AI can help reduce fraud attempts and save money through better real-time detection, experts say. 

“If banks are losing less money, then they can also trim down their fraud loss reserve and deploy that capital for more productive use,” Jim McCarthy, founder and chairman of financial consulting agency McCarthy Hatch and a founding member of the Consumer Financial Protection Bureau, said during this month’s FinAi Banking Summit. “FIs can nearly half their fraud loss reserves by 2030 if AI is implemented correctly.” 

However, such a reversal will not happen overnight, he said.

JPMorgan, for example, reported in its fourth-quarter 10-K that its allowance for credit losses, which includes delinquencies and fraud-related payments for 2025, was $31.2 billion, up from $26.9 billion in 2024. 

The bank also stated in its 10-K that the attempts to defraud the bank and its clients continue to increas and become more complex. 

AI can help banks track fraud and money laundering attempts in real time, McCarthy said, adding that AI can increase scrutinyon questionable transactions and quickly investigate to aid human evaluators in stopping bad actors. 

Banks need to deploy AI within operations to stop bad actors but also improve the bottom line over years, McCarthy said. 

AI solutions should be embedded into existing workflows for more accurate screening by leveraging proprietary data sets and reducing time spent by an evaluator jumping betweenplatforms, Kendra Brown, senior director of banking and sell side research business unit at AI and data company FactSet, told FinAi News. 

Risk management, compliance and fraud management are perfect examples of where AI can automate tedious processes “to remove some of the inherent human error that comes from doing those things manually,” she said. 

Cybersecurity, compliance and fraud operations yield high return on investment for AI, according to IT service provider Infosys’ Bank Tech report published this month. By June, FIs are expected to increase their spend on cyber and fraud operations by 3.1% year over year.  

Two-pronged approach 

AI can assist banks in two ways to crackdown on fraud and money laundering issues, Garry Teekah, director of market development at fraud and anti-money laundering company Fenergo, told FinAi News. 

With AI, investigators get “a holistic view of the ecosystem of both the entity, the data around that entity,” Teekah said, unlike the one signal  company got before.  

“AI, in Phase 1, is helping case managers to really get right into red flags with a lot of information to evaluate the transaction,” he said. 

In Phase 2, “AI tools can help banks in expediting reviews of transactions and flag them to regulators,” he said. 

Fenergo’s AI tool, which provides end-to-end services — from flagging a transaction, researching the entity, involving a human with all the information and then filing it with regulators if necessary — can reduce manual review times for KYC, fraud and AML compliance by up to 80%, Teekah said. 

If banks spend less time on investigations and being more accurate fighting fraud and money laundering, then they will end up saving money, Teekah said. 

Register here for the upcoming FinAi Lending Summit, set for Oct. 7-8 in Las Vegas.