The fraud landscape confronting UK FinTechs has transformed dramatically, with synthetic identity fraud, account takeover attacks, mule accounts and AI-generated documentation now commonplace.
Yet, according to compliance technology provider SmartSearch, many firms continue to depend on fragmented or outdated fraud tools that cannot keep pace with either evolving threats or mounting regulatory expectations.
SmartSearch recently discussed why UK FinTech fraud services fail and what firms should use instead.
The scale of the problem is laid bare in SmartSearch’s 2026 Compliance Report, which found that UK firms spend an estimated £33.9bn annually on compliance, with 36% of that expenditure wasted on processes that could be automated. The research also revealed that 68% of compliance professionals devote up to half their working time to repetitive tasks that add little strategic value.
Much of the issue stems from legacy fraud platforms built around static rules and manual reviews. While these systems may have coped with older fraud techniques, they frequently fail to detect modern threats such as deepfake-enabled impersonation, authorised push payment (APP) fraud, crypto-enabled financial crime and AI-generated documents. Fraudsters now simply move faster than traditional compliance processes can respond, and static controls create blind spots that criminals are increasingly exploiting.
Siloed compliance systems compound the danger. In many FinTechs, identity verification sits in one platform, transaction monitoring in another, sanctions screening elsewhere, and fraud alerts are managed separately. This fragmentation limits visibility into customer risk and means warning signs can be missed or investigated too late. SmartSearch argues that effective fraud prevention demands a connected view of customer behaviour across the entire lifecycle.
Manual processes present a further risk. The 2026 report found that only 30% of firms currently use AI for sanctions screening, while 52% struggle with Ultimate Beneficial Owner (UBO) verification. As regulators place greater emphasis on proactive risk management, such resource-intensive workflows become increasingly difficult to sustain.
According to SmartSearch, modern FinTech fraud tools should unite fraud prevention, identity verification and AML compliance within a single risk-based framework. Key capabilities include real-time identity verification with biometric and liveness checks, automated AML screening covering sanctions, PEPs and adverse media, advanced transaction monitoring capable of spotting mule activity and velocity anomalies, and integrated risk scoring that reduces false positives.
When evaluating providers, compliance leaders should ask whether a platform combines fraud and AML functions, supports ongoing monitoring, scales with transaction volumes, provides a complete audit trail and offers API integrations.
Read the full SmartSearch post here.
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