7 Understanding financial fraud and foundational detection strategies
This chapter covers
- Understanding the criticality and evolving landscape of financial fraud
- Identifying key financial fraud typologies and their characteristics
- Applying a four-layer framework to foundational fraud detection techniques
- Detailing AI-powered enhancements for each layer in fraud system
- Exploring advanced AI modeling, including LLMOps for fraud management
The image of a masked bandit robbing a stagecoach in the Wild West, pistols drawn and demanding "Your money or your life!", might seem like a relic of a bygone era. In those days, theft was a physical act, involving the tangible transfer of gold coins or paper currency. Fast forward to today, and the landscape of financial crime has undergone a dramatic transformation. The modern-day "bandits" are no longer confined to dusty trails; they navigate the intricate pathways of the digital world, exploiting vulnerabilities in systems where vast sums of money change hands not as physical cash, but as fleeting data points on a ledger. The rise of e-commerce, digital payments, and online banking has created an unprecedented flow of these digital transactions, and with it, a fertile ground for sophisticated fraudsters.