Compliance Hub

Fraud Detection Using Machine Learning in Banking

Tookitaki

10 min

read

The financial landscape is evolving rapidly. With this evolution comes an increase in financial crimes, particularly fraud.

Financial institutions are constantly seeking ways to enhance their fraud detection and prevention mechanisms. Traditional methods, while effective to some extent, often fall short in the face of sophisticated fraudulent schemes.

Enter machine learning. This technology has emerged as a game-changer in the banking sector, particularly in fraud detection.

Machine learning algorithms can sift through vast volumes of transaction data, identifying patterns and anomalies indicative of fraudulent activities. This ability to learn from historical data and predict future frauds is revolutionising the way financial institutions approach fraud detection.

An illustration of machine learning algorithms analyzing transaction data

However, the implementation of machine learning in fraud detection is not without its challenges. Distinguishing between legitimate transactions and suspicious activity, ensuring data privacy, and maintaining regulatory compliance are just a few of the hurdles to overcome.

This article aims to provide a comprehensive overview of fraud detection using machine learning in banking. It will delve into the evolution of fraud detection, the role of machine learning, its implementation, and the challenges faced.

By the end, financial crime investigators and other professionals in the banking sector will gain valuable insights into this cutting-edge technology and its potential in enhancing their fraud detection strategies.

The Evolution of Fraud Detection in Banking

The banking sector has always been a prime target for fraudsters. Over the years, the methods used to commit fraud have evolved, becoming more complex and sophisticated.

In response, financial institutions have had to adapt their fraud detection systems. Traditional fraud detection methods relied heavily on rule-based systems and manual investigations. These systems were designed to flag transactions that met certain predefined criteria indicative of fraud.

However, as the volume of transactions increased with the advent of digital banking, these traditional systems began to show their limitations. They struggled to process the vast amounts of transaction data, leading to delays in fraud detection and prevention.

Moreover, rule-based systems were often unable to detect new types of fraud that did not fit into their predefined rules. This led to a high number of false negatives, where fraudulent transactions went undetected.

The need for a more effective solution led to the exploration of machine learning for fraud detection.

Traditional Fraud Detection vs. Machine Learning Approaches

Traditional fraud detection systems, while useful, often lacked the ability to adapt to new fraud patterns. They were rigid, relying on predefined rules that could not capture the complexity of evolving fraudulent activities.

Machine learning, on the other hand, offers a more dynamic approach. It uses algorithms that learn from historical transaction data, identifying patterns and anomalies that may indicate fraud. This ability to learn and adapt makes machine learning a powerful tool in detecting and predicting future frauds.

Moreover, machine learning can handle large volumes of data, making it ideal for the digital banking environment where millions of transactions occur daily.

Limitations of Conventional Systems in the Digital Age

In the digital age, the volume, velocity, and variety of transaction data have increased exponentially. Traditional fraud detection systems, designed for a less complex era, struggle to keep up.

These systems often generate a high number of false positives, flagging legitimate transactions as suspicious. This not only leads to unnecessary investigations but can also result in a poor customer experience.

Furthermore, conventional systems are reactive, often detecting fraud after it has occurred. In contrast, machine learning allows for proactive fraud detection, identifying potential fraud before it happens. This shift from a reactive to a proactive approach is crucial in minimising financial loss and protecting customer trust.

Machine Learning: A Game Changer in Fraud Detection

Machine learning has emerged as a game changer in the field of fraud detection. Its ability to learn from data and adapt to new patterns makes it a powerful tool in the fight against financial fraud.

Machine learning algorithms can analyze vast amounts of transaction data in real-time. They can identify complex patterns and subtle correlations that may indicate fraudulent activity. This level of analysis is beyond the capabilities of traditional rule-based systems.

Moreover, machine learning can predict future frauds based on historical data. This predictive capability allows financial institutions to take proactive measures to prevent fraud, rather than reacting after the fact.

Machine learning also reduces the number of false positives. It can distinguish between legitimate transactions and suspicious activity with a high degree of accuracy. This not only saves resources but also improves the customer experience.

However, implementing machine learning in fraud detection is not without its challenges. It requires high-quality data, continuous model training, and a deep understanding of the underlying algorithms.

