Enhancing fraud detection with AI and machine learning

Christine Foster at the GenAI Centre of Expertise Experian UK&I describes the rise of AI fraud and outlines methods of fighting it

 

No part of society will be untouched by the transformative power of Generative AI. From healthcare to financial services, to the workplace and the way customers interact with businesses, the application of AI is already being embedded into a vast array of products and services, dramatically improving efficiency and outcomes.

 

As we become more familiar with it and the technology matures in the years ahead, the potential impact of GenAI on our everyday lives is incalculable.

 

However, with vast potential also comes potential pitfalls, and in the fraud landscape specifically, we are seeing the rise of AI fundamentally reshape the industry. Advanced techniques, such as deepfakes and synthetic identity creation, are becoming increasingly common and can be used by criminals rapidly and at scale.

 

This poses a risk not only to people’s personal information but to an organisation’s brand, reputation, and revenue. Conversely, organisations are also fighting back and ensuring AI is increasingly being deployed to identify and prevent these attacks.

 

The rise of AI fraud

Let’s take synthetic fraud as an example. Previously, creating new identities to apply for financial products through a combination of different individuals’ personal information, often purchased on the dark web, was a time-consuming process for criminals.  

 

Now, due to the growth in AI, the time it takes to create or steal identities has rapidly reduced. Criminals can quickly fabricate volumes of new synthetic identities using both real and fake information to launch fraud attacks on financial service companies.

 

AI can also let fraudsters create fake identity documents which are indistinguishable from genuine ones, creating even greater difficulty in identifying and preventing fraudulent applications.

 

To indicate the scale of the problem, recent analysis shows there was an increase of 60% in false identity cases in 2024, with the cases now making up nearly a third (29%) of all identity fraud cases. In addition, our latest annual Fraud and FinCrime report revealed more than a third (35%) of UK businesses reported being targeted by AI-related fraud in the first quarter of 2025, up from 23% in 2024. 

 

The rise of AI fraud prevention

To counter the rise of AI-powered fraud, businesses are also using it to strengthen their fraud prevention measures, and many are investing heavily in new prevention systems. The Fraud and FinCrime report shows that the majority of businesses (68%) are planning on increasing their fraud prevention budgets in 2025.

 

The focus of this investment and proactive approach to preventing fraud is centred on a significant, fundamental shift away from traditional systems. Instead, businesses are looking at more adaptive, data-driven approaches which can analyse volumes of transactions in real-time, identify unusual patterns and adjust accordingly to emerging threats.

 

This means that over half (52%) of UK businesses are looking to enhance their AI analytics capabilities, and 51% are developing new models to support better customer decision-making and reduce false positives. 

 

On top of this, nearly two-thirds of businesses (60%) are prioritising investment in synthetic identity detection, and 55% plan to increase their budgets in this area too. What we are seeing is that advanced identity verification tools, including those that combine behavioural data with traditional checks, are becoming more widely adopted. The reason behind this is simple: these tools help businesses identify inconsistencies and reduce the risk of fraud during the onboarding process. 

 

AI is already proving itself as an essential tool in the financial services fraud prevention space by being able to analyse volumes of data at rapid speed, ensuring that potentially fraudulent activity and applications can be identified like never before.

 

However, it also brings another advantage. By boosting efficiency and detection, fraud teams are able to concentrate on cases which are genuinely fraudulent and pose a risk to the business, rather than having to spend time investigating cases which have been incorrectly flagged as potentially fraudulent.

 

Ultimately, while AI is fuelling the trend of increasingly sophisticated identity theft schemes, it’s also the very technology financial institutions are adopting to fight back. That is why investment in this area is growing. Businesses are taking a multi-layered approach to fraud prevention, combining multiple technologies to detect fraud and new threats.

 

AI is a fundamental part of this new approach, one which will ensure fraud prevention systems are fit to meet the challenges of the years ahead.

 

---

 

Christine Foster is General Manager for the GenAI Centre of Expertise, Experian UK&I

 

Main image courtesy of iStockPhoto.com and Ole_CNX