The Role of Artificial Intelligence in Fraud Detection and Prevention in Banking

Abstract

In the evolving landscape of digital banking, the threat of financial fraud has become increasingly sophisticated and pervasive. This paper explores the pivotal role of Artificial Intelligence (AI) in detecting and preventing fraud within the banking sector. Traditional fraud detection systems, which rely on static rules and manual monitoring, are often insufficient against dynamic and rapidly evolving fraudulent techniques. AI-powered systems, leveraging machine learning, deep learning, and natural language processing, offer proactive, adaptive, and efficient solutions to mitigate financial risks. This study provides a comprehensive review of current AI technologies used in fraud detection, evaluates their effectiveness, discusses implementation challenges, and outlines future directions for AI integration in banking fraud prevention. By adopting AI, banks can enhance the security of their financial systems, ensure regulatory compliance, and improve customer trust and operational efficiency.