Banks have long relied on traditional security measures like passwords, OTPs, and static transaction limits to protect customer accounts from fraud. However, these defenses are proving increasingly ineffective.
Fraudsters are leveraging advanced tactics like AI-generated deepfakes, phishing, and credential stuffing to bypass these static barriers, driving a significant rise in ATO fraud.
With the ATO fraud market projected to reach $16.8 billion by 2025, the financial impact is becoming impossible to ignore.
In this article, we'll explore how adopting advanced ATO fraud detection strategies can help financial institutions stay ahead of evolving fraud tactics.
Key Takeaways:
- The growing threat of ATO Fraud: ATO fraud is increasingly sophisticated, with fraudsters employing advanced methods like AI-generated deepfakes and credential stuffing to bypass traditional security measures.
- Common entry points for ATO fraud: Fraudsters often exploit vulnerabilities through methods like credential stuffing, phishing, SIM swaps, and malware.
- Effective ATO fraud detection strategies: A successful ATO fraud detection system integrates real-time monitoring with advanced technologies like behavioral biometrics, device fingerprinting, and AI.
- How VALID Systems improves ATO fraud protection: VALID Systems offers real-time fraud detection solutions, combining AI-powered fraud scoring, transaction analysis, and cross-channel fraud detection.
What is ATO fraud?
Account Takeover (ATO) fraud occurs when a cybercriminal gains unauthorized access to a legitimate user's account, such as a bank account, payment app, email, or credit card. The fraudster then exploits this access to steal funds, exfiltrate data, or facilitate money laundering.
These alarming statistics reflect the rising threat of ATO fraud and its growing impact:
- A 24% year-over-year increase in ATO attacks in 2024. (Sift's Q3 2024 Digital Trust Index)
- 83% of organizations experienced at least one ATO incident in the past year. (Abnormal Security's 2024 State of Cloud Account Takeovers Report)
- A striking 70% password reuse rate among users exposed in two or more breaches over the last year. (SpyCloud 2025 Identity Exposure Report)
To combat this growing threat, adequate ATO fraud detection strategies are essential for identifying and mitigating risks before they lead to significant financial losses.
Most common entry points for ATO fraud
The shift to digital-first banking has changed how people behave online, creating new opportunities for fraudsters to take advantage of.
These are the most common methods they use to carry out account takeover fraud:
Credential stuffing
Credential stuffing is one of the most common methods used by fraudsters to access accounts.
In 2024, over 70% of compromised credentials involved reused passwords, significantly increasing the risk of ATO fraud.
By harvesting login credentials from breaches, cybercriminals reuse them across platforms, automating high-volume login attempts to gain unauthorized access.
Phishing
Despite the rise of high-tech threats, phishing remains a classic method for account takeovers, now supercharged with AI. Banks are facing an escalating risk, as 82.6% of all phishing emails analyzed show some use of AI to enhance these attacks.
Credential theft attacks have skyrocketed by 703%, driven by advanced phishing kits. Additionally, 8 out of 10 organizations reported that at least one individual fell victim to a phishing attempt, according to CISA Assessment teams.
These scams often use:
- Fake emails
- Impersonation calls
- Deceptive messages
The goal of these scams is to deceive individuals into revealing their login credentials or one-time passcodes.
SIM swap and mobile hijack
SIM swapping is another increasingly common tactic, where fraudsters manipulate telecom providers to take control of a victim's phone number. Once in control of the number, fraudsters can intercept two-factor authentication (2FA) codes, account recovery messages, and even phone calls from the bank. This allows them to impersonate the victim's phone identity and gain access to financial and communications apps.
The dramatic 1,000%+ spike in SIM swap cases in 2024 has prompted banks and telecom providers to collaborate on solutions.
Malware and keyloggers
Malicious software, including malware and keyloggers, remains a major threat to account security.
Once installed on a victim's device, malware can capture login data, session tokens, or even reroute transactions before the victim detects any unusual activity.
