Fraud Management in Banking: An Overview

Financial district bank in black and white

Fraud prevention and detection are essential components in maintaining the integrity and trustworthiness of banking institutions.

The relentless evolution of fraud tactics, such as ATM skimming, phishing, and synthetic identity fraud, underscores the imperative of proactive fraud management. The substantial cost of fraud recovery further amplifies this need. Through a blend of technological solutions, user education, and tailored fraud management strategies, banks can significantly fortify their defenses, safeguarding their assets and reputation in the face of growing cyberthreats.

When it comes to fraud prevention and detection, a one-size-fits-all approach often falls short. Today, in the digital age, banks need a balanced framework tailored to their needs; one that leverages new technology while also fostering an educated and aware user base. 

In this overview of fraud management in banking, we will discuss several common attack vectors, explore the role of technology in fraud prevention, and provide five strategies to fortify your firm and protect your reputation.

Let’s dive in.

Fraud Prevention and Fraud Detection Defined

When it comes to fraud management, prevention and detection are two sides of the same coin.

Fraud prevention includes any defensive measure that thwarts attacks before they occur. 

Where prevention fails, fraud detection tools identify and eradicate active threats. 

These protocols often work interchangeably. 

Though there are many strategies to consider, leading countermeasures often include the use of data loss prevention (DLP) software, multi-factor authentication (MFA), employee awareness training, TLS certificates, and gated domains.

Though still an emerging technology, machine learning (ML) and artificial intelligence (AI) tools can also help banks avoid fraud. 

By rapidly analyzing and verifying data, ML and AI algorithms can identify fraud patterns and behavioral anomalies. In other words, this technology can both preempt and detect attacks in real-time.  

While all of these solutions are worth your consideration, effective fraud management strategies demand a tailored approach. 

Though it’s tempting to implement a one-size-fits-all solution, banks must pursue custom strategies that address their unique vulnerabilities. 

As we will discuss, the bedrock of these standards begins with an encrypted, gated domain. 

Examples of Banking Fraud 

Bank fraud has a tragic degree of inevitability. 

In the digital world, cybersecurity breaches are a matter of when, not if.

Every day, banks grapple with tactile scams like ATM skimming alongside cyberattacks like phishing, spoofing, and wire fraud.

In 2020, synthetic identity fraud—where criminals craft composite identities from multiple sources—drained $20 billion from U.S. banks and financial institutions.

Though these methods are built by bad actors, they are unleashed by an unlikely source: unwitting employees and careless customers.

In fact, fraudsters craft these “social engineering” traps with a bank’s staff and clients in mind. Indeed, insider threats cost firms an average of $16.2 million per year

Though there’s only one path to integrity, there are a thousand routes to fraud. And the cost of that fraud is devastating—especially to banks. 

In fact, every dollar lost to fraud costs banks $4.36 to recover

Fraud management in banking is no longer a passive consideration: it’s now an existential requirement.  

5 Practical Strategies for Combating Fraud 

No matter what people may promise, there’s no silver bullet against fraud. 

To build a reliable defense against bad actors, you need comprehensive strategies that prevent, detect, and contain active threats. 

Here’s the good news: you and your team have considerable autonomy with this process.

Countless vendors are at your disposal, and you’ll have no shortage of options to consider.

As you jumpstart your journey, consider using the following measures as a template to inspire your security framework:

1. Employee Training

Devices and networks aren’t the primary target for fraud—people are. 

According to the World Economic Forum, 95% of all cyberattacks involve human error

Whether you hire a third-party provider or create your own curriculum, bank employees must know how to identify fraud, avoid pitfalls, and report active threats. 

Without this training, your staff won’t know how to prevent attacks or more importantly, mitigate real ones.

Employee training won’t just make your bank more secure. It will also save significant sums of money (and free up valuable time for your IT team). 

Check out our comprehensive guide to employee training.

2. Customer Education 

Though they’re your biggest asset, your customers are also a liability to your bank. 

