Role of Artificial Intelligence in Identifying Financial Fraud

Abstract

This thesis explores the role of Artificial Intelligence (AI) in identifying and preventing financial fraud in the age where the world continues to digitalize. Focus being the protection offered by financial institutions to their consumers. Frauds such as phishing scams, identity theft, and online shopping fraud are explored. The thesis examines the different AI-driven tools used to enhance protection, such as real-time transaction monitoring, predictive analytics, Know Your Customer (KYC) processes, and social media and dark web monitoring. These methods are compared to the traditional rule-based ones to accentuate the capabilities of AI-driven methods. The results highlight AI’s superiority in scalability, adaptability, and accuracy when compared to the previous methods in place. However, there are still challenges ahead, such as data integrity and quality, ethical concerns, regulatory inconsistencies, and algorithmic biases. The findings emphasize the improvement AI-driven tools have made in securing consumers from financial fraud. Yet emphasis is put on being cautious, and especially the need for consumer education, explainable AI, and improved data integrity. The thesis aims to provide a holistic understanding of AI’s role in the safety and security of consumers and the future direction of where AI-enabled fraud prevention strategies are headed.