Understanding Machine Learning Algorithms in Banking

Machine learning algorithms can be broadly classified into supervised and unsupervised learning models. Supervised learning models are trained on labeled data, where the outcome of each transaction (fraudulent or legitimate) is known. These models learn to predict the outcome of new transactions based on this training.

Unsupervised learning models, on the other hand, do not require labeled data. They identify patterns and anomalies in the data, which can indicate potential fraud. These models are particularly useful in detecting new types of fraud that do not fit into known patterns.

Both supervised and unsupervised learning models have their strengths and weaknesses. The choice of model depends on the specific requirements of the financial institution and the nature of the data available.

Regardless of the type of model used, the effectiveness of machine learning in fraud detection depends largely on the quality of the data and the accuracy of the model training.

Real-Time Transaction Monitoring with Machine Learning

One of the key advantages of machine learning is its ability to process and analyse large volumes of data in real-time. This is particularly important in the context of digital banking, where transactions occur around the clock and across different channels.

Real-time transaction monitoring allows financial institutions to detect and prevent fraud as it happens. Machine learning algorithms can analyse each transaction as it occurs, flagging any suspicious activity for immediate investigation.

This real-time analysis is not limited to the transaction itself. Machine learning models can also analyze the context of the transaction, such as the customer's typical behavior, the time and location of the transaction, and other relevant factors.

This comprehensive analysis allows for more accurate fraud detection, reducing both false positives and false negatives. It also enables financial institutions to respond quickly to potential fraud, minimising financial loss and protecting customer trust.

Implementing Machine Learning Models for Fraud Detection

Implementing machine learning models for fraud detection requires a strategic approach. It's not just about choosing the right algorithms, but also about understanding the data and the business context.

The first step is to define the problem clearly. What type of fraud are you trying to detect? What are the characteristics of fraudulent transactions? What data is available for analysis? These questions will guide the choice of machine learning model and the design of the training process.

Next, the data needs to be prepared for analysis. This involves cleaning the data, handling missing values, and transforming variables as needed. The quality of the data is crucial for the performance of the machine learning model.

Once the data is ready, the machine learning model can be trained. This involves feeding the model with the training data and allowing it to learn from it. The model's performance should be evaluated and fine-tuned as necessary.

Finally, the model needs to be integrated into the existing fraud detection system. This requires careful planning and testing to ensure that the model works as expected and does not disrupt the existing processes.

Supervised vs. Unsupervised Learning in Fraud Detection

In the context of fraud detection, both supervised and unsupervised learning models have their uses. The choice between the two depends on the nature of the problem and the data available.

Supervised learning models are useful when there is a large amount of labeled data available. These models can learn from past examples of fraud and apply this knowledge to detect future frauds. However, they may not be as effective in detecting new types of fraud that do not fit into known patterns.

Unsupervised learning models, on the other hand, do not require labeled data. They can identify patterns and anomalies in the data, which can indicate potential fraud. These models are particularly useful in detecting new types of fraud that do not fit into known patterns.

Regardless of the type of model used, the effectiveness of machine learning in fraud detection depends largely on the quality of the data and the accuracy of the model training.

The Role of Data Quality and Model Training

Data quality plays a crucial role in the effectiveness of machine learning models for fraud detection. High-quality data allows the model to learn accurately and make reliable predictions.

Data quality involves several aspects, including accuracy, completeness, consistency, and timeliness. The data should accurately represent the transactions, be complete with no missing values, be consistent across different sources, and be up-to-date.

Model training is another critical factor in the success of machine learning for fraud detection. The model needs to be trained on a representative sample of the data, with a good balance between fraudulent and legitimate transactions.

The model's performance should be evaluated and fine-tuned as necessary. This involves adjusting the model's parameters, retraining the model, and validating its performance on a separate test set.

Continuous monitoring and updating of the model is also essential to ensure that it remains effective as new patterns of fraud emerge.

Challenges in Machine Learning-Based Fraud Detection

Despite the potential of machine learning in fraud detection, there are several challenges that financial institutions need to address. One of the main challenges is the complexity of financial transactions.

Financial transactions involve numerous variables and can follow complex patterns. This complexity can make it difficult for machine learning models to accurately identify fraudulent transactions.

Another challenge is the imbalance in the data. Fraudulent transactions are relatively rare compared to legitimate transactions. This imbalance can lead to models that are biased towards predicting transactions as legitimate, resulting in a high number of false negatives.

