BANKS ARE FIGHTING FRAUD IN SILOS AS CRIMINALS BUILD A NETWORKED INDUSTRY

The fight against financial fraud is entering a dangerous new phase as organised criminal networks become increasingly connected, specialised and commercially structured, while many banks continue to confront fraud through fragmented teams, disconnected intelligence and siloed controls.

Fraud is no longer simply the work of individual criminals attempting to deceive customers or manipulate payment systems. The emergence of fraud as a service and phishing as a service has created an increasingly industrialised criminal economy, allowing different actors to specialise in social engineering, identity theft, mule recruitment, money movement and cyber infrastructure.

That creates a fundamental imbalance for financial institutions. Criminal networks can operate across banks, jurisdictions and payment channels, while fraud teams often see only the portion of activity taking place inside their own institution.

The problem is compounded by the separation of fraud, investigations, KYC, transaction monitoring and beneficiary functions. Information that could connect apparently unrelated incidents may exist across several departments without being assembled quickly enough to expose the wider criminal network.

Industry experts highlighted the problem in a discussion featured by RegTech Analyst, arguing that banks still face significant barriers to sharing intelligence that could help identify organised fraud networks.

Privacy concerns are one of those barriers. Financial institutions can be cautious about exchanging customer information because of uncertainty over what data can legally be shared. Yet effective intelligence sharing does not necessarily require the unrestricted exchange of complete customer profiles.

Transaction identifiers, payment information, account details and other targeted intelligence can sometimes provide sufficient signals to connect cases while limiting unnecessary exposure of personal information.

Regulatory developments are beginning to address some of these obstacles. Estonia, for example, introduced legislation allowing banks to exchange fraud intelligence and delay suspicious instant payments, reflecting a broader European movement towards faster intervention and greater cooperation between financial institutions.

But external information sharing is only part of the problem.

Banks must also confront their internal fragmentation. An institution may already possess transaction histories, KYC information, beneficiary intelligence and previous fraud reports capable of revealing a wider criminal operation. If those signals remain separated across departments, the institution can effectively have the evidence without having the intelligence.

That weakness creates opportunities for criminals to move from one institution to another. An account associated with suspicious activity may be closed by one bank, only for the same network to establish new relationships elsewhere and encounter a fresh institution starting its investigation from the beginning.

The growing sophistication of criminal networks therefore raises a larger compliance question. Can banks continue to manage fraud as a collection of individual incidents when the criminals themselves are operating as interconnected organisations?

For compliance teams, the emerging lesson is clear. Fraud prevention is increasingly shifting from isolated transaction monitoring towards coordinated financial crime intelligence, where information from multiple functions and institutions can be connected quickly enough to identify the people, accounts, infrastructure and payment routes behind an attack.

The regulatory challenge will be balancing faster intelligence sharing with privacy, data protection, proportionality, auditability and due process.

The criminals have built a networked industry. The financial sector now faces pressure to build a networked defence.

Compliance takeaway: The central weakness exposed by the changing fraud landscape is fragmentation. Banks may possess the data required to identify organised criminal networks, but disconnected fraud, KYC, investigations, payments and compliance functions can prevent those signals from becoming actionable intelligence. Stronger internal information sharing, lawful cross institution intelligence exchange and coordinated investigations will increasingly determine whether financial institutions can keep pace with organised fraud.