How AI Can Enhance Bank Fraud Detection in Real Time

What is AI-powered fraud detection

Why AI is making fraud more difficult to detect

Fraud has always adapted to new technology, and artificial intelligence is no exception. Even though AI is being used to protect your assets from fraud, criminals are now using AI to make scams more convincing and harder to spot, as well.

According to the FBI’s Internet Crime Complaint Center, criminals use AI to create realistic emails, text messages and fake online profiles that look legitimate. AI tools can remove spelling errors, translate languages and generate believable content at scale. Some scams now will include fake images, use voice cloning or video to impersonate people, businesses or even trusted institutions and gain access to valuable information or money.

These tactics make it harder for traditional fraud detection methods to keep up. Older systems typically rely on known patterns or fixed rules. Fixed rules are predefined and human-written conditions that operate on the “if X, the Y" logic. When scams change quickly or begin to look more realistic, outdated fraud detection systems may end up missing early warning signs.

As fraud becomes faster and more sophisticated, banks need tools that can adapt just as quickly. AI is positioned to fill that gap, by allowing the faster spotting of subtle changes and patterns that may be difficult, if not impossible, for people or rule-based systems to catch.

How AI improves fraud detection in banks

AI can help banks strengthen fraud detection by combining the speed, scale and efficacy of machine learning. Machine learning models for fraud detection are designed to review millions of transactions and identify high-risk activity in real time.

While still early on, this approach has already delivered strong results. In fiscal year 2024, the U.S. Department of the Treasury reported preventing and recovering more than $4 billion in fraud and improper payments by using data-driven tools, including machine learning AI. These systems helped prioritize high-risk transactions, detect check fraud faster and stop suspicious payments before funds were lost.

In banking, similar machine learning tools are being used to support fraud monitoring by:

• Identifying unusual transactions as they occur in real-time
• Reducing false alerts by learning normal customer behavior
• Helping teams focus on the highest-risk activity first

By supporting better decision making through clearer signals and faster insight, banks can now respond sooner to fraudulent activity while continuing to meet regulatory and security standards.

AI transparency and trust

Using AI responsibly is just as important as using it effectively and in banking, trust depends on transparency, strong oversight and clear safeguards.

AI systems work best when people remain involved across almost every use. Human review helps confirm decisions, reduce errors and ensure customers are treated fairly. Additionally, clear data governance also serves to protect privacy and supports compliance within financial regulations.

That focus on responsible use extends beyond internal systems. Building understanding and education around AI helps strengthen trust and provide essential tools for the future. Community education efforts, such as Associated Bank’s AI Academy, reflect a broader commitment to helping people understand how artificial intelligence works and how it can be used thoughtfully in financial services and beyond.

When AI is applied with care, it becomes a tool that supports security, clarity and long-term confidence.

What AI means for customers

For banking customers, AI-powered fraud detection will ultimately help create a safer and more reliable banking experience for all. Faster detection can mean quicker alerts, fewer unauthorized transactions and less overall disruption when account activity looks suspicious.

At the same time, smarter systems can reduce unnecessary declines or alerts by better understanding normal account behavior. That balance helps protect accounts while keeping everyday banking simple, secure and convenient.

As fraud risks continue to evolve as a result of AI, machine learning fraud detection systems will also continue to improve their fraud detection and security capabilities.

Learn about how artificial intelligence is both transforming the tools used to combat fraud and the tactics fraudsters employ in Associated Bank’s Webinar on Artificial Intelligence.