The dynamic nature of fraud is another challenge. Fraudsters continuously adapt their tactics to evade detection. This means that machine learning models need to be regularly updated to keep up with new patterns of fraud.

Finally, there are challenges related to data privacy and security. Financial transactions involve sensitive personal information. Financial institutions need to ensure that this data is handled securely and that privacy is maintained.

Distinguishing Legitimate Transactions from Fraudulent Activity

Distinguishing between legitimate transactions and fraudulent activity such as credit card fraud is a key challenge in fraud detection. This is particularly difficult because fraudulent transactions often mimic legitimate ones.

Machine learning models can help to address this challenge by identifying patterns and anomalies in the data. However, these models need to be trained on high-quality data and need to be regularly updated to keep up with changing patterns of fraud.

False positives are another concern. These occur when legitimate transactions are incorrectly flagged as fraudulent. This can lead to unnecessary investigations and can disrupt the customer experience. Strategies to minimise false positives include refining the model's parameters and incorporating feedback from fraud investigators.

Ethical and Privacy Considerations in Data Usage

The use of machine learning in fraud detection raises several ethical and privacy considerations. One of the main concerns is the use of personal transaction data.

Financial institutions need to ensure that they are complying with data protection regulations. This includes obtaining the necessary consents for data usage and ensuring that data is stored securely.

There is also a need for transparency in the use of machine learning. Customers should be informed about how their data is being used and how decisions are being made. This can help to build trust and can also provide customers with the opportunity to correct any inaccuracies in their data.

Finally, there are ethical considerations related to the potential for bias in machine learning models. Financial institutions need to ensure that their models are fair and do not discriminate against certain groups of customers. This requires careful design and testing of the models, as well as ongoing monitoring of their performance.

Financial Institutions Winning the Fight Against Fraud

Financial institutions are increasingly turning to machine learning to combat fraud. This is not just limited to large multinational banks. Smaller banks and credit unions are also adopting these technologies, often in partnership with fintech companies.

One example is the Royal Bank of Scotland, which uses machine learning to analyze customer behaviour and identify unusual patterns. This has helped the bank to detect and prevent fraud, improving customer trust and reducing financial loss.

Another example is Danske Bank, which uses machine learning to detect money laundering. The bank's machine learning model analyses transaction data and flags suspicious activity for further investigation. This has helped the bank to comply with anti-money laundering regulations and has also reduced the cost of investigations.

These examples show that machine learning is not just a tool for the future. It is already being used today, helping financial institutions to win the fight against fraud.

The Future of Fraud Detection in Banking

The future of fraud detection in banking is promising, with machine learning playing a central role. As technology continues to evolve, so too will the methods used to detect and prevent fraud.

Machine learning models will become more sophisticated, capable of analysing larger volumes of data and identifying more complex patterns of fraudulent activity. This will enable financial institutions to detect fraud more quickly and accurately, reducing financial loss and improving customer trust.

At the same time, the integration of machine learning with other technologies, such as artificial intelligence and blockchain, will enhance fraud detection capabilities. These technologies will provide additional layers of security, making it even harder for fraudsters to succeed.

The future will also see greater collaboration between financial institutions, fintech companies, and law enforcement agencies. By sharing data and insights, these organizations can work together to combat financial fraud more effectively.

Emerging Trends and Technologies

Several emerging trends and technologies are set to shape the future of fraud detection in banking. One of these is deep learning, a subset of machine learning that uses neural networks to analyse data. Deep learning can identify complex patterns and correlations in data, making it a powerful tool for detecting fraud.

Another trend is the use of behavioural biometrics, which analyses the unique ways in which individuals interact with their devices. This can help to identify fraudulent activity, as fraudsters will interact with devices in different ways to legitimate users.

Finally, the use of consortium data and shared intelligence will become more common. By pooling data from multiple sources, financial institutions can build more accurate and robust machine learning models for fraud detection.

Preparing for the Next Wave of Financial Crimes

As technology evolves, so too do the methods used by fraudsters. Financial institutions must therefore be proactive in preparing for the next wave of financial crimes. This involves staying up-to-date with the latest trends and technologies in fraud detection, and continuously updating and refining machine learning models.

Financial crime investigators will also need to develop new skills and expertise. This includes understanding how machine learning works, and how it can be applied to detect and prevent fraud. Training and professional development will therefore be crucial.

