Apr 19, 2024
5 min read

Fraud Detection and Prevention—Best Practices 2024 

Learn about fraud detection and prevention with actionable tips

Fraud is one of the biggest threats to companies worldwide. Failure to properly confront fraudsters results in both financial and reputational losses. More importantly, fraud often leads to penalties from regulators, as part of efforts to confront money laundering, terrorism financing, drug trafficking, and so on. 

According to Juniper’s Research, companies are expected to lose over $362 billion globally between 2023 and 2028 due to fraud. By the same token, it’s expected that spending on identity verification solutions will reach $18.6 billion by 2027, double the current value. So, it’s important to learn how to spend your money right as well. 

In this article, Sumsub prepared an exhaustive guide to fraud detection and prevention. We also explain how companies can implement a working anti-fraud solution with all the necessary policies. 

What is fraud detection?

. Fraud detection is the process of monitoring users, including their transactions and behavioral patterns, with the goal of spotting fraudulent activity. Fraud detection can be, for instance, a company’s efforts to track unusual changes in user geolocation or abnormal purchases. 

As technologies advance, fraud gets more complex.Therefore, companies implement new fraud detection tools, including automated technologies and AI-powered solutions.

What is fraud prevention?

Fraud prevention includes company policies that aim to prevent fraud in the first place. These policies are typically based on a risk assessment, which clarifies the most probable types of fraud a company may face. Such assessments should be conducted on a regular basis in order to ensure that the measures taken are appropriate for the level of risk. 

The difference between fraud prevention and detection

Fraud prevention and detection go hand in hand with each other. Fraud detection works with the cases that have happened or are happening now. Fraud prevention, on the other hand, aims to stop fraud before it even occurs. Thus, the former process can be explained as a reactive one, while the latter one is proactive. While fraud prevention sounds more attractive than fraud detection, companies will have to rely on both processes in order to learn more about fraudsters, recover losses at the quickest possible time, and constantly develop their policies for future attacks. This can be done by analyzing the patterns from the cases collected through fraud detection solutions.

Most common types of fraud

Fraud may take many forms depending on region and businesses that are targeted. The most common types of fraud include: 

  • Account takeover: This involves the acquisition and use of compromised user credentials on various online platforms. Fraudsters trade and exchange stolen user information obtained through various means (e.g., phishing, data breaches, and malware attacks)
  • Fake accounts: Fraudsters can create a fake account using forged or stolen data
  • Chargebacks: This involves card payment charges that customers request to be refunded over alleged disputes. This often occurs when fraudsters steal payment cards or information to make purchases. and make a purchase. T
  • Promo abuse: This is when company’s promotional materials are misused. These include referral bonuses, vouchers, sign-up bonuses, coupons, or discounts. While such campaigns aim to attract new audiences, certain individuals attempt to trick the system by taking more than their fair share—and, often enough, they succeed
  • Money muling: A form of money laundering where criminals employ other individuals to move illicit funds
  • Payment fraud: Stealing payment information to make unauthorized transactions. 

You can also learn about fraud in different industries here:

The three fraud trends identified in 2023 and expected to prevail in 2024 are deepfake usage, complex fraud patterns, and advanced forgeries. Specifically AI-generated technologies and deepfake in particular continue to pose a significant threat in the realm of fraud. The widespread accessibility of this technology has made it easier and cheaper for criminals to create highly realistic audio, photo, and video manipulations, deceiving individuals and fraud prevention systems. 

Another growing issue is that fraudsters turn towards more complex and sophisticated techniques, fueling more advanced scams and money laundering schemes. For example, account takeovers alone increased by 155% globally in 2023. This trends was even more worrying as fraudsters now organize into fraud networks, making it more difficult for companies to detect and confront them,

Another visible trend is that fraudsters now attack less obvious and less regulated businesses and institutions, including online media, professional services, healthcare, transportation, and video gaming. This means that all companies need to take action to confront the spread of fraud and avoid falling victim to illegal activities. 

Criminals will continue coming up with new ways to abus platforms. Even today we see that 70% of fraud takes place after the Know Your Customer (KYC) stage. To confront this, companies will need multi-layered anti-fraud solutions that detect advanced fraudulent signals, including behavioral anti-fraud measures and transaction monitoring.

Check out these articles to learn more about the fraud trends of 2024:

How to detect fraud

Companies need to implement comprehensive solutions that can detect fraud at various stages. This can include advanced authentication methods, real-time monitoring for suspicious activities, regular employee training and awareness programs, and strong encryption for sensitive data.

There is no universal formula that can stop and detect all fraudsters. However, there are certainly some preventative practices that can minimize it:

  • Advanced identity verification solutions
  • Transaction monitoring 
  • Behavioral pattern checks
  • Device fingerprinting
  • Background checks
  • Password protection

Companies should develop a proper KYC process and ensure ongoing monitoring. If done right, it can easily spot fraudsters. 

Some solutions that companies need to detect and prevent fraud includes:

  • Know Your Customer (KYC)
  • Know Your Business
  • Transaction Monitoring 
  • Geolocation Tracking
  • Deepfake Detection
  • Device Fingerprinting 
  • Fraud Scoring
  • Fraud Network Detection
  • Behavioral Intelligence

Check out these articles to learn about ways to prevent fraud:

Best practices for fraud detection and prevention

We at Sumsub have prepared a checklist for fraud detection and prevention:

  • Implement KYC protocols:
    • Mandate robust Know Your Customer (KYC) procedures for client onboarding 
    • Regularly update and validate customer data 
    • Utilize identity verification services to cross-check client details 
    • Invest in technology that can identify deepfake videos and audios 
  • Secure data storage:
    • Use encryption for sensitive data 
    • Regularly update and back up databases 
    • Limit access to sensitive information 
  • Implement strong authentication methods:
    • Use multi-factor authentication (MFA) for accessing company systems 
    • Regularly update and strengthen password policies
  • Regular training & awareness programs:
    • Educate employees about the latest fraud tactics 
    • Conduct regular cybersecurity drills 
  • Monitor transactions:
    • Implement real-time monitoring of transactions to spot suspicious activities 
    • Set up alerts for unusual patterns
  • Vet vendors:
    • Ensure third-party vendors follow strict security protocols 
    • Regularly review and audit their security practices
  • Update security systems:
    • Keep all software, especially security software, updated 
    • Regularly patch vulnerabilities in the system 
  • Implement incident response plan:
    • Have a plan in place for potential breaches 
    • Regularly review and rehearse the response plan 
  • Employ physical security:
    • Ensure secure access controls to company premises 
    • Use surveillance systems like CCTV cameras
  • Perform regularly audit & review:
    • Conduct security audits regularly 
    • Review and update security policies as needed 
  • Get feedback:
    • Encourage employees to report suspicious activities 
    • Create an anonymous reporting system if necessary

If you want to learn more about the ways to detect fraud and confront it in a timely manner, download our Identity Fraud Report


  • What is the most common type of online fraud?

    The most common types of fraud include:

    • Account takeover fraud

    • Fake account

    • Chargeback fraud

    • Promo abuse

    • Money muling

  • What is the fraud prevention process?

    Fraud prevention consists of company policies that aim to prevent fraud. The policies are typically based on a risk assessment, which allows a company to clarify the most probable types of fraud they may face.

  • What is the most effective technique to detect fraud?

    The most effective measures include:

    • Advanced identity verification solutions

    • Transaction monitoring

    • Behavioral pattern checks

    • Device fingerprinting

    • Background checks

    • Password protection

Fraud PreventionIdentity VerificationTransaction Monitoring