust out or simply disappear. 

How to leverage AI💡

Advanced AI-powered identity verification solutions form a formidable line of defense against identity theft. This includes technologies such as face recognition which ensures a robust layer of security by authenticating individuals through their unique facial features and matching that against the pictures present on the official ID documents.

Liveness checks add an extra dimension by verifying the user’s presence in real time, eliminating the risk of impersonation through static images or videos.

Document verification, on the other hand, leverages AI algorithms to scrutinize the authenticity of official documents, making it significantly harder for malicious actors to forge or manipulate identification credentials.

Money muling

Money muling is a growing concern in the world of financial crime, posing a serious threat to the global economy. Money muling involves individuals who, often unwittingly, become intermediaries in illegal financial transactions. Criminals recruit these individuals to move illicit funds through their bank accounts, exploiting them as a means to obscure the true origins of the money.

How to leverage AI💡

To counter this threat, financial institutions are increasingly turning to advanced technologies such as AI-powered Anti-Money Laundering (AML) solutions. These solutions leverage machine learning algorithms for transaction monitoring, enabling them to identify patterns indicative of money muling activities. Additionally, AI is employed in sanctions screening, which helps flag transactions involving a Politically Exposed Person (PEP) or entities on watchlists.

AI is helping financial institutions not only enhance their ability to detect and prevent money laundering, but also help them comply with AML compliance regulations.

Document forgery

Document forgery involves creating or altering official documents. Fraudsters use sophisticated techniques to produce counterfeit identification, bank statements, and other critical documents, undermining the integrity of transactions and compromising the security of financial systems. This illicit activity can result in severe consequences, including financial losses, legal complications, and damage to a company’s reputation.

How to leverage AI💡

AI-powered ID document verification solutions scrutinize documents for inconsistencies, anomalies, and other signs of manipulation. These solutions also compare the provided documents against vast databases of genuine IDs and accurately identify potential forgeries. 

Implementing AI-powered ID verification not only fortifies the security measures of financial services but also streamlines customer onboarding processes, enhancing overall efficiency and customer experience.

Account takeover

Account takeover fraud is a malicious practice wherein cybercriminals gain unauthorized access to a user’s online accounts, exploiting personal information for nefarious purposes. This type of fraud typically involves stealing login credentials through various means such as phishing, credential stuffing, or malware attacks. Once infiltrated, fraudsters can manipulate the account, posing as a legitimate user to make unauthorized transactions or access sensitive information.


How to leverage AI💡

AI-powered identity verification solutions verify the identity of an individual with biometric authentication, liveness check, and document verification. Additionally, real-time monitoring and adaptive risk assessment further enhance security measures.

Deepfake fraud

Deepfake fraud is a rapidly evolving form of cybercrime that leverages artificial intelligence (AI) to manipulate or generate realistic-looking multimedia content, often using facial or voice synthesis technology. Fraudsters use deepfakes for malicious purposes, such as identity theft, spreading misinformation, or committing financial fraud.

How to leverage AI💡

Forward-thinking organizations are turning to advanced AI-powered identity verification and biometric verification solutions with liveness checks. These technologies add an extra layer of security by ensuring that the identity being verified is not only authentic but also physically present. Liveness checks use dynamic interactions, such as facial movements or gestures, to confirm that the biometric data is being captured from a live person and not from a prerecorded or manipulated source.

AI-powered deepfake detection can ensure that you’re onboarding real individuals every time, ensuring that you don’t lose money or reputation to deepfake fraud.

How FE Credit saved $15M+ with proactive fraud detection

Let’s look at a real-world example of AI-powered fraud detection.

FE Credit is a leading financial institution in Vietnam with 12 million+ customers, including 30% of new loan contracts each year. It is a subsidiary of VPBank (Vietnam Prosperity Bank), one of the leading banks in Vietnam.

With HyperVerge’s proactive fraud prevention, FE Credit was able to save a whopping $15+ Million! How did they do it? 

HyperVerge enabled FE Credit to:

  • Prevent past fraudsters from onboarding
  • Detect and prevent synthetic identity fraud proactively
  • Leverage proprietary face AI for implementing blocklist and golden records
  • Provide superior experience to customers

To read more about success stories like this, check out our customer stories here! 

Stay ahead of fraudsters with HyperVerge

Financial fraud is a real threat and you need to invest in technology that is reliable and scalable. Look for a comprehensive fraud detection and prevention solution that can help you with:

Document verification

Biometric verification

Liveness verification

Deepfake detection

Leading financial institutes have seen powerful results with HyperVerge:

  • 2x more frauds detected
  • 50% lower customer drop-off

Want to see how we fit into your workflows? Sign up for a customized demo here.