Fraud has become one of the most pressing global threats to businesses, fuelled by increasingly sophisticated schemes and shifting regulatory demands.
Data from Moody’s shows that the United States recorded more than 59,000 fraud-related risk events in 2024—over 12,500 more than five years ago. As fraud grows in scale and complexity, companies are adopting more comprehensive strategies to safeguard both their interests and their clients, claims Moody’s.
In the UK, fraud remains the most common crime against individuals. The National Economic Crime Centre’s 2024 report found that it accounted for 37% of all crimes experienced by the public, yet only an estimated 13% of these incidents were reported. The impact extends far beyond victims’ personal losses. The Global Anti-Scam Alliance estimates that $1.03tn is lost each year to scams ranging from credit card fraud and romance scams to phishing, push-payment attacks, and synthetic identity fraud.
Managing fraud is made more challenging by the breadth of threats, the speed at which typologies evolve, and the complex web of third-party relationships that can carry risk. Regulatory frameworks are tightening, with the UK’s “failure to prevent” fraud offence requiring senior managers to allocate proportionate budgets for prevention, including technology and training. The law also extends responsibility to associated persons and firms, meaning that if one party benefits from another’s fraudulent activity, they could be held liable.
One illustrative example highlights the complexity. Company X, a global service provider, offers funding to hundreds of businesses on behalf of larger financial institutions. When one major lender flagged suspicious activity during monitoring, an investigation revealed widespread fraud linked to false invoicing and tax evasion. The lender withdrew credit, filed suspicious activity reports (SARs), and shared its findings with both regulators and other institutions. This diligence helped demonstrate compliance with the “failure to prevent” offence.
Early detection and continuous monitoring are key tools in this fight. Techniques such as negative news screening and the use of proprietary default risk scores can alert firms to indicators of financial distress or misconduct. Adverse media reports, public records, and intelligent screening platforms allow organisations to build risk profiles, detect hidden connections, and act quickly to off-board risky clients or escalate investigations.
Fraud prevention efforts must also address the use of shell companies, which can obscure ownership and facilitate large-scale financial crime. Between 2018 and 2023, Moody’s flagged over 30,000 entities displaying behaviours commonly linked to shell companies. Its Shell Company Indicator tracks seven red-flag areas, including outlier directorships, circular ownership, jurisdictional mismatches, mass registrations, dormancy, and financial anomalies—providing valuable signals for investigative teams.
A proactive fraud prevention framework can offer multiple benefits. It enhances risk management by identifying threats early, supports compliance with evolving regulations, and improves operational efficiency by automating key screening processes. Crucially, it also strengthens stakeholder trust—an asset that is as valuable as any financial safeguard in today’s interconnected risk environment.
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