Emerging Financial Crime Trends, Payment Fraud, and Risk Mitigation: How Banks Can Be Prepared

September 26, 2022

Consumers’ worldwide adoption of instant, contactless transactions has provided an opportunity for some to take advantage of loopholes and weaknesses in digital systems. Peer-to-peer (P2P) payments fraud, synthetic identities, and cryptocurrency scams are just a few examples in the current trends of financial crimes. Financial institutions, regulators, and technology providers alike are exploring avenues to stay ahead of these developments and prevent fraud.

Perspectives in this insight were derived from a recent panel discussion partner Robin Nunn participated in at The Clearing House and Bank Policy Institute’s 2022 Annual Conference, which was held from September 6-7, 2022 in New York.  Robin moderated a panel entitled “Developments in Fraud and Protecting Against Emerging Threat Vectors,” which explored emerging financial crime trends across the industry and the best practices to combat these advancing threats.

Scammers Move Quickly

Although financial crimes are not new to many businesses, the speed in which new technologies are changing the way fraud is committed has pushed companies to reevaluate their security procedures and fraud response. Those seeking to gain access to consumer identities or accounts can often adapt and move at a faster pace than the practices and policies meant to combat their efforts.

Consumers and companies face the threat of financial crime from a several directions as criminals create more complex methods of stealing money and personal information—damaging not only consumers, but company reputations. By taking advantage of political instability, companies that quickly shifted to online platforms early in the COVID-19 pandemic, and federal relief payments, thieves are targeting a variety of industries, including traditional banking and fintech firms.

The top financial crime trends financial leaders should be aware of include COVID-19 relief payment fraud, including Paycheck Protection Program (PPP) loans; identity theft; cryptocurrency Ponzi schemes that promise big returns but ultimately leave investors with empty pockets; and more opportunities to breach network security in the face of continued remote work.

Identity Verification, Collaboration Can Fight Financial Crime

For leaders in the financial services industry, proactive, collaborative measures could help financial institutions and other businesses anticipate and rebuff criminal efforts.

  • Review impacted policies, procedures, and disclosures. Banks should identify and review the policies, procedures, and consumer disclosures that may require revision to address any expanding regulatory changes and expectations.
  • Evaluate the Consumer Financial Protection Bureau’s (CFPB’s) Electronic Fund Transfers FAQs. The questions and answers pertain to compliance with Regulation E’s requirements. The latest update encompasses additional details regarding person-to-person/P2P payments and payment providers in relation to Regulation E.
  • Confirm notification protocol. Banking organizations are required to notify their primary federal regulator within 36 hours in the event of an occurrence that results in actual harm to the confidentiality, integrity, or availability of an information system. Banks should confirm their existing Reg E error claim intake channels have effective processes, including reviewing any website forms and customer call scripts.
  • Utilize existing practices. Where feasible, Know Your Customer or Know Your Client protocols, which are intended to ensure a customer is who they claim to be, can help minimize instances of financial crime.
  • Assess training needs. Banks should consider refreshing their training needs assessments to identify impacted roles and responsibilities, including third parties engaged in error claim processing.
  • Implement better technology and operational analytics. Technology providers have created new, savvy products, such as third-party verification, video verification, and biometric offerings, to assist with consumer identity confirmation and reduce chances of theft. Financial institutions also are investing in fraud detection efforts to mitigate the threat of financial crime.
  • Improved information sharing and transparency. Some experts see this as a way to detect potential illicit activity, while others encourage entities building financial crime deterrence measures to learn from the successes or failures of other companies or industries.

Regulatory Agencies Keep Eye on Financial Crime

Regulatory agencies around the world are paying attention to financial crimes and seeking ways to boost corporate transparency, including the United States with its Corporate Transparency Act and pending ENABLERS Act legislation, and to close longstanding regulatory gaps while encouraging innovation in tech.

In particular, the CFPB is exploring ways to fight the massive uptick in fraud regarding real-time payments. The Electronic Fund Transfer Act (EFTA) and Regulation E provide specific protections to consumers when they transfer funds electronically. A consumer is protected if they are tricked into handing over account information to a fraudster who then initiates a transfer. However, a consumer is not protected if they are deceived into authorizing transactions that they believe are legitimate but are actually part of a scam. According to a WSJ report, the CFPB is preparing to release new guidance aimed at requiring banks to make refunds to victims of scammers who defraud consumers into sending money to a third party using an online money-transfer platform.

Also in the United States, the Anti-Money Laundering Act of 2020 aims to bolster the country’s anti-money laundering efforts. The Financial Crimes Enforcement Network (FinCEN) has taken several steps to enact the law. Among them is the issuance of priorities regarding anti-money laundering and countering the financing of terrorism, which priorities include corruption, cybercrime, and fraud. The action is meant to help financial institutions prioritize their own compliance resources. In early 2022, FinCEN issued a proposed rule for a suspicious activity report sharing pilot program.


Confronting the variety and evolving nature of criminal financial schemes may seem like a daunting task. Companies and regulators alike recognize the need to remain vigilant of technological changes and adapt to help financial institutions be in a better position to protect themselves and their customers.