How FPAD is Transforming Scam Detection

By Sandy Lavorel, Head of Fraud Intelligence at NetGuardians

Across Europe, scams are escalating, becoming more targeted, manipulative and harder to detect, with only 28% of scams attempts being reported to authorities and a mere 4% of fraud victims ever recovering their lost funds. Criminals no longer rely on brute-force tactics or suspicious activity that easily triggers traditional fraud filters. Instead, they’re exploiting human psychology, trust and digital communication to persuade victims to transfer funds voluntarily - commonly known as Authorised Push Payment (APP) fraud or scam, and the figures are staggering.

The alarming rise in such scams has exposed a serious flaw in traditional fraud prevention strategies. No matter how sophisticated, rule-based and basic anomaly detection systems struggle to detect crimes where the transaction is technically legitimate and initiated by the user.

With rising threats, there's a greater need than ever for real-time, intelligence-led and collaborative strategies, especially those strengthened by smart use of AI.

In response, a new wave of innovation is beginning to transform scam detection across the SEPA region. One of the most promising developments is EBA CLEARING’s Fraud Pattern and Anomaly Detection (FPAD) initiative. Launched to provide centralised and intelligence-led tools that enhance financial institutions ability to spot fraud as it happens, FPAD is changing the way financial institutions combat modern fraud threats by making existing systems smarter and leveraging the intelligence of shared data.

Understanding FPAD - A Two-Pronged Approach

FPAD is designed as an augmentation layer, not a replacement, for existing fraud detection systems. The system enhances in-house capabilities with instant infrastructure-level insights drawn from across the European payments ecosystem. At its core, FPAD brings together two powerful and complementary capabilities.

The first is an Account Assessment / Verification of Payee (VOP) function. It provides interactive validation of beneficiary account details to reduce payment errors and stops fraud before any payment has been made. This is similar to the UK’s Confirmation of Payee (CoP) scheme, with this feature introducing ‘positive friction’ to discourage accidental or scam-induced misdirection of funds. It allows payers to verify that the recipient’s details match the intended party, offering greater clarity and control before funds are transferred. It is essentially a practical deterrent that slows down fraud in the moment it matters the most. It also allows users to meet the requirements of the EU Instant Payments Regulation.

The second is a Transaction Assessment/Pre-payment risk assessment that enhances the fraud detection controls in place. This is a Network view of data that provides risk insights on beneficiaries and fraud patterns.

FPAD leverages the billions of transactions processed through EBA CLEARING’s systems to generate a unique network view that characterises payment behaviours and account relationships. By retrieving transactions and building statistical profiles, FPAD creates a dynamic representation of how accounts interact, enabling sophisticated risk assessments. Its detection and prevention models use this network view to contextualise transaction and account data to deliver precise Account and Transaction Assessments. As transactions flow through the system, FPAD’s detection models analyse them in real time, with results accessible to Payment Service Providers (PSPs) for further action.

Importantly, this capability looks beyond the confines of any single institution’s dataset, drawing from macro-level insights to identify fraud signals invisibly to siloed systems. However, these insights should be considered as one input among many, strategically integrated and further enhanced through the application of AI within a bank’s existing fraud detection architecture. Together, these capabilities deliver something conventional systems cannot - real-time intelligence-led decisioning that is collaborative by design.

The Power of Community Intelligence

Legacy fraud detection tools tend to operate in silos, restricted to the transaction histories and behaviours within an individual institution. While this can effectively spot outliers in a single customer’s account, it doesn’t capture broader patterns, such as newly active mule accounts or coordinated scam rings, visible only when institutions collaborate. It opens up a major blind spot in treating fraud as a localised problem.

But today’s fraudsters don’t operate within neat institutional boundaries. They work across borders, channels and financial networks, creating complex webs of mule accounts and decentralised scam operations that can remain undetected if only viewed through a single lens.

This is especially true with Authorised Push Payment (APP) fraud, where the crime may appear legitimate from the payer’s side, but the destination account is part of a coordinated fraud ring.

FPAD represents a step-change with its ability to tap into network-level intelligence, identifying threats that may appear harmless in isolation but become clear when viewed in aggregate. By combining intelligence from across the ecosystem, FPAD offers a panoramic view of fraud activity, making it a powerful complement to in-house systems.

It takes a network to defeat a network, and this ethos is embedded in FPAD’s architecture. It’s not just a new fraud tool, but a new way of thinking about fraud defence by being collaborative, intelligent and scalable. For banks and PSPs, this shift holds profound implications. It means the difference between acting in isolation and acting with the force of collective insight. As fraudsters become more coordinated and adaptive, so must the industry’s response.

Why This Matters Now

The urgency for more proactive fraud detection isn’t just being driven by criminal activity, but it is also being marshalled into regulation. Around the world, regulators are moving quickly to close the gap between the speed of fraud and the pace of institutional response, placing new expectations on financial institutions to not just detect and respond to fraud, but also demonstrate how they are doing so.

In the UK, liability for APP fraud is shifting towards financial institutions and banks, with new rules mandating reimbursement for victims in most cases. In the EU, proposed legislations such as PSD3 and the Payment Services Regulation (PSR) are expected to tighten the regulatory framework around fraud mitigation, customer protection and transparency. These updates will likely include enhanced obligations around real-time risk assessment, fraud reporting and operational resilience, particularly for cross-border and instant payments.

For financial institutions, fraud detection capabilities must evolve beyond static rules and internal-only models. Regulators are looking for demonstrable and auditable fraud prevention measures, and institutions that fall behind risk not just penalties, but reputational damage and customer attrition.

FPAD helps meet the challenges financial institutions are facing around regulatory compliance. It provides evidence of proactive risk management, supports regulatory alignment and if used wisely reduces false positives by improving accuracy. For banks seeking to protect their customers and comply with evolving standards, FPAD won’t just be a helpful tool, but a strategic advantage in staying ahead.

A Call to Action for the Banking Industry

For banks, the question is no longer whether fraud will strike, but how prepared we are to detect and prevent it. FPAD offers a framework that is scalable and has already proven effective. But to be successful, its insights must be applied in context, as part of a broader AI enhanced fraud strategy, tailored to each institution’s unique risk landscape. The more financial institutions contribute to and leverage this shared intelligence, the stronger the collective defences become.

In the fight against financial crime, intelligence is our most powerful ally. FPAD shows us what’s possible when we put that intelligence to work. And in an age of intelligent criminals, only intelligent fraud detection can win.

I believe that one day, people will choose to bank only with institutions that not only help them grow their wealth, but also shield them from the most pervasive and profitable form of organised crime - fraud.

At NetGuardians, our solutions are built to revolutionise the way financial institutions fight fraud, scams and money mules. By harnessing the collective intelligence of a connected community and turning it into a powerful scoring engine, we dramatically strengthen the industry’s ability to detect and prevent financial crime with greater speed and precision.

Sandy Lavorel, Head of Fraud Intelligence at NetGuardians