Fraud detection and fraud prevention are two related programs organizations use to combat fraud. Fraud prevention is a set of policies and processes to reduce the risk of fraud before it happens. Fraud detection is the process of recognizing fraud as it’s happening so it can be stopped.
Typically, fraud prevention strategies are aligned to specific industries or businesses, such as a retailer trying to stop shoplifting. Fraud prevention supports strategic revenue and profitability goals and involves a set of business policies across customer interactions and internal processes.
Fraud detection involves the tactical application of technology tools and manual processes to monitor all manner of transactions to determine if they’re being performed by an authorized person for legitimate reasons. For example, is the person trying to submit a loan application the actual individual identified, and are they submitting factual information a lender can use to assess risk?