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Fraud Case Management System in Banking.

Why Should Financial Institutions Use Fraud Case Management System to Fight Fraud in 2025

  • 8 min read

As custodians of wealth, banks are prime targets for fraudsters seeking financial gain. The scale, sophistication, and evolving nature of fraud in the banking sector make it one of the most challenging industries to secure.

This guide explores the latest trends in banking fraud and how implementing a strong fraud case management system helps financial institutions combat fraud effectively in 2025.

The Scale of Fraud in Banking

According to the BBC, fraud cases have risen by 16%, with criminals now stealing in excess of £3 million per day, as reported by the banking industry. UK Finance highlighted that perpetrators have notably targeted individuals by exploiting one-time passcodes. Despite the increase in reported fraud cases, total financial losses have seen a slight decline, amounting to £572 million in the first half of the year.

Given this scale, relying solely on manual processes is unsustainable. Banks must adopt fraud case management systems to manage these threats effectively.

The Cost of Fraud in Banking

Fraud has far-reaching consequences for banks, including:

  1. Financial Losses: According to the BBC, APP fraud involves criminals impersonating legitimate organisations, like banks or tradespeople, to trick victims into transferring money or purchasing non-existent goods. In the first half of the year, there were 97,344 cases, with losses totalling £214 million. New mandatory regulations, effective from 7 October, require UK banks to refund victims of APP fraud up to £85,000 within five days. Prior to these rules, most banks adhered to a voluntary reimbursement code.
  2. Reputational Damage: Failing to address fraud effectively erodes customer trust, potentially driving clients to competitors and tarnishing the bank’s reputation.
  3. Regulatory Risks: Non-compliance with fraud prevention regulations can result in hefty fines, legal penalties, and increased scrutiny from regulatory bodies.

Emerging Fraud Trends in Banking

Fraud in the banking industry continues to evolve with new techniques and methods being used by criminals. Here are some of the most common types of fraud affecting banks today:

Phishing

Phishing happens when a scammer contacts someone through email, text, or phone, pretending to be their bank. The scammer’s main goal is to trick the person into clicking a link that installs harmful software (like malware or spyware) or into sharing personal information, such as passwords or account details.

Phishing is very common because scammers are skilled at imitating banks. It doesn’t just target banking customers—bank employees are also frequent victims. Criminals may use phishing to break into a bank’s systems, which is one of the leading causes of corporate data breaches.

Identity Theft

Identity theft is one of the simplest forms of fraud. It happens when a criminal steals someone’s personal information—like their name, address, or phone number—and uses it without permission. In banking, identity theft often leads to “account takeovers,” where the thief gains control of a customer’s account to steal money or make unauthorised transactions.

Credential Theft

Credential theft involves stealing sensitive information like passwords, ID numbers, or Social Security numbers. Criminals often use this information to access online banking accounts or other financial platforms. Once they gain access, they can drain funds or use the account for illegal activities, just like with identity theft.

Wire Fraud

Wire fraud occurs when criminals use phone calls, emails, or online communication to trick someone into sending money electronically. This often happens across state or national borders. For example, a scammer might pretend to be a family member or a friend in urgent need of financial help, convincing the victim to send money via wire transfer. In the U.S., wire fraud is a serious federal crime investigated by the FBI.

Money Laundering

Money laundering is when criminals try to hide where their illegal money comes from by passing it through legitimate banks or businesses. This type of fraud doesn’t just hurt banks financially—it can also damage their reputation and involve them in criminal activities unknowingly. If a bank is found to have helped with money laundering, even unintentionally, it could face heavy fines, legal penalties, and loss of trust.

Application Fraud

Application fraud occurs when a scammer uses a stolen or fake identity to apply for a loan or credit card. At first, the scammer might use the account responsibly to build trust and get higher credit limits. Then, they will make large purchases and disappear without paying, leaving the bank to cover the losses. This type of fraud is also called “account opening fraud” or “accounting fraud.”

By staying aware of these fraud techniques, banks and customers can take steps to better protect themselves from financial crimes.

