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Account Takeover Fraud Detection for Financial Institutions

How Financial Institutions Can Strengthen Account Takeover Fraud Detection

Ann Marie Smith

3/28/2025

The Association of Certified Financial Examiners (ACFE) reports that account takeovers are now the second most common form of fraud, citing “alarming rates” of attacks on financial institutions. Fraudsters use information from data breaches or social engineering to gain access to financial accounts and then steal money.

How common is it? 29% of consumers have experienced some form of account takeover. Put another way, that’s about 77 million people, adding up to nearly $13 billion in losses.

For victims, the impact can be devastating, draining their accounts and leaving their financial house in ruins. Financial institutions are often left picking up the pieces, losing customers, absorbing losses, and seeing their reputations severely damaged.

Cybercriminals Are More Aggressive Than Ever

Cybercriminals use phishing, credential stuffing, malware attacks, and other nefarious tactics to gain access to accounts. Once inside, they may change account details, transfer funds, or open new lines of credit in the victim’s name. Financial institutions are prime targets due to the sensitive financial data they hold.

With digital banking becoming more widespread, attackers are using increasingly sophisticated techniques to bypass traditional security measures.

The Impact on Financial Institutions

The effects of account takeover fraud go beyond financial loss. Institutions must absorb the cost of reimbursing stolen funds, covering chargebacks, and handling fraud investigations. In addition, they face reputational damage as customers lose trust in their ability to provide a secure banking environment.

Regulatory scrutiny is also a concern. Banks and financial service providers must comply with stringent security and fraud prevention regulations, and failing to prevent account takeover fraud can result in hefty fines. As fraudsters continue to evolve their tactics, financial institutions must stay ahead with stronger fraud protection services.

Traditional Account Takeover Fraud Detection Falls Short

Surprisingly, some financial institutions still rely on static security measures like passwords and one-time authentication codes. However, these defenses can be easily compromised. Credential leaks, phishing schemes, and brute-force attacks make it simple for cybercriminals to gain unauthorized access.

Rules-based fraud detection systems also fall short, as they rely on predefined parameters to identify suspicious activity. Unfortunately, attackers are adept at mimicking legitimate user behavior, making it difficult for traditional systems to detect anomalies.

Ongoing Account Monitoring in Fraud Detection

To combat account takeover fraud, financial institutions must adopt a proactive approach through continuous monitoring. Ongoing account monitoring enables real-time detection of suspicious activity by analyzing user behavior, device fingerprints, and transaction patterns.

With AI-driven fraud protection services, banks can identify and mitigate threats before they escalate. Behavioral biometrics, geolocation tracking, and machine learning models can help distinguish between legitimate users and imposters, reducing false positives while improving security.

Best Practices for Strengthening Account Takeover Fraud Detection

A few best practices can help reduce risk and improve account takeover fraud detection.

  • AI-powered fraud protection services: Leveraging artificial intelligence and machine learning to help detect suspicious activity in real-time.
  • Risk-based authentication: Adding additional verification steps for logins from new devices, locations, or activity considered high risk.
  • Biometric authentication: Beyond multi-factor authentication (MFA), facial recognition, voice recognition, and liveness detection can make it harder for attackers to gain unauthorized access.
  • Customer education and security features: Encouraging customers to use security features like biometric authentication and account alerts can prevent unauthorized access.
  • Threat intelligence sharing: Partnering with industry groups and fraud prevention networks allows institutions to stay informed on emerging threats and fraud trends.
  • Behavioral biometrics: Comparing past user behavior to look for anomalies that indicate non-human activity or inconsistencies with prior user interactions.

Many financial institutions are employing real-time transaction monitoring in addition to account monitoring. In conjunction with risk scoring, high-risk transactions can be analyzed at scale for unusual activity.

Account takeover fraud detection and prevention requires a multi-layered approach. Combining these best practices with account monitoring provides a solid framework to keep threat actors at bay.

Fraud Protection Services from Command Credit

Identity theft and synthetic fraud are increasingly challenging to detect. AI tools have helped cybercriminals create more convincing fakes and do it at scale. You need robust fraud protection services to avoid account takeover.

It starts with onboarding to help identify potential fraudsters before you book their account or allow them access. Detecting fraudulent entities should be at the forefront of your onboarding process.

Ongoing account monitoring can scan accounts and automatically alert you to suspicious activity that requires investigation or intervention. This can help mitigate risk, loss, and liability, creating a more secure environment for your customers.

Contact Command Credit today to discuss your fraud protection service needs and how you can improve your account takeover fraud detection.