The Role of Artificial Intelligence in Cybersecurity for Financial Fraud Detection and Prevention

Abstract

Financial fraud, particularly computer-environment-reliant fraud has been an ongoing global concern. Sources, both anecdotal and research, have consistently inundated the print media with concerning reports of cyber fraud various kinds running into billions of dollars yearly. From the forgoing, it is evident that traditional systems of fraud mitigation are fast losing its grips on the menace fraudulent activities. Traditional fraud mitigation parameters are rule based. They are targeted against meeting certain rule challenge. More so, criminals appear to keep changing their pattern of crimes to fool the system and stay undetected.  Rule-based traditional approaches are not effective against the current state of dynamism and persistence in fraudulent financial cybercrimes. AI and machine learning approaches have proven to be more resilient in tackling the today’s threat of cybercrimes as they evolve. The reason being that AI is equally an evolving mechanism which collects data from both historic and learning activities, while building a continuous model capable of acting proactively to arrest threats before they occur.  Hence, this is poised to demonstrate the importance of AI in fraud mitigation, given the current patterns of crimes marked by sophistication and persistence. This study analyzes how artificial intelligence contributes to strengthening cybersecurity, with a focus on detecting and preventing financial fraud. It reviews different AI techniques—including both supervised and unsupervised machine learning approaches—that examine transaction behaviors and identify anomalies indicative of fraudulent activity. The research underscores AI's capacity for real-time detection and automated response, which enhances the ability of financial institutions to address increasingly complex cyber threats. Incorporating AI into cybersecurity strategies offers a promising avenue for creating more secure financial environments and fostering greater customer confidence in digital banking.