Finally, financial institutions will need to adopt a multi-layered security approach. This involves using a range of technologies and methods to detect and prevent fraud, with machine learning being just one part of the solution. By doing so, they can ensure that they are well-prepared to combat the ever-evolving threat of financial fraud.

Conclusion: Embracing Machine Learning for a Safer Banking Environment

In conclusion, as financial institutions strive to stay ahead of increasingly sophisticated fraud tactics, adopting advanced solutions like Tookitaki's FinCense becomes imperative.

With its real-time fraud prevention capabilities, FinCense empowers banks and fintechs to screen customers and transactions with remarkable 90% accuracy, ensuring robust protection against fraudulent activities. Its comprehensive risk coverage, powered by cutting-edge AI and machine learning, addresses all potential risk scenarios, providing a holistic approach to fraud detection.

Moreover, FinCense's seamless integration with existing systems enhances operational efficiency, allowing compliance teams to concentrate on the most significant threats. By choosing Tookitaki's FinCense, financial institutions can safeguard their operations and foster a secure environment for their customers, paving the way for a future where fraud is effectively mitigated.

Experience the most intelligent AML and fraud prevention platform

Talk to an expert

Experience the most intelligent AML and fraud prevention platform

Download Now

Experience the most intelligent AML and fraud prevention platform

Download Now

Top AML Scenarios in ASEAN

Download Now

The Role of AML Software in Compliance

Download Now

The Role of AML Software in Compliance

Download Now

We’ve received your details and our team will be in touch shortly.

In the meantime, explore how Tookitaki is transforming financial crime prevention.

Learn More About Us

Oops! Something went wrong while submitting the form.

Ready to Streamline Your Anti-Financial Crime Compliance?

Get Started

Our Thought Leadership Guides

Compliance Hubs

17 Sep 2025

6 min

read

The Investigator’s Edge: Why AML Investigation Software Is a Must-Have for Singapore’s Banks

In the fight against financial crime, detection is only half the battle. The real work starts with the investigation.

Singapore’s financial institutions are facing unprecedented scrutiny when it comes to anti-money laundering (AML) compliance. As regulators raise the bar and criminals get smarter, the ability to investigate suspicious transactions swiftly and accurately is now a non-negotiable requirement. This is where AML investigation software plays a critical role.

In this blog, we explore why AML investigation software matters more than ever in Singapore, what features banks should look for, and how next-generation tools are transforming compliance teams from reactive units into proactive intelligence hubs.

Why Investigation Capabilities Matter in AML Compliance

When a transaction monitoring system flags an alert, it kicks off an entire chain of actions. Analysts must determine whether it's a false positive or a genuine case of money laundering. This requires gathering context, cross-referencing multiple systems, documenting findings, and preparing reports for auditors or regulators.

Doing all of this manually is not only time-consuming, but also increases the risk of human error and compliance gaps. For banks operating in Singapore's high-stakes environment, where MAS expects prompt and well-documented responses, this is a risk few can afford.

Key Challenges Faced by AML Investigators in Singapore

1. Alert Overload

Analysts are often overwhelmed by a high volume of alerts, many of which turn out to be false positives. This slows down investigations and increases backlogs.

2. Fragmented Data Sources

Information needed for a single investigation is typically spread across customer databases, transaction logs, sanctions lists, and case notes, making it difficult to form a complete picture quickly.

3. Manual Documentation

Writing investigation summaries and preparing Suspicious Transaction Reports (STRs) can take hours, reducing the time available for deeper analysis.

4. Audit and Regulatory Pressure

MAS and other regulators expect detailed, traceable justifications for every action taken. Missing documentation or inconsistent processes can lead to penalties.

What AML Investigation Software Does

AML investigation software is designed to streamline, standardise, and enhance the process of investigating suspicious activities. It bridges the gap between alert and action.

Core Functions Include:

Case creation and automated alert ingestion
Intelligent data aggregation from multiple systems
Risk scoring and prioritisation
Investigation checklists and audit trails
Natural language summaries for STR filing
Collaborative case review and escalation tools

Must-Have Features in AML Investigation Software

When evaluating solutions, Singaporean banks should look for these critical capabilities:

1. Smart Alert Triage

The system should help investigators prioritise high-risk alerts by assigning risk scores based on factors such as transaction patterns, customer profile, and historical activity.