9 Features of a Fraud Case Management System That That Will Help in Preventing Fraud in Financial Institutions

A strong fraud management system relies on synergy between automated tools and collaboration. Here’s a step-by-step breakdown:

1. Data Collection

The fraud investigation process begins by gathering data from various sources, including behavioural data like login times and transaction patterns, device data such as IP addresses, operating systems, and browser types, and transaction data detailing amounts, frequencies, and recipient information. This data is collected in real-time to establish a baseline of normal activity for each customer.

2. Preprocessing

Collected data undergoes cleaning and standardisation to ensure it is accurate and usable for analysis. This includes removing duplicates, correcting errors, standardising formats, and anonymising sensitive information to maintain compliance with data privacy laws. Preprocessing ensures the fraud detection tools receive high-quality input for analysis.

3. Anomaly Detection

Automated tools analyse preprocessed data to identify unusual patterns that deviate from established norms, such as accessing an account from an unfamiliar device, conducting transactions at odd hours, or performing high-frequency transfers. Algorithms powered by machine learning and behavioural analytics detect these anomalies in real time.

4. Rule-Based Monitoring

Anomalies detected by automated tools are evaluated against predefined rules and thresholds to assess their risk level. For example, transactions exceeding a certain amount, frequent logins from multiple locations, or transfers to unverified accounts may trigger alerts or block actions. These rules are updated regularly to adapt to new fraud tactics.

5. Fraud Response

When high-risk activity is detected, automated systems immediately take action to mitigate potential fraud. Responses include blocking suspicious transactions, freezing accounts temporarily, or initiating additional security measures like two-factor authentication (2FA). These responses are designed to secure accounts while minimising disruption for genuine users.

6. Escalation to Analysts

Cases that cannot be conclusively determined as fraudulent by automated systems are escalated to human fraud analysts. These experts examine flagged transactions or activities in greater detail, reviewing additional data points and historical context to decide whether to approve, decline, or escalate for further action.

7. Customer Communication

If additional verification is needed, banks reach out to customers through secure channels like SMS, email, or app notifications. They may request confirmation of specific transactions or guide customers on securing their accounts if fraud is suspected. Proactive communication builds customer trust and prevents further unauthorised activity.

8. Resolution and Documentation

Once a case is resolved, detailed records are maintained for compliance and future reference. Documentation includes the nature of the suspicious activity, the investigative process, and the actions taken to mitigate the risk. These records help improve detection systems and ensure adherence to regulatory requirements.

9. Reporting and Feedback Loop

Fraud trends and case outcomes are analysed and reported to evaluate the effectiveness of the bank’s fraud management measures. Insights from these reports are used to refine detection rules, enhance algorithms, and address emerging threats. This continuous feedback loop ensures that the system evolves to counteract new fraud techniques effectively.

What Are Your Rights if You’re a Victim of Fraud?

If you’ve been a victim of fraud, there are certain protections and rights in place to help you. In the UK, the Financial Conduct Authority (FCA) oversees financial services and ensures they follow the rules.

Here’s what you should know:

  • You Can File a Complaint: If you have an issue with a financial company regulated by the FCA, you can take your complaint to the Financial Ombudsman Service. They help resolve disputes and can order the company to pay you compensation.
  • New Fraud Reimbursement Rules: From 7 October 2024, new rules called the Mandatory Reimbursement Requirement were introduced to protect customers from authorised push payment (APP) scams. These scams involve fraudsters tricking you into sending them money.
    • These rules are not optional for banks, unlike the previous voluntary code.
    • Most UK money transfers of up to £85,000 are covered. However, international transfers and payments involving cryptocurrencies are not included.
    • Refunds will now be shared equally between the bank sending the money and the bank receiving it, ensuring fair responsibility.

If you experience fraud, these measures are designed to provide you with better protection and ensure you’re treated fairly.

What’s Next?

For banks and financial institutions, staying ahead of fraud requires continuous improvement. Investing in a strong fraud case management system is essential in 2025. Using such systems can further optimise workflows and enhance system effectiveness.

Whether you’re building fraud detection workflows from scratch or improving existing processes, adopting a proactive, technology-driven approach is key to combating fraud in 2024 and beyond.