Fraud is no longer confined by borders. It has evolved into an international issue, with perpetrators often operating from different countries than their victims. Developed nations such as the US, UK and the rest of Western-Europe remain prime targets. Particularly in the UK, the combination of a large population and English-speaking residents makes it a lucrative hunting ground for fraudsters. Despite the advancements in fraud prevention tools, reported fraud continues to rise year after year, exposing significant vulnerabilities in the global financial ecosystem.
Financial institutions have invested heavily in fraud detection and authentication measures, yielding some success.
Account Takeover Fraud has decreased thanks to multi-factor authentication (MFA), risk-based authentication and customer education campaigns that teach users to avoid sharing sensitive information.
Authorized Push Payment (APP) Fraud, like invoice scams, is being reduced through initiatives such as "Verification of Payee" (VoP) checks in the UK and the Netherlands (and soon rest of the world), where beneficiaries’ account details are verified before payments are processed. With VoP becoming mandatory in the EU in context of the Instant Payments and PSD3 directives, this defensive measure will be further rolled-out in coming years.
However, while some fraud types have declined, new schemes are emerging at an alarming rate, fueling a net increase in fraud losses. The rapid evolution of fraud tactics highlights the need for a holistic and collaborative approach to combating financial crime.
Social media platforms have become breeding grounds for scams, ranging from fake merchants to phishing schemes targeting unsuspecting users. These scams are particularly challenging for banks to detect because the transactions often appear legitimate and are authenticated using standard protocols.
The growing sophistication of these schemes underscores a pressing need for collaboration between financial institutions, social media companies, telecommunications providers, and law enforcement. Faster data sharing about known scams, fraudulent accounts, and IP addresses can help reduce the spread of fraud. Likewise, law enforcement agencies must be equipped to handle the growing volume of reported cases, particularly when international cooperation is required.
The persistence and growth of fraud, despite improved defenses, stem from several factors:
Globalization of Fraud: Fraud is now a global industry. In developing countries, where economic opportunities may be limited, fraud offers a potential income stream. The accessibility of the internet and the relatively low risk of prosecution make it an attractive option for individuals and organized crime groups alike.
Professionalization and Automation: Criminal organizations have industrialized fraud, dividing tasks among specialized teams: data theft, target filtering, victim manipulation, payment fraud execution, and money laundering. Many of these tasks are now automated using AI, which can generate phishing scripts, tailor social engineering messages, and even create deepfakes to deceive victims.
Fraud as a Service (FaaS): Commoditization of fraud tools has lowered entry barriers. Cybercriminals can purchase fraud kits, stolen credentials, and even AI-assisted services to streamline operations.
Political and Economic Drivers: State-sponsored fraud and hacking groups use financial crime as a tool to fund regimes or destabilize geopolitical adversaries. The rise of cryptocurrencies has further complicated matters, enabling untraceable cross-border transactions and circumventing traditional Know Your Customer (KYC) and Anti-Money Laundering (AML) measures.
Low Detection and Prosecution Rates: Small fraud cases often go unreported due to the high cost of investigation, enabling fraudsters to operate below detection thresholds. Additionally, underfunded institutions in developing countries and lenient penalties reduce the deterrent effect.
The fight against fraud requires a multifaceted strategy:
Enhanced Fraud Detection and Analysis: Banks should integrate fraud prevention systems with AML processes, adopting a unified approach known as FRAML. AI-powered models can improve fraud detection, automate the preparation of Suspicious Activity Reports (SAR), and generate insights into trends and attack vectors. As a result, banks will be able to detect more fraud, but can avoid as well that minimum thresholds to analyse and process fraud can be avoided.
Add fraud prevention techniques in earlier stages of the process: see my blogs "The Missing Link in Fraud Prevention: Real-Time Customer Dialogue" (https://bankloch.blogspot.com/2025/06/the-missing-link-in-fraud-prevention.html") and "The First Line of Defense: Tackling Scams Before Transactions" (https://bankloch.blogspot.com/2025/09/the-first-line-of-defense-tackling.html) for more information.
Collaboration Across Ecosystems: Financial institutions must work more closely with social media platforms, telecommunications providers, and law enforcement agencies. Sharing information—such as suspicious account details, IP addresses, and fraud patterns—can help neutralize threats faster.
Improved Law Enforcement Support: With millions of SAR reports filed annually, only a fraction are investigated thoroughly. A shift from box-checking to targeted enforcement is needed to prosecute criminal networks effectively.
Financial Education: Educating customers remains a critical line of defense. Awareness campaigns can help individuals recognize scams and take precautions to safeguard their assets.
Tightening Crypto Regulations: Cryptocurrencies must be brought under stricter regulatory frameworks to mitigate their misuse in fraud and money laundering activities. Regulations like MiCA in the EU and the US GENIUS Act are good steps in the right direction, but additional measures (preferably internationally coordinated) are required.
Fraud is evolving, but so too must our defenses. Only through international collaboration, intelligent systems, and a united effort across industries can we hope to turn the tide on financial crime. As criminals leverage cutting-edge tools and tactics, the global community must stay one step ahead to protect consumers and institutions alike.
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