2. Contextual Data Aggregation

A strong tool pulls in data from across the bank — including core banking systems, transaction logs, KYC platforms, and screening tools — to provide investigators with a consolidated view.

3. Natural Language Summarisation

Leading software uses AI to generate readable, regulator-friendly narratives that summarise key findings, reducing manual work and improving consistency.

4. Audit-Ready Case Management

Every step taken during an investigation should be logged and traceable, including decision-making, reviewer notes, and attached evidence.

5. Integration with STR Reporting Systems

The software should support direct integration with platforms such as GoAML, used in Singapore for suspicious transaction reporting.

How Tookitaki's FinCense Platform Elevates AML Investigations

Tookitaki’s FinCense platform is designed with Singapore’s regulatory expectations in mind and includes a specialised Smart Disposition Engine for AML investigations.

Key Features:

AI Copilot (FinMate)
Acts as an intelligent assistant that helps compliance teams assess red flags, suggest investigative steps, and provide context for alerts.
Smart Narration Engine
Automatically generates STR-ready summaries, saving hours of manual writing while ensuring consistency and auditability.
Unified View of Risk
Investigators can see customer profiles, transaction history, typologies triggered, and sanction screening results in one interface.
Scenario-Based Insight
Through integration with the AFC Ecosystem, the system maps alerts to real-world money laundering typologies relevant to the region.
Workflow Customisation
Investigation steps, user roles, and escalation logic can be tailored to the bank’s internal policies and team structure.

Benefits for Compliance Teams

By implementing AML investigation software like FinCense, banks in Singapore can achieve:

Up to 50 percent reduction in investigation time
Enhanced quality and consistency of STRs
Faster closure of true positives
Lower regulatory risk and better audit outcomes
Improved collaboration across compliance, risk, and operations

Checklist: Is Your Investigation Process Ready for 2025?

Ask these questions to evaluate your current system:

Are investigators manually pulling data from multiple systems?
Is there a standard template for documenting cases?
How long does it take to prepare an STR?
Can you trace every decision made during an investigation?
Are your analysts spending more time writing than investigating?

If any of these answers raise red flags, it may be time to upgrade.

Conclusion: Better Tools Build Stronger Compliance

AML investigation software is no longer a nice-to-have. It is a strategic enabler for banks to stay ahead of financial crime while meeting the rising expectations of regulators, auditors, and customers.

In Singapore's rapidly evolving compliance landscape, banks that invest in smart, AI-powered investigation tools will not only keep up. They will lead the way.

Ready to take your AML investigations to the next level? The future is intelligent, integrated, and investigator-first.

The Investigator’s Edge: Why AML Investigation Software Is a Must-Have for Singapore’s Banks

Compliance Hubs

17 Sep 2025

6 min

read

Agentic AI in Compliance: The Secret Weapon Against Financial Crime

Agentic AI is reshaping compliance in Australian banking, delivering real-time intelligence and smarter investigations.

Introduction

Compliance has always been a balancing act. Banks and fintechs must detect suspicious activity, meet regulatory requirements, and protect customers, all while keeping costs under control. In Australia, where AUSTRAC has stepped up enforcement and the New Payments Platform (NPP) enables real-time transfers, the pressure on compliance teams has never been greater.

Enter Agentic AI in compliance. Unlike traditional machine learning, Agentic AI operates as intelligent agents that perform specialised tasks within compliance workflows. It is transparent, explainable, and adaptive, making it a powerful tool for anti-money laundering (AML) and fraud prevention. For Australian institutions, Agentic AI is not just the future — it is fast becoming a necessity.

What is Agentic AI in Compliance?

Agentic AI refers to artificial intelligence models designed to act autonomously as agents within a broader system. In compliance, this means AI tools that:

Detect suspicious activity in real time.
Adapt to new typologies and fraud schemes.
Support investigators with case summaries and recommendations.
Automate reporting in regulator-ready formats.

Unlike black-box AI, Agentic AI is explainable, meaning every decision can be justified to regulators such as AUSTRAC.

Why Compliance Needs Agentic AI

1. Real-Time Payment Risks

With NPP and PayTo, funds can move across accounts in seconds. Legacy systems cannot keep up. Agentic AI enables millisecond-level monitoring.

