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AI-powered fraud detection: Protecting financial services with Elastic

By

Karen Mcdermott

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Fraud in financial services is becoming more sophisticated, costing the industry billions annually and eroding customer trust. Recently, Deloitte published an article highlighting the risk AI brings in the form of fraudsters to the financial services industry: “Fake content has never been easier to create — or harder to catch. As threats grow, banks can invest in AI and other technologies to help detect fraud and prevent losses.” 

The article reports an incident in January 2024 where an employee at a Hong Kong-based firm sent $25 million to fraudsters after being instructed to do so by her CFO on a video call that also included other colleagues. It turned out, however, that she wasn’t on a call with any of these people. Instead, fraudsters created a deepfake that replicated their likenesses to trick her into sending the money.

Ironically, as much as AI can bring risk, it can also be used to combat fraud — fighting fire with fire. At Elastic, we are already working with our financial services clients and offering them our robust Search AI Platform to detect, prevent, and mitigate fraud effectively.

The role of AI in financial fraud detection

AI introduces unprecedented precision and scalability in fraud detection by analyzing vast datasets in real time. It excels in identifying subtle patterns that traditional rule-based systems might miss, such as:

  • Anomalous transaction patterns: AI and machine learning (ML) models detect irregularities in transaction volumes, values, or geographies — flagging potential fraud attempts like money laundering or anomalous fund transfers.

  • Behavioral analytics: AI-powered tools identify deviations in user behavior, such as unusual login attempts or account activity, to combat account takeover (ATO) techniques.

  • Predictive analytics: ML models predict potential fraud scenarios, enabling preemptive actions rather than reactive responses.

Elastic: A unified approach to fraud detection

Elastic enhances fraud detection through a distributed data mesh architecture and AI-driven analytics. By integrating machine learning, Elastic automates the identification of unknown anomalies while reducing false positives. Key features include:

  • Real-time alerts: High-fidelity alerts are generated from AI-driven rules and ML algorithms.

  • Threat intelligence integration: Custom and prebuilt integrations enrich data with actionable insights.

  • Scalable data processing: The Elastic Search AI Platform processes massive data volumes across hybrid, on-premises, or cloud environments.

Real-world use cases

  1. Account takeovers (ATO): Elastic detects brute force attacks, password spraying, and enumeration activities, empowering analysts to act swiftly.

  2. Transaction stacking: AI identifies suspicious sequences, such as deposits and withdrawals in rapid succession or amounts just below regulatory thresholds.

  3. Fraudulent account detection: AI algorithms pinpoint unusual patterns in account creation or funding, flagging potentially fraudulent activities.

The future of fraud detection with AI

As financial fraud continues to evolve, institutions need proactive solutions to stay ahead. The Elastic Search AI Platform exemplifies how AI and machine learning can revolutionize fraud detection — ensuring compliance, reducing operational costs, and restoring customer confidence.

To learn more about how Elastic uses AI to combat fraud, download Detecting Financial Fraud with Elastic Security.

Related resources 

The release and timing of any features or functionality described in this post remain at Elastic's sole discretion. Any features or functionality not currently available may not be delivered on time or at all.

In this blog post, we may have used or referred to third party generative AI tools, which are owned and operated by their respective owners. Elastic does not have any control over the third party tools and we have no responsibility or liability for their content, operation or use, nor for any loss or damage that may arise from your use of such tools. Please exercise caution when using AI tools with personal, sensitive or confidential information. Any data you submit may be used for AI training or other purposes. There is no guarantee that information you provide will be kept secure or confidential. You should familiarize yourself with the privacy practices and terms of use of any generative AI tools prior to use. 

Elastic, Elasticsearch, ESRE, Elasticsearch Relevance Engine and associated marks are trademarks, logos or registered trademarks of Elasticsearch N.V. in the United States and other countries. All other company and product names are trademarks, logos or registered trademarks of their respective owners.

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