Fault detection and isolation in water distribution networks is an active topic due to its model's mathematical complexity and increased data availability through sensor placement. Here we simplify the model by offering a data driven alternative that takes the network topology into account when performing sensor placement and then proceeds to build a network model through online dictionary learning based on the incoming sensor data. Online learning is fast and allows tackling large networks as it processes small batches of signals at a time and has the benefit of continuous integration of new data into the existing network model, be it in the beginning for training or in production when new data samples are encountered. The algorithms show good performance when tested on both small and large-scale networks.