2. Alert Overload

Traditional systems produce high false positives. Agentic AI reduces noise, allowing compliance teams to focus on genuine risks.

3. Evolving Typologies

From mule accounts to deepfake scams, criminals are innovating constantly. Agentic AI learns from new patterns and adapts automatically.

4. AUSTRAC Expectations

Regulators require transparency and effectiveness. Agentic AI provides explainable alerts, audit trails, and regulator-ready reports.

5. Rising Compliance Costs

Staffing costs are high in Australia’s compliance sector. AI reduces manual workload and increases investigator efficiency.

How Agentic AI Works in Compliance

1. Transaction Monitoring

Agentic AI reviews transactions in real time, assigning risk scores and flagging anomalies.

2. Behavioural Analytics

Tracks customer behaviour across logins, devices, and transactions to detect unusual activity.

3. Case Investigation

AI copilots summarise cases, suggest next steps, and draft Suspicious Matter Reports (SMRs).

4. Continuous Learning

Agentic AI adapts from investigator feedback and new data, improving accuracy over time.

5. Federated Intelligence

Through networks like the AFC Ecosystem, Agentic AI incorporates insights from global compliance experts without exposing sensitive data.

Use Cases of Agentic AI in Compliance

Account Takeover Fraud: Detects unusual login and transaction activity in real time.
Authorised Push Payment (APP) Scams: Identifies high-risk transfers initiated under duress.
Mule Networks: Maps hidden links between accounts, devices, and transactions.
Sanctions Screening: Flags high-risk names or entities with contextual intelligence.
KYC/CDD Monitoring: Automates risk scoring of new and existing customers.
Regulatory Reporting: Auto-generates SMRs, TTRs, and IFTIs in AUSTRAC-compliant formats.

Benefits of Agentic AI in Compliance

Real-Time Detection: Protects institutions from losses and reputational damage.
Reduced False Positives: Saves investigators time and reduces operational costs.
Explainability: Provides regulators with clear reasoning for alerts.
Efficiency: Automates routine investigation tasks.
Scalability: Works for both Tier-1 banks and smaller institutions.
Customer Trust: Demonstrates proactive protection against fraud.

Challenges in Deploying Agentic AI

Data Quality Issues: Poor data reduces AI accuracy.
Integration Complexity: Legacy systems make implementation difficult.
Skills Gap: Few compliance teams have in-house AI expertise.
Cost of Adoption: Smaller institutions may struggle with upfront costs.
Change Management: Teams need training to trust and use AI effectively.

Case Example: Community-Owned Banks Adopting Agentic AI

Community-owned banks such as Regional Australia Bank and Beyond Bank are showing how Agentic AI can be deployed effectively. By adopting advanced compliance platforms, they have reduced false positives, improved reporting, and enhanced their ability to detect mule networks in real time.

These banks prove that Agentic AI is not only for Tier-1 players. With the right platform, even mid-sized institutions can benefit from AI-driven compliance innovation.

Spotlight: Tookitaki’s FinCense

FinCense, Tookitaki’s compliance platform, integrates Agentic AI to deliver end-to-end compliance and fraud prevention.

Real-Time Monitoring: Detects suspicious activity across NPP, PayTo, remittance corridors, and crypto.
Agentic AI Models: Continuously adapt to new money laundering and fraud patterns.
Federated Intelligence: Draws from typologies contributed by the AFC Ecosystem.
FinMate AI Copilot: Summarises alerts, recommends next steps, and drafts regulator-ready reports.
AUSTRAC Compliance: Automates SMRs, TTRs, and IFTIs with complete audit trails.
Cross-Channel Coverage: Banking, wallets, cards, remittances, and crypto monitored under one system.

FinCense helps Australian institutions reduce compliance costs, meet AUSTRAC requirements, and strengthen customer trust.

Best Practices for Implementing Agentic AI

Start with Data Quality: Clean, reliable data ensures accurate AI outputs.
Adopt Explainable Models: Transparency is essential for AUSTRAC and internal stakeholders.
Integrate Across Channels: Cover NPP, cards, wallets, and crypto under one platform.
Pilot First: Begin with a small use case before scaling across the institution.
Train Investigators: Ensure teams are equipped to work with AI copilots.
Engage Regulators Early: Keep AUSTRAC informed about how AI is being used.

