Risks have grown as more financial activity happens online and personal data moves across apps, devices, and networks.
Fraud prevention in banks is no longer just a security concern, it’s an operational priority.
Risk and fraud teams are under pressure to detect anomalies faster, reduce false positives, and maintain seamless customer service, all without overwhelming their core systems or back-office teams.
In this article, we'll explore how banks can stay ahead of modern threats and how solutions like VALID Systems set the new standard in fraud defense to help you stay safe.
Fraud prevention in banking involves various strategies, technologies, and safeguards designed to detect and stop fraudulent activity before it causes harm. These efforts include spotting suspicious activity, verifying identities, blocking unauthorized access, and tracking account behavior.
When we consider that 79% of organizations faced payment fraud attempts in 2024, it's clear that fraud is not rare.
Fraud prevention is the foundation of modern banking on multiple levels:
Fraudsters now mix old-school schemes with new tactics powered by data breaches, social engineering, and instant payments. Here are the major threats banks face in 2025:
Despite digital banking's growth, paper check fraud is surging. Criminals steal checks, alter names or amounts using a tactic known as check washing, and deposit them via mobile, ATM, or in person. Outdated verification makes these altered checks hard to catch and costly to banks.
The numbers paint a clear picture: 94% of bank leaders say their institution or its customers were directly affected by check fraud in the past 18 months.
And with check fraud attempts continuing to rise sharply, industry experts estimate total losses could hit $30 billion by 2025.
Synthetic identity fraud is widely considered the fastest-growing financial crime in the U.S. It involves combining real and fake information to create entirely new, believable identities.
These "ghost" profiles often pass verification checks, open bank accounts, and gradually build credit, only to eventually default on large loans or be used to launder money. Because there's no real victim to report the fraud, it often goes undetected until it's too late.
The financial impact is massive. U.S. banks lose an estimated $6.3 billion annually to synthetic identity fraud, with each fake account costing an average of around $15,700.
Billions of leaked credentials have made account takeover fraud alarmingly easy. Fraudsters use phishing, credential stuffing, and SIM swaps to hijack accounts, steal funds, and operate as legitimate users.
The scale of the threat is growing fast. ATO attacks surged by 24% in 2024, underscoring how quickly these tactics evolve.
83% of organizations experienced at least one ATO incident in the past year, while 24% of consumers reported being victims in 2024, up from 18% the year before.
Instant payment systems like RTP, FedNow, and Zelle offer speed, but that speed also benefits fraudsters.
Scammers trick victims into willingly sending money, posing as bank staff, service providers, or trusted contacts. Users approve authorized push payment (APP) scams themselves, which makes it hard for them to stop since the payments settle instantly.
Business email compromise (BEC) is one of the most costly types of fraud.
Fraudsters impersonate executives or vendors to trick companies into sending large wire or ACH transfers. Banks often process these fraudulent transactions.
Despite years of awareness, BEC remains the top fraud method, with 63% of organizations reporting it as their biggest threat. Preventing it requires better verification and regular client education.
Legacy tools handled slower, more predictable threats. Today's fast-moving scams slip past them with ease.
What's keeping banks vulnerable:
Let's shift from theory to practice. Here's how you, as the bank, can stay ahead of modern frauds:
A layered defense remains the foundation of any resilient fraud strategy, especially when improved with AI.
Intelligent systems can assess risk at each layer in real time, adjusting defenses based on context and behavior.
For example, a high-risk business transaction might automatically trigger AI-driven risk scoring, followed by a call-back verification or dual authorization by two staff members.
Best practices include:
VALID Systems' INclearing Loss Alerts apply behavioral analytics during the clearing process to spot irregularities as they happen. By catching unexpected activity early, the system helps identify potentially fraudulent checks before they result in losses.
Instant payment systems (like RTP, Zelle, and FedNow) do not allow for delayed reviews. An AI-powered bank must detect fraud as it happens, not after the money's gone.
Action steps:
VALID Systems Real-Time Loss Alerts (RTLA®) screens check real-time deposits across mobile, ATM, and in-branch channels. It flags suspicious items immediately and helps stop altered or stolen checks before they clear.
Static rules like "flag all transfers over $5,000" are predictable and effortless to break.
Machine learning models, on the other hand, identify subtle, nonlinear risk patterns that static thresholds miss.
To get started:
Build internal guidelines around explainability, accuracy, retraining frequency, and compliance alignment, especially if you're subject to audits or must document risk decisions.
The onboarding stage is your first and best chance to stop fraud before it starts. Weak identity checks leave the door open for bad actors to slip through.
Modern onboarding strategies should include:
Strengthen customer service training, including mandatory verifications on high-risk transactions, even during inbound calls.
Fraud isn't isolated - it moves between banks, fintech, and geographies. One device or identity might hit three institutions in a single day. That's why fraud prevention must become a collaborative effort.
Key initiatives include:
VALID is built for collaborative intelligence. The platform supports integration with consortium data sources and fraud networks, allowing banks to enrich their detection models with external insights without violating privacy regulations.
With transaction volumes rising, manual reviews can't scale. At the same time, over-automation without context leads to alert fatigue and missed threats.
The solution is smart automation, automated where it can be, human-guided where it matters.
Best practices:
Fraud prevention isn't just an internal job.
An informed customer base can act as an extension of your fraud defense – they are less likely to fall for scams and more likely to report suspicious incidents.
Key strategies:
VALID Systems' Fraud Trend Analytics monitors evolving fraud patterns across transactions and surfaces key insights for financial institutions. These insights help banks fine-tune internal training programs and proactively educate customers about emerging threats.
Here’s what operations teams should look for in a fraud prevention platform that actually works in day-to-day banking environments:
With over 20 years of experience in risk decision-making and deep expertise in fraud detection, VALID helps financial institutions prevent losses before they happen.
Trusted by major players like PNC Bank, TD Bank, and Truist, VALID processes more than $4 trillion in annual check volume, but its fraud prevention capabilities go far beyond checks.
What sets VALID Systems apart:
VALID Systems doesn’t just detect fraud - it strengthens your fraud operations. From reducing investigation times to eliminating unnecessary holds, VALID streamlines how banks identify, act on, and recover from risk.
That’s why operational teams at institutions like PNC and Truist trust VALID to protect workflows and customers alike.
VALID provides the infrastructure to:
Ready to modernize your fraud defense strategy?
Schedule a consultation to learn how VALID Systems can help your team act faster, investigate smarter, and confidently prevent losses.