The first part of this manuscript discusses a finite element method that captures arbitrary discontinuities in a two‐phase medium by exploiting the partition‐of‐unity property of finite element shape functions. The fluid flow away from the discontinuity is modelled in a standard fashion using Darcy's relation, and at the discontinuity a discrete analogy of Darcy's relation is used. Subsequently, dynamic shear banding is studied numerically for a biaxial, plane‐strain specimen. A Tresca‐like as well as a Coulomb criterion is used as nucleation criterion. Decohesion is controlled by a mode‐II fracture energy, while for the Coulomb criterion, frictional forces are transmitted across the interface in addition to the cohesive shear tractions. The effect of the different interface relations on the onset of cavitation is studied. Finally, a limited quantitative study is made on the importance of including a so‐called dynamic seepage term in Darcy's relation when considering dynamic shear banding.