The Future of Agentic AI in Compliance

Deeper Integration with Real-Time Payments: PayTo and other overlay services will require millisecond-level monitoring.
Countering AI-Powered Fraud: Criminals will use deepfakes and synthetic identities, making Agentic AI even more critical.
Shared Compliance Networks: Banks will collaborate more closely through federated learning.
AI-First Compliance Teams: Investigations will be led by AI copilots, with human oversight.
Sustainability of Compliance: Automation will help reduce the rising cost of compliance.

Conclusion

Agentic AI is not just a buzzword. It is redefining compliance in Australia by making fraud detection faster, investigations smarter, and reporting more transparent. For banks and fintechs facing AUSTRAC’s high expectations, Agentic AI offers a path to resilience and trust.

Community-owned banks like Regional Australia Bank and Beyond Bank demonstrate that adoption is possible for institutions of all sizes. Platforms like Tookitaki’s FinCense integrate Agentic AI to deliver compliance outcomes that go beyond regulatory checkboxes.

Pro tip: The future of compliance will belong to institutions that combine real-time monitoring, adaptive AI, and explainable reporting. Agentic AI is the foundation of that future.

Agentic AI in Compliance: The Secret Weapon Against Financial Crime

Compliance Hubs

16 Sep 2025

6 min

read

AI in Fraud Detection in Banking: Transforming Australia’s Fight Against Financial Crime

With fraud moving faster than ever, Australian banks are turning to AI to detect and prevent scams in real time.

Fraud is one of the biggest challenges facing banks today. In Australia, losses to scams exceeded AUD 3 billion in 2024, with criminals exploiting digital banking, instant payments, and cross-border channels. Legacy systems, built for batch monitoring, cannot keep up with the scale and speed of these threats.

This is why AI in fraud detection in banking is rapidly becoming a necessity. Artificial intelligence allows institutions to detect suspicious activity in real time, adapt to new fraud typologies, and reduce the burden on compliance teams. In this blog, we explore how AI is reshaping fraud detection in Australia, the benefits it brings, and how banks can implement it effectively.

Why Fraud Detection Needs AI

1. Speed of Real-Time Payments

The New Payments Platform (NPP) has transformed banking in Australia by enabling instant transfers. Unfortunately, it also allows fraudsters to move stolen funds before they can be recalled. AI is essential for monitoring and scoring transactions within milliseconds.

2. Evolving Typologies

From account takeover fraud to deepfake scams, criminals are constantly innovating. Static rules cannot keep up. AI models can detect unusual patterns that indicate new fraud techniques.

3. Rising Alert Volumes

Traditional systems flood investigators with false positives. AI reduces noise by distinguishing genuine risks from harmless anomalies.

4. AUSTRAC Expectations

Regulators demand effective monitoring and reporting under the AML/CTF Act 2006. AI provides transparency and scalability to meet these expectations.

How AI Works in Fraud Detection

1. Machine Learning Models

AI systems are trained on historical transaction data to identify suspicious behaviour. Unlike static rules, machine learning adapts over time.

2. Behavioural Analytics

AI monitors customer behaviour, such as login times, device usage, and transaction patterns, to flag unusual activity.

3. Anomaly Detection

AI identifies deviations from normal behaviour, such as sudden large transfers or new device access.

4. Natural Language Processing (NLP)

Used in screening communications or transaction details for suspicious intent.

5. Federated Learning

Allows banks to share insights on fraud patterns without exposing sensitive customer data.

Common Fraud Typologies Detected by AI

Account Takeover (ATO): AI detects unusual login behaviour, device changes, and suspicious transfers.
Authorised Push Payment (APP) Scams: Analyses transaction context and behavioural cues to flag high-risk payments.
Mule Account Networks: Identifies linked accounts moving funds in rapid succession.
Card-Not-Present Fraud: Flags unusual online purchase behaviour.
Business Email Compromise (BEC): Detects unusual payment instructions and new beneficiary activity.
Crypto Laundering: Monitors conversions between fiat and digital assets for anomalies.

Red Flags AI Helps Detect in Real Time

High-value transfers to new or suspicious beneficiaries.
Transactions inconsistent with customer profiles.
Multiple failed login attempts followed by success.
Rapid inflows and outflows with no account balance retention.
Sudden changes in customer details followed by large transfers.
Transfers to high-risk jurisdictions or exchanges.

