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What's the difference between credit risk and fraud risk?

Fraud risk and credit risk are two different types of risks that financial institutions face.

Credit risk is the risk that a borrower will not be able to repay their loan or credit obligation. This risk is primarily associated with the borrower's creditworthiness and ability to make timely payments.

On the other hand, fraud risk is the risk of financial loss or reputational damage that arises from fraudulent or criminal activity. This risk is primarily associated with the possibility that an individual or group will engage in fraudulent behavior, such as identity theft, embezzlement, or money laundering.

While credit risk is related to the borrower's ability to repay the loan, fraud risk is related to the possibility of a criminal act being committed.

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