Today’s Fraud and Financial Crime Threats

Railroad track breaking off in two different directions

As complex geopolitical and economic shocks continue to happen, crime underwriters must stay alert and agile to counter emerging threats and navigate unforeseen disturbances.

With the recent release of The State of Financial Crime 2024, our Fidelity / Crime team shares key insights that highlight the evolving landscape and the implications for our industry.

Innovations in the Payments Landscape

The payments industry is rapidly evolving with open banking, contactless payments, digital wallets and currencies, and buy now pay later options. These innovations are improving customer experiences but also pose significant challenges for financial crime compliance. The open banking market is expected to grow substantially, with a significant increase in the use of contactless payments and mobile banking. With ever increasing ways to transfer funds, firms must stay vigilant in order to prevent unauthorized transfers and spending.

The Convergence of Cybercrime and Money Laundering

AI is becoming a critical tool in the fight against financial crime, but it is also being exploited by criminals. Cybercrime is anticipated to cost $9.5 trillion in 2024, with synthetic identity fraud remaining a significant threat. Firms must ensure they understand and document AI solutions, breaking down silos between financial crime compliance and cybersecurity teams to identify risks across the organization.

Bribery, Corruption, and PEPs

With over 40 countries holding elections in 2024, the politically exposed persons (PEPs) environment will become more complex. Allegations of corruption and money laundering may emerge, impacting sanctions and the fight against illicit financial flows. Firms are planning to become more risk-averse in managing PEPs and are looking to reduce reliance on manual screening processes.

Regulatory Themes

The use of AI, real-time payment schemes, beneficial ownership, and corporate transparency are key themes. The growth of public-private partnerships and strategies to circumvent sanctions are also areas of focus. Firms need to be proactive in adopting new technologies and capabilities to combat financial crime effectively.

What This Means for Your Firm

In the ever-evolving landscape of financial crime, it's essential for organizations to proactively protect themselves. One crucial step is to consider the use of Crime Insurance, which provides vital protection against financial losses related to business-related crimes such as theft by employees, forgery, and robbery. By investing in crime insurance, organizations can mitigate the potential financial risks associated with criminal activities.

Additionally, Kidnap & Ransom (K&R) insurance can provide vital protection against the financial impact of extortion, ransom, or illegal detention, helping  high net-worth individuals, families, and firms, both domestically and during foreign travel, achieve peace of mind. It typically covers monies paid to kidnappers, loss of ransom in transit, and other related expenses. It is essential for all entities to seriously consider integrating crime and K&R insurance into their risk management strategies to safeguard against potential losses and help ensure a secure future for all stakeholders. The coverage is relevant for various entities, including financial institutions, nonprofit organizations, private companies, and public companies.

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