ARTICLES

Over the past few years, money launderers have found new techniques to defraud individuals and organizations. Money laundering has continued to take numerous forms, especially with the digital evolution. It may be a web of tokens, cross-chain tools, and digital ecosystems to disguise illicit funds, which challenges even the most advanced compliance systems.

As financial products, digital payments, and cross-border transactions become more complex, the opportunity for criminals to exploit financial institutions grows in parallel. The digitisation of corporate registries, social networks, public databases, sanctions lists, and media archives has created a vast ecosystem of open data.

Money laundering remains a persistent global threat to financial institutions, as criminals continue to evolve and deploy ever-more sophisticated techniques to legitimise the proceeds of crime. According to an estimate from the Ministry of Home Affairs (MHA), Indians suffered losses of ~US$8 billion due to online scams, which are linked to significant money-laundering, during the first five months of 2025.

Straw Buying takes place when an individual buys something for another person who may not be legally allowed to purchase it by themselves. While this concept is often related to firearms purchase, it can occur in many sectors, including pharmaceuticals, luxury and consumer goods, and in financing contracts.

The world has moved beyond simple fraud to far more complex schemes, blurring the line between financial crime and systemic harm that resembles crime. An individual in a respected position can unintentionally or deliberately create consequences that lead to social disruptions, breach of financial stability, and erosion of trust.

A money mule is someone who unknowingly transfers illegally obtained funds on behalf of criminals, typically through their personal bank account. For institutions, identifying such patterns is crucial for an effective risk management framework and strategies.

The rapid growth of digital payment systems, e-commerce, and online banking has significantly increased the scale and complexity of cross-border fraud. Cybercriminals now employ sophisticated tools, including malware, bots, and synthetic identities, to operate globally, fuelled by the anonymity and reach of digital transactions.

Fraud was a localized crime that involved physical impersonation, counterfeit documents, or direct theft. These were limited by geography and required personal interaction. The digital age has given fraud a global reach. With online banking, digital wallets, and complex credit products, fraudsters operate across borders, exploiting cyber vulnerabilities.

The effect of layering extends far beyond financial crimes. For banks and financial institutions, failure to detect such activities can result in regulatory sanctions and irreversible reputation damage. The impact reaches Governments that lose tax revenue that could otherwise support public services and national development.

A Central Bank Digital Currency (CBDC) is a digital currency issued by a country’s central bank to complement, rather than replace, cash. Unlike cryptocurrencies like Bitcoin, CBDCs are regulated by the government and aim to combine the convenience of digital payments with the stability of traditional money.

Shadow banks were identified as non-bank financial intermediaries that were key players in the flow of credit. These entities perform essential functions of lending and investing. In India, shadow banks not only survived the post-crisis impact but grew to become a pillar of the financial ecosystem.

Balancing both innovation and compliance is not only possible but essential for long-term success. Compliance, when designed well, doesn’t block innovation, but guides it and can ensure that financial institutions grow responsibly, protect customers, and build long-term trust.

Deepfakes are reshaping financial fraud, with synthetic identities, forged documents, and AI-driven impersonations bypassing KYC and AML checks. Governments and banks are responding with stronger biometrics, digital identity wallets, and stricter data protection laws. The future of compliance will rely on layered verification, AI anomaly detection, and collective vigilance.

The impact of fraud extends beyond financial losses, as it quietly obstructs the long-term potential of a business. Beyond the immediate financial hit, fraud can create a chain reaction of legal issues, regulatory non-compliance, and reputation harm that may take years to repair.

The global Banking, Financial Services, and Insurance (BFSI) sector is experiencing growth, with market capitalization projected to rise to around ~US$25 trillion by 2025. This growth is driven by digitalization and a demand for innovative products. At the forefront of this is Agentic Artificial Intelligence (AI), which boosts operational efficiency, enhances customer service, and ensures regulatory compliance.

As early as 300 BCE, Greek merchant Hegestratos attempted to sink his ship to claim insurance – a plan that highlights financial deception is not a modern issue and there are many examples of fraud infiltrating the highest levels of power. While tactics have evolved from forged documents to digital manipulation, the underlying motive remains … Read more

A 2021 FATF analysis found that over 50 jurisdictions had identified the misuse of professional services, especially legal and accounting, for money laundering. In India, the Enforcement Directorate has increasingly flagged professionals’ roles in high-profile cases, including setting up shell companies and routing funds offshore.

Data breaches surged by ~78%, exposing ~US$1.8 billion records globally, while Gartner predicts compliance spending will rise by ~40% by 2026. Once a back-office function, compliance has become a strategic priority, influencing business decisions and partnerships.

Despite growing awareness around financial literacy, India continues to lose an estimated ~US$100 million each year to Ponzi schemes. In many parts of the country, financial education has come too late, only after countless individuals have already fallen victim.

UPI-related frauds have surged by 85%, rising from 725,000 cases in FY23 to 1.34 million cases in FY24. While UPI has transformed India’s digital payment landscape, the spike in fraud follows a familiar trajectory. As financial systems evolve, from counterfeit currency to forged cheques, and now digital transactions, so do the methods of exploitation.