What are anti-fraud systems in a bank?

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What are anti-fraud systems in a bank?

With the money exchange rates growing alongside the evolving economy worldwide, every bank has to adapt. Mobile bank applications are not enough anymore, many customers prefer using a totally online bank platform — Revolut, Monzo, Starling, Genome, Monobank, etc. Most importantly, fraudsters give banking institutions no quota, endlessly inventing ways to steal money. 

This requires deploying reliable anti-fraud systems in every bank. While many industry-leading financial entities prefer to develop internal fraud prevention instruments, most banks opt for some kind of online account protection and fraud prevention. Covery has a ton to say about fighting fraud in the bank sector as a reliable anti-fraud tool widely used in the UK, Europe, and the USA.   

Without further ado — let’s delve into the intricacies of running anti-fraud systems in a bank, the threats they have to face and the tools they require to overcome the fraud wave.

What defines bank fraud?

Bank fraud is a combination of illegal activities aimed at defrauding a bank, customer, or both into transferring their money or other sensitive data to a fraudster. This kind of malevolent behavior can result in significant monetary and reputational losses, so timely fraud prevention and detection are essential for any online bank (and brick-and-mortar ones too, surely.)

Let’s now take a look at what types of fraud a bank can encounter.

What are the 5 common types of bank fraud?

Every online bank professional knows the main types of fraud financial organizations are exposed to

  • Pure fraud. Also known as wire fraud, this type of fraud where scammers use forged identities and contact banks over email, fax, or even social media to pull money for seemingly legitimate purposes.
  • Online account stealing. An important part of the previous fraud type, this one is aimed at bank customers and includes “phishing” — trying to convince them to disclose their online account credentials, password reset answers, SSN, bank IDs, etc.
  • Account takeover. A logical continuation of the previous phase, ATO fraud includes changing the password to a customer’s online bank account. Such stolen accounts can be later used for a variety of illegal activities.
  • Money laundering. One of the key fraud types any bank has to deal with, money laundering involves transferring large sums of ill-gained money through several credible sources in order to make them look “clean”.
  • Fake online account fraud. Also known as accounting fraud, this one involves creating fictitious businesses and asking for a loan from banks by providing forged documents.

As you can see, the common denominator here is the usage of online communication methods and transactions to forge identities and commit various fraud types. This means that the technology field is where every bank must defend itself. What tools are in their arsenal?

How do banks detect fraud?

A bank is no longer all about thick walls, steel safes, piles of coins, and banknotes. In the digital economy, every bank must be an online bank and operate in fiat money and various digital assets. This means that servers, cloud storages, Big Data, Artificial Intelligence and Machine Learning are the defining tools for fighting fraud now.

  • Big Data. Fraudsters never invent a unique scheme for every fraud attempt, nor do they use a unique equipment set. They follow a certain pattern and leave traces that can be tracked, and monitored so that a bank can be alarmed if such activity or equipment surfaces again. Naturally, this means millions of data points, which form huge Big Data warehouses that are combed by AI algorithms.
  • Artificial Intelligence. Every bank must approve or decline hundreds of thousands of transactions big and small, on a daily basis. From multi-million cross-border transactions to monthly subscriptions or utility bills, to grocery and household items purchases using bank-issued cards at POS terminals. Every such transaction has to be checked for fraud and approved or declined by the bank — making it impossible without automation. AI steps in, tracking dozens of unique identifiers for every transaction for signs of fraud — and making a decision in under a second.
  • Machine Learning. It is not enough to configure an AI algorithm and let it work. To remain relevant, it must adapt to changing conditions. Machine Learning does exactly that, constantly adding new data to a training set to ensure the AI algorithm takes into consideration all the required information. This is how Covery protects every business account for Genome — a Lithuanian challenger bank, offering SEPA and SWIFT transfers across the EU and worldwide.
  • ARM and GRC. Access Rights Management, as well as Governance Risk and Compliance, are essential aspects of every online bank’s digital landscape. Knowing who can do what, who did any action, and if the compliance requirements were met is crucial both in terms of internal monitoring and for external audits. One of the key aspects of any fraud prevention in any bank is KYC/AML compliance, which ensures a bank does not become an accomplice to the crime of money laundering.

Naturally, using comprehensive risk mitigation, fraud prevention, and chargeback management platform is better than using a variety of separate tools to deal with such challenges. Covery, the enterprise-grade anti-fraud system with granular access control and flexible Machine Learning models coupled with a rule-based risk logic engine, is capable of meeting all these needs.


There are several ways for a bank to ensure reliable fraud prevention. They can develop such a system internally, based on their insights and know-how of their systems. They can also order a variety of specialized anti-fraud tools, each catering to a single facet of the threat.

But the best decision business-wise would be to use the end-to-end risk management and an anti-fraud tool like Covery, which comes with a wide range of features that help deal with any challenge a bank can face. From device fingerprinting and behavioral analysis to Trustchain, supervised Machine Learning, and in-depth analytics — Covery delivers a ton of value to any online bank or other financial organization.

Wanna check it out? Order a free demo and see how Covery can help solve the challenges you are facing!