Keyloggers record every keystroke on an infected device, giving fraudsters access to sensitive information like passwords, bank account numbers, and other personal details.
Social engineering
Fraudsters often employ social engineering tactics to manipulate victims into transferring large sums of money willingly.
This strategy includes scams like "pig butchering," where fraudsters establish fake romantic relationships to trick individuals into sending funds.
Pig butchering scams led to $5.5 billion in crypto losses in 2024, making them the most significant fraud scheme of the year.
Social engineering attacks are challenging to detect because they often involve transactions that appear legitimate, making it difficult for banks to intercept them.
Fraudsters may spend months building trust with their targets, making it challenging for institutions to identify these attacks before significant losses occur.
Deepfake voice and video impersonation
Generative AI has radically changed the landscape of fraud.
In 2023 and 2024, one in ten companies reported being targeted by deepfake scams.
Deepfake technology allows fraudsters to impersonate a customer's voice or likeness, creating unsettling new fraud scenarios.
Fraudsters use AI-driven voice cloning to impersonate CEOs and authorize wire transfers or trick bank representatives into resetting accounts.
For example, a fraudster can mimic a bank customer's voice on a call or even appear as a convincing video of the customer during a live verification check.
How ATO fraud typically unfolds
ATO fraud typically unfolds in multiple stages, all of which banks monitor for signs of suspicious activity:
- Observation: Fraudsters gather data from social media, data breaches, or the dark web to gather information about their target.
- Exfiltration: Using tactics like phishing or malware, fraudsters collect login credentials. Credential stuffing bots then test these credentials in large volumes across various sites.
- Infiltration: Once fraudsters gain access, they immediately make changes - resetting passwords, updating contact details, and sometimes enabling new authentication methods to lock out the real account holder.
- Exploitation: After taking full control, fraudsters transfer funds, open lines of credit, drain accounts, or even sell the account on dark web marketplaces.
ATO fraud: Real-world examples
Here are some recent cases that highlight the growing threat of ATO fraud:
- Connecticut case: A Willimantic resident fell victim to a "pig butchering" cryptocurrency scam, losing over $225,000. Scammers lured the victim through text messages to invest in a fake platform called 'XeggeX.' Authorities recovered $180,000 under a court order.
- Arup engineering firm, UK: Fraudsters used an AI deepfake to steal $25 million from the UK engineering firm Arup. The fraudsters impersonated company executives using realistic AI-generated videos and voices to authorize the transfer.
- George Clooney Deepfake, Argentina: Scammers tricked an Argentinian woman out of $12,000 using a deepfake of George Clooney. She spent six weeks communicating with the fake account, believing it was the actor.
Key indicators for early ATO fraud detection
Effective ATO fraud detection involves recognizing several red flags that can indicate suspicious activity:
- Unusual login behavior: Access attempts from unfamiliar devices, foreign IP addresses, or locations outside of the customer's typical patterns.
- Rapid account changes: Sudden password resets, contact information updates, or the addition of new devices.
- Account linking spree: A series of new payees, beneficiaries, or trusted devices added in quick succession.
- Transaction anomalies: Wire transfers, bill payments, or large purchases made to new or high-risk locations, often right after a profile change.
- Increased password reset requests: Multiple failed login attempts followed by rapid password resets.
6 proactive measures to improve ATO fraud detection and security
As a financial institution, you need a multi-layered, dynamic defense for ATO fraud detection in 2025, blending several essential technologies:
1. Deploy behavioral biometrics to detect impostors in real time
Behavioral biometrics tracks how users naturally interact with devices - how they type, swipe, tap, or navigate. These patterns are unique to each person and nearly impossible to fake.
Why it matters:
Even if a fraudster uses valid credentials, their behavioral patterns rarely match those of a genuine user. That mismatch raises a silent flag and helps block account takeover before damage occurs.
