How AI will tackle fraud in financial industry in Bangladesh

“Fraud is an uncommon, well-considered, imperceptibly concealed, time-evolving and often carefully organized crime which appears in many types of forms.” – Van Vlasselaer et al

Although fraud has recently drawn heightened attention, it is by no means a new phenomenon unique to modern society — or even to humans. Many animal species exhibit behaviors that could be described as deceptive or fraudulent. However, since notions such as “wrongdoing” or “crime” are inherently human constructs, this discussion confines itself to human activities.

The New Face of Fraud in Bangladesh

Like many other economies, Bangladesh—particularly its financial sector—is now grappling with a new wave of fraud driven by digital innovation. In the past, the country primarily faced traditional forms of fraud such as cheque forgery, loan scams, and counterfeit currency. However, incidents like the Standard Chartered Bank card fraud and the Bangladesh Bank Sanchayapatra system breach have highlighted a shift toward technologically sophisticated crimes.

Unlike manual frauds that required time and physical effort to execute, digital frauds can unfold within seconds. This evolution underscores the urgent need for Bangladesh’s financial institutions to strengthen technological resilience and develop proactive mechanisms to combat this new breed of financial crime.

AI: A Double-Edged Sword
The rapid advancement of Artificial Intelligence (AI) has changed the game for both defenders and fraudsters. On one side, AI empowers criminals with tools that make their attacks faster, more convincing, and harder to detect. Generative AI can create deepfakes and synthetic voices mimicking real individuals, while AI-driven phishing tools can craft highly personalized scams that bypass traditional security filters. Fraudsters can even deploy machine learning to identify vulnerabilities in financial systems and automate attacks with alarming speed.

Fraud has thus evolved from static deception into dynamic, intelligent manipulation—powered by algorithms.

The New Arsenal: AI for Detection and Defense
To win this digital arms race, financial institutions must upgrade their defenses. Relying on outdated tools is no longer an option. The financial sector must invest in systems capable of continuous learning, real-time detection, and adaptive response—qualities intrinsic to AI.

Unlike traditional rule-based systems that depend on static parameters (for example, blocking transactions above a fixed amount), AI-driven models continuously learn from both historical and live data. These models identify subtle deviations in customer behavior, detect new fraud patterns, and adapt to evolving tactics.

AI-powered fraud detection systems use machine learning to analyze thousands of transactions per second—assessing variables like transaction size, geolocation, device type, time of day, spending history, and behavioral context. Any abnormality—such as a sudden spending spike or login from an unfamiliar device—is flagged instantly. Through predictive modeling and anomaly detection, AI minimizes false positives while enabling real-time risk evaluation.

Crucially, ensemble models—where multiple algorithms assess a transaction simultaneously—improve both accuracy and resilience. Yet, the effectiveness of these systems depends heavily on high-quality data and continuous retraining. Financial institutions must maintain strong feedback loops, feeding in confirmed fraud cases and customer insights to keep their models adaptive and relevant.

Global Lessons: AI in Action
Leading financial institutions worldwide have already demonstrated how AI can transform fraud prevention.
❖ Cognizant developed an AI-powered cheque fraud detection system using neural networks to analyze scanned cheque images. Each cheque receives a “confidence score,” helping banks swiftly flag altered or forged instruments with precision.
❖ JP Morgan Chase implemented AI to reduce false fraud alerts, cutting false positives by 50% and improving actual fraud detection by 25%.
❖ Visa’s AI-based scam disruption program employs automation and network analysis to identify and neutralize fraudulent networks before they reach consumers.
❖ American Express uses deep learning to dynamically monitor transactions, merging behavioral data and spending history to detect anomalies in real time.
These initiatives showcase how AI has evolved from being merely a supportive tool to becoming the frontline defender of financial integrity.

The Way Forward for Bangladesh
Bangladesh’s financial ecosystem stands at a pivotal juncture. While the digital revolution has unlocked unprecedented opportunities in payments, banking, and fintech, it has also exposed institutions and customers to new risks. The response cannot be reactive—it must be predictive, data-driven, and collaborative.

To build a secure digital financial future, Bangladesh must:
❖ Adopt AI-based fraud detection systems across banks, mobile financial services, and digital payment platforms.
❖ Invest in data governance and ensure access to clean, comprehensive, and interoperable datasets.
❖ Establish cross-institutional intelligence sharing, enabling banks and regulators to identify fraud patterns collectively.
❖ Strengthen regulatory sandboxes to test and deploy innovative fraud prevention models responsibly.

AI is not just a tool—it is the foundation of trust in the digital financial era. As fraudsters evolve, so must our defenses. Bangladesh’s financial sector must urgently embrace AI-driven fraud prevention systems to protect customers, maintain confidence, and preserve institutional credibility.

Without a data-centric, AI-enabled approach, the sector risks losing not only money but also the public trust essential for sustainable digital transformation. If we fail to act now, Bangladesh may struggle to recover from the economic and reputational damage that unchecked digital fraud could bring. But if we act decisively—uniting technology, policy, and ethics—AI can become not merely an algorithmic safeguard, but an assurance of trust in the future of finance.

Obedur Rashid Bin Sakrat Kaderi: Banker & Data Science Enthusiast