INTERNATIONAL JOURNAL OF LATEST TECHNOLOGY IN ENGINEERING,
MANAGEMENT & APPLIED SCIENCE (IJLTEMAS)
ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XV, Issue VI, June 2026
“Enhancing Fraud Detection in Core Banking Systems Through
Risk-Based Internal Controls and Forensic Auditing”
Dr. Shailendrasingh Dikit
Assistant Professor-Chhatrapati Shahu Institute of Business Education and Research,
Kolhapur(Maharashtra) India.
Received: 16 July 2026; Accepted: 21 July 2026; Published: 04 August 2026
ABSTRACT
The proliferation of Core Banking Systems (CBS), digital banking, cloud computing and real-time payment
platforms has made financial fraud more sophisticated. Current fraud detection techniques are not effective
anymore against new cyber assaults and complex financial crimes. This paper discusses the role of forensic
auditing, risk-based internal controls and emerging technologies in enhancing fraud prevention in commercial
banks. It discusses the application of forensic auditing with a combination of digital forensics, artificial
intelligence (AI), machine learning, behavioural analytics, blockchain, and continuous auditing to improve fraud
detection, fraud investigation, and regulatory compliance. The study also discusses contemporary issues in
banking fraud such as insider threats, data privacy, legacy system integration, and regulatory requirements and
suggests strategic measures to enhance fraud resilience. The findings indicate that the implementation of
intelligent technologies with strong governance and forensic auditing mechanisms enable proactive fraud
management, strengthen operational resilience, protect customer assets, and build trust in digital banking
ecosystems.
Keywords : Core Banking Systems (CBS), Forensic Auditing, Financial Fraud Detection, Artificial Intelligence
(AI), Blockchain Technology, Continuous Auditing, Risk-Based Internal Controls, Digital Banking
Part 1: Introduction and Development of Fraud in Core Banking Systems
The Digital revolution of banking has transformed the financial services with Core Banking Systems (CBS),
cloud computing, artificial intelligence (AI), mobile banking and real-time payment platforms. Although these
technologies have enhanced operational efficiency and customer convenience, they have also heightened banks’
exposure to sophisticated cyber fraud.
Modern CBS converges the deposits, loans, payments, customer management and regulatory reporting on one
central platform enabling real time banking on multiple digital channels. But this combination is a lucrative
target for cybercriminals who use phishing, malware, ransomware, identity theft, insider fraud and social
engineering attacks. The growing volume of digital transactions is beyond the capability of traditional manual
audits or rule-based fraud detection systems.
In the face of these challenges, banks are turning to AI, machine learning, predictive analytics and behavioural
monitoring to fight fraud in real-time. But technology alone cannot eliminate fraud. Strong governance, risk-
based internal controls, ethical organisational culture, regulatory compliance and forensic auditing are key to
effective fraud prevention. As banking moves online, banks can enhance operational resilience, safeguard
customer assets, comply with regulations and maintain public trust by combining intelligent fraud detection,
risk-based controls and forensic auditing.
Part 2: Risk Based Internal Controls and Fraud Prevention
The growing sophistication of financial fraud in Core Banking Systems (CBS) has made banks to move to
proactive risk-based internal control frameworks instead of traditional compliance-based approaches. Risk-based
Page 3962