How to use behavioral biometrics:
- Monitor interaction patterns continuously: Use AI to track user behavior from login to logout.
- Flag deviations: Sudden changes in behavior trigger real-time authentication challenges.
- Pair with other tools: Combine behavioral insights with device or IP intelligence for multi-factor fraud detection.
2. Integrate device fingerprinting and geo-velocity checks
Device fingerprinting creates a unique ID for every device based on hardware, software, and configuration data. It works behind the scenes to validate the device during login.
Why it matters:
Fraudsters often use emulators, virtual machines, or new devices. If a user logs in from a known risky setup or an unexpected location, that's a red flag.
How to apply device and location checks:
- Identify known devices: Allow regular customer devices to reduce friction.
- Detect device farms: Flag logins from devices linked to multiple accounts or past fraud.
- Analyze geo-velocity: Catch suspicious patterns like back-to-back logins from different continents within minutes.
3. Use AI and machine learning to score every login and transaction
AI is the foundation behind modern ATO fraud detection. Machine learning evaluates every login, payment, or account change in real time and assigns a risk score based on dozens of factors.
How it works:
AI models process behavioral, transactional, and environmental data, thereby detecting subtle anomalies that humans might miss.
Steps to implement AI-driven fraud detection:
- Assign real-time risk scores: Prioritize high-risk sessions for review or challenge.
- Use predictive models: Identify accounts likely to be targeted before fraud occurs.
- Continuously retrain models: Use fresh data to adapt to evolving attack patterns.
4. Layer authentication methods for stronger defense
No single authentication method is foolproof. A layered approach significantly increases the chance of blocking fraud attempts without impacting the user experience.
Core authentication strategies to use:
- Multi-Factor Authentication (MFA): Combine passwords with OTPs, biometrics, or push approvals.
- Risk-Based Authentication (RBA): Adjust verification levels dynamically based on the session's risk score.
- Continuous Authentication: Monitor user behavior and device posture throughout the session, not just at login.
Pro tip:
Upgrade from traditional MFA to phishing-resistant methods like FIDO2 passkeys. These block even the most sophisticated credential-stealing attempts.
5. Tap into threat intelligence and credential monitoring
Banks are no longer fighting ATO fraud alone. Sharing data and staying informed helps spot threats before they reach your customers.
How to implement proactive detection strategies:
- Monitor dark web marketplaces: Check if customer credentials have been leaked or sold.
- Participate in fraud consortiums: Share and receive real-time alerts about emerging threats.
- Collaborate with law enforcement: Speed up incident response and build cases against repeat offenders.
6. Respond instantly when ATO fraud is detected
Speed matters. Identifying a threat and intervening immediately reduces losses and builds trust with your customers.
Best practices for response:
- Freeze compromised accounts: Temporarily block access and transactions until verified.
- Trigger step-up authentication: Request biometric or phone verification if behavior seems suspicious.
- Notify customers immediately: Provide alerts with clear instructions to confirm or dispute activity.
- Remediate efficiently: Guide users through password resets, fund recovery, and security education.
How VALID Systems helps financial institutions in ATO fraud detection
As financial institutions face increasing threats from ATO fraud, staying ahead of fraudsters is more critical than ever. Modern fraud detection strategies need to go beyond traditional security measures and incorporate advanced technologies that offer real-time protection.
VALID Systems offers purpose-built, real-time solutions that help banks and financial institutions identify and prevent ATO fraud before it leads to significant losses.
VALID strengthens your ATO fraud protection by:
- Continuously monitoring and scoring every deposit and transaction in real-time
- Utilizing behavioral patterns to flag fraud attempts
- Providing cross-channel fraud detection and collaborative intelligence sharing
- Enabling proactive, data-driven responses with CheckDetect
Ready to stop ATO fraud before it impacts your bottom line?
Schedule a free consultation with VALID Systems to explore how our solutions can improve your fraud detection capabilities and offer real-time, responsive protection against ATO fraud.