It’s Time to Make “Catch All Fraud” Detection Systems Obsolete
- The "Catch All Fraud" system has been highly touted for years
- The results, however, are not acceptable
- The system is easily overwhelmed, which can be weaponized by fraudsters
Despite being in operation for a decade, the "Catch All Fraud" detection system has failed to live up to its billing of successfully apprehending all fraudulent activity. The FraudWit blog examines serious questions about its effectiveness and utility in today's rapidly changing financial landscape.
The "Catch All Fraud" detection system was designed to tackle all the fraud a bank would see. It was touted as the one stop shop for fraud detection, a Swiss Army knife of sorts. The faintest hint of fraud was expected to alert a team of analyst who were starry eyed and ready to stop the bad guys. It was going to do great things. However, the lack of successful detection raises questions about its effectiveness and utility in today’s rapidly changing financial landscape. That and the fact that it has never caught anything.
Today, we know that there is no single technology that can detect the majority of fraud -- leading many financial institutions to adopt a multi-layered technology approach to fraud. However, there are still a portion of financial institutions that, despite seeing low success rates, stick with these "Catch All Fraud" systems.
Why FIs Still Utilize "Catch All Fraud" Systems
There are several reasons why FIs continue to utilize these systems, even when they are not getting the desired results. However, the blog notes that the inertia of tradition is the major factor keeping this ineffective system in place. Organizations often find it easier to stick with existing frameworks, even when they are clearly not working. Implementing new systems involves costs and risks, and some believe the "Catch All Fraud" carries “brand value” that cannot be easily replaced.
Leader: Why did we take that loss?
Subordinate: Well, sir, we did do away with the Catch All Fraud system...it could be that.
Leader: Unacceptable, reinstate the Catch All Fraud system immediately. We can't not have a fraud detection system designated to catch all the fraud. What would people think?!
Subordinate: Sorry sir, on it sir.
While the example is rudimentary, it does provide a glimpse into an outdated mindset.
Additionally, the performance metrics of this system highlight a concerning complacency. Rather than focusing on the accuracy and effectiveness of fraud detection, the metrics emphasize the volume of flagged transactions --15-20% of legitimate transactions are incorrectly flagged, overwhelming investigators while giving the illusion of an active system. This has led to an unchallenged status quo, with analysts simply clicking "PASS" on alerts without addressing the underlying issues. Fraudsters weaponize this weakness by launching low-impact, high-frequency attacks to mask serious fraud.
Major Investments into Fraud Systems May Lead to Obsolescence of "Catch All Fraud" System
Fortunately, we are seeing more FIs take the necessary steps to increase investments into fraud systems -- which may, in turn, move a significant portion of FIs away from the "Catch All Fraud" system.
In fact, according to research from Alloy:
- 99% of respondents report using AI as a part of their fraud prevention system.
- 93% of respondents said that their organization is making ongoing investments in fraud prevention in 2025.
- 62% have increased investments in fraud prevention.
Modern fraud detection systems utilize advanced technologies like machine learning and predictive analytics to adapt to new threats. Furthermore, many systems are designed for specific purposes. For instance, OrboGraph's Anywhere On-Us Fraud solution is specifically developed for detecting check fraud. The OrbNet Forensic AI technology interrogates check images, along with deploying targeted transactional analyzers, to identify counterfeits, forgeries, and alterations. The system generates risk scores that feed fraud review platforms, enabling FIs to blend the results with other fraud systems to better detect check fraud.
As FraudWit concludes: "It is high time to challenge the status quo and seek out systems that genuinely protect and serve the business landscape."