That may be difficult to accept, but it’s true. In 2022, there were 2.4 million consumer fraud reports, which cost a total of $8.8 billion

During that time, fraudulent bank transfers were the largest source of loss ($1.5 billion). 

Customers need to know how easily they can fall victim to fraud.

They need to know that hackers can easily target them through their mobile phone, whether they’re using Instagram, Venmo, or WhatsApp.

While education is an investment in your client, it’s also an extra layer of defense for your firm. 

Though your customers might make the mistakes, your team is held responsible for fixing them.

Just like with your employees, show customers what phishing and spoofing emails look like.

Help them to recognize the difference between legitimate domains and lookalike domains


Remind them that no legitimate person or business would urgently ask for wire transfers or confidential information.

Send them recurring email newsletters with anti-fraud tips, and mail hard copy cybersecurity FAQs to address common misconceptions. And if you have Gen-Z customers, you can leverage social media to make cyber hygiene relatable and fun. 

3. Multi-Factor Authentication (MFA)

Alphanumeric passwords, however complex they might be, are no longer secure.

By instituting multi-factor authentication (MFA) for customers and employees, fraudsters will have a much harder time getting what they want.

In fact, MFA can help prevent up to 90% of cyberattacks

After all, even if fraudsters steal a password (or harvest one through a brute force attack), they won’t be able to gain access to an account without the additional authentication factors. 

Plus, if you can incorporate biometrics, like fingerprint or facial ID, it will add another impenetrable layer of security. 

We recommend exploring some popular MFA providers for financial institutions. 

4. TLS Certificates 

To secure your network (and prevent traffic interruption), you need TLS certificates. 

With a Transport Layer Security (TLS) certificate, you can enable an authenticated, encrypted connection between your clients and your server. 

TLS certificates deliver three essential features, as they:

  • Show customers that your website is trustworthy.
  • Ensure that transferred data is unreadable to fraudsters.
  • Protect sensitive customer information and payment data. 

While securing customer and employee transactions, TLS certificates can also improve your search engine optimization (SEO) rankings and ensure compliance with PCI-DSS, GDPR, and other strict regulations. 

5. Data Loss Prevention (DLP)

In the online banking world, whoever controls your data dictates your destiny. 

With Data Loss Prevention (DLP) protocols, you’ll reduce the risk of data theft and destruction. 

Like an advanced surveillance system, DLP analyzes network traffic and data at all times: whether in storage, in use, or in transit.

While fulfilling many bank compliance requirements, DLP solutions prevent data exfiltration and limit data destruction after a breach.

Therefore, DLP strategies are crucial to protecting bank client information and thwarting fraud.

Check out these popular DLP providers for banks.

Bonus: Gated Domains

The rise of fraud and cyberattacks has created a crisis in the banking community. 

Bad actors are shamelessly stealing and spoofing bank identities to manipulate customers and staff. In fact, over 3.1 billion spoofed emails are sent every day with a sickening goal:
to trick well-intentioned people into revealing confidential information. 

Though these strategies often succeed with unrestricted domains, they break down with gated domains like .Bank.

Fraudsters thrive on impersonation—a .Bank domain deprives them of that luxury. And while anyone can purchase an unrestricted domain, only verified banks and their associations can get .Bank.

Here’s the best part: moving to .Bank is the simplest cybersecurity safeguard imaginable.

While helping employees and customers know what’s real (and what’s not), it delivers a knockout punch to hackers. 

It’s affordable. It’s easy to implement. And it slams the door on hackers. 

Welcome to .Bank: Your Secure Domain

A bank’s reputation is everything. 

That’s why fraud is so disturbing, because it threatens your good name and the people that 

uphold it.

We built .Bank so you’ll never have to deal with counterfeit websites and emails ever again. 

We didn’t build it for every industry, we built it exclusively for banks. 

You have a lot to worry about already, so we made the transition as straightforward (and affordable) as possible.

By moving to a .Bank domain, you’ll instantly add a vital layer of security that stops bad actors from undermining your business. 

You’ll ensure your employees and customers always know what’s real—and more importantly, what’s not.

Find out why 800+ banks said goodbye to their old domains. 

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