Published : 4 weeks ago, on 11/11/2024

Yuval Marco, General Manager, Enterprise Fraud Management, NICE Actimize

AI has significantly enhanced the abilities of fraudsters, making their schemes more efficient and allowing them to evade detection for extended periods. Financial institutions are currently grappling with several major fraud challenges aligned to this scenario. Notes Yuval Marco, General Manager, Enterprise Fraud Management, NICE Actimize, authorized push payment (APP) fraud remain a key concern to Fis.  

“Despite efforts to strengthen account takeover controls and modernize payment systems, fraudsters have shifted their focus towards exploiting customers using AI-driven scams,” Marco explains. The 2024 Fraud Insights report by NICE Actimize highlighted a marked increase in authorized fraud volume, indicating that these scams successfully bypass traditional controls. 

Marco warns, “These schemes present significant challenges to the defenses of financial institutions and threaten financial stability, largely due to evolving reimbursement policies and liability shifts.

Payments fraud remains a pressing issue, as Marco observes a notable rise in the average amount associated with fraudulent transactions over the past year. “In North America, check fraud has surged, while in Europe, the faster payment systems have led to heightened fraud occurrences,” he elaborates. Fraudsters are manipulating account and beneficiary maturity to improve their success rates.

Compliance Poses Its Own Problems

Regulatory compliance poses another challenge. As scams lead to substantial losses, regulators worldwide are compelling financial institutions to compensate affected customers. Marco notes that new UK regulations, along with pending EU and US policies, are “driving financial institutions to enhance their response times, reimbursement policies, and operational procedures.”

The rising cost of fraud management is also a challenge for institutions, as increasing transactions, scams, and claims elevate operational expenses. Marco emphasizes that institutions are “keen on adopting cloud technology and case management tools to mitigate these costs effectively.

Furthermore, identity fraud has grown more sophisticated with AI advancements. “Fraudsters are creating deepfake documents, complicating verification processes, and bypassing identity checks, enabling them to open mule accounts and impersonate legitimate users,” the fraud executive states.

Despite these challenges, Marco believes in the crucial role of AI in combating fraud. “AI provides unparalleled detection and prevention capabilities,” he asserts. AI can significantly enhance detection processes, strategy formulation, and operations by identifying unusual patterns and incorporating investigation feedback. For detection, continuous adaptation of AI models is essential, while advanced models help in spotting complex fraud patterns. In strategy, machine learning can identify data trends and recommend rules, benchmark performance, and provide strategic advice. Operationally, generative AI accelerates investigation processes through efficient documentation and case summaries.

Regarding new APP fraud regulations in the UK, Marco advises financial institutions to take proactive measures. This includes enhancing onboarding and application fraud controls, developing specific detection models for money mule activities, improving APP fraud controls with tailored strategies, and optimizing fraud investigation processes. 

Automating workflows and using case management tools can greatly enhance fund recovery efforts,” he suggests.

Marco stresses that AI presents both challenges and opportunities for fraud prevention teams, concluding, “Financial institutions must enhance defenses at every stage, from account opening to comprehensive fraud monitoring, by fully leveraging AI across detection, strategy, and operations to achieve optimal fraud prevention.