Fraud continues to be a significant issue globally, with over 59,000 risk events reported in the US in 2024 alone. As fraud schemes evolve, businesses must adopt comprehensive strategies to mitigate these risks and protect both their interests and clients.
The UK’s National Economic Crime Centre revealed that fraud is the most common crime, representing 37% of all reported crimes. However, many fraud incidents go unreported, leading to significant financial losses—estimated at $1.03 trillion annually globally. Key fraud types include credit card fraud, phishing, and identity theft.
According to Moody’s, the complexity of managing fraud arises from the vast number of potential threats, including those across third-party networks. Regulations, such as the UK’s “failure to prevent” fraud offence, mandate businesses to implement fraud prevention measures, not only internally but also among associated firms. For example, if one bank benefits from fraud involving another, both may face liability.
A model scenario illustrates how fraud can spread: Company X, a service provider for major financial institutions, faces an investigation after suspicious activities are uncovered. This results in credit withdrawal and widespread fraud discovery involving false invoicing and tax evasion. The global lender shares its findings with other institutions, demonstrating compliance with fraud prevention laws.
Ongoing screening and monitoring, including negative news screening, are vital in detecting early signs of fraud. Adverse media stories can provide crucial insights, enabling businesses to refresh risk profiles and trigger targeted investigations.
Shell companies, often used in fraud schemes, can mask ownership and operations. Moody’s Shell Company Indicator helps identify risks like outlier directorships, financial anomalies, and circular ownership. By detecting these early, businesses can prevent fraud at scale.
To combat fraud effectively, a proactive and flexible approach is essential. This includes using intelligent screening services and adhering to regulatory requirements, ensuring better protection, improved compliance, and enhanced trust.
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