Benefits of AI in Fraud Detection

1. Real-Time Monitoring

AI processes data instantly, essential for NPP and PayTo transactions.

2. Reduction in False Positives

Adaptive models cut down on irrelevant alerts, saving investigators’ time.

3. Faster Investigations

AI copilots summarise cases and recommend next steps, reducing investigation times.

4. Scalability

AI can handle increasing transaction volumes without needing large compliance teams.

5. Improved Regulatory Alignment

Explainable AI ensures alerts can be justified to AUSTRAC and other regulators.

6. Enhanced Customer Trust

Customers are more likely to trust banks that prevent fraud proactively.

Challenges in Deploying AI

Data Quality Issues: AI is only as good as the data it learns from.
Integration with Legacy Systems: Many banks still rely on outdated infrastructure.
Skills Shortages: Australia faces a lack of experienced data scientists and AML specialists.
Explainability Concerns: Black-box models may not meet AUSTRAC’s transparency expectations.
Cost of Implementation: High initial investment can be a barrier for smaller institutions.

Case Example: Community-Owned Banks Using AI

Community-owned banks like Regional Australia Bank and Beyond Bank are adopting AI-powered compliance platforms to strengthen fraud detection. These institutions demonstrate that advanced fraud prevention is not only for Tier-1 banks. By leveraging AI, they reduce false positives, detect mule networks, and meet AUSTRAC’s expectations, all while operating efficiently.

Spotlight: Tookitaki’s FinCense

FinCense, Tookitaki’s compliance platform, integrates AI at its core to deliver advanced fraud detection capabilities for Australian institutions.

Real-Time Monitoring: Detects suspicious activity across NPP, PayTo, and cross-border corridors.
Agentic AI: Learns from evolving fraud patterns and continuously improves accuracy.
Federated Intelligence: Accesses real-world typologies from the AFC Ecosystem.
FinMate AI Copilot: Summarises cases, recommends next steps, and drafts regulator-ready reports.
AUSTRAC Compliance: Generates Suspicious Matter Reports (SMRs) and maintains audit trails.
Cross-Channel Protection: Covers banking, cards, wallets, remittances, and crypto.

FinCense empowers banks to fight fraud proactively, cut compliance costs, and build customer trust.

Best Practices for Implementing AI in Fraud Detection

Start with Data Quality: Clean, structured data is the foundation of effective AI.
Adopt Explainable AI: Ensure every alert can be justified to regulators.
Integrate Across Channels: Cover all payment types, from NPP to crypto.
Train Staff on AI Tools: Empower investigators to use AI effectively.
Pilot and Scale Gradually: Start small, refine models, then scale across the enterprise.
Collaborate with Peers: Share insights through federated learning for stronger defences.

The Future of AI in Fraud Detection in Australia

Deeper PayTo Integration: AI will play a critical role in monitoring new overlay services.
Detection of Deepfake Scams: AI will need to counter AI-driven fraud tactics such as synthetic voice and video.
Shared Fraud Databases: Industry-wide collaboration will improve real-time detection.
AI-First Compliance Teams: Copilots like FinMate will become standard tools for investigators.
Balance Between Security and Experience: AI will enable strong fraud prevention with minimal customer friction.

Conclusion

AI is transforming fraud detection in banking, particularly in Australia where real-time payments and evolving scams create unprecedented risks. By adopting AI-powered platforms, banks can detect threats earlier, reduce false positives, and ensure AUSTRAC compliance.

Community-owned banks like Regional Australia Bank and Beyond Bank prove that even mid-sized institutions can lead in AI-driven compliance innovation. For all financial institutions, the path forward is clear: embrace AI not just as a tool, but as a cornerstone of fraud detection and customer trust.

Pro tip: The most effective AI in fraud detection is transparent, adaptive, and integrated into the entire compliance workflow. Anything less leaves banks one step behind fraudsters.

AI in Fraud Detection in Banking: Transforming Australia’s Fight Against Financial Crime

Blogs

17 Sep 2025

6 min

read

The Investigator’s Edge: Why AML Investigation Software Is a Must-Have for Singapore’s Banks

In the fight against financial crime, detection is only half the battle. The real work starts with the investigation.

Why Investigation Capabilities Matter in AML Compliance