5 Common Financial Crimes and How Your Bank Can Avoid Them


Financial crime is an overarching term used to describe crimes in which an individual or group takes money, property, or assets that belong to others for personal gain. Although these crimes are not new in the banking landscape, it should be noted that malicious actors are now taking advantage of even the most novel digital platforms to enact increasingly sophisticated criminal activities. Serious offenses such as fraud and money laundering continue to be prevalent threats to banks, their consumers, and potentially an entire nation’s economic stability.

While governments are actively working to combat financial crimes in the digital age, banks can also work to address these risks through best practices and new technological capabilities. To illustrate, here are some of the most common financial crimes and how your bank can combat them.

Money Laundering

Money laundering refers to malicious actors’ attempts to acquire, conceal, and secure funds that originated from criminal activities. Successful money laundering activities typically involve legitimate-looking transactions that push through without attracting attention. Money laundering can also turn into terrorist financing if the sources of funding stem from both illegal and legitimate transactions.

Banks can opt to invest in modern anti-money laundering (AML) solutions to better detect suspicious transactions and identify criminal networks. For one, banks can improve their AML compliance by integrating tools that utilize artificial intelligence (AI) and machine learning (ML) to detect cases of money laundering as they happen or, sometimes, even before they happen. Such tools typically leverage behavioral analytics and neural network algorithms to paint a picture of “normal” consumer transactions and determine exchanges that seem out of line. A well-designed AML suite can use such capabilities to alert banks and authorities on questionable transactions without wasting time on false positives.

Moreover, efficient AML software can help speed up investigations by generating contextualized Suspicious Activity Reports (SARs) that take into account global watchlists, sanctions, and government-issued warnings. Streamlining the creation of such reports simplifies cross-communication with law enforcement and provides comprehensive insights that will aid in the creation of consumer advisories.

Identity Theft

Identity theft is a prevalent threat faced by banks as well as many other types of financial institutions (FIs), including credit card companies and fintech. Essentially, identity theft occurs when someone uses an individual’s personal information, such as names, addresses, social security numbers, and bank account details, without the latter’s consent. Criminals can use this information for a myriad of applications, from getting government benefits to funding a personal shopping spree.

Most banks actively launch campaigns to educate their consumers on best practices to prevent identity theft. Such practices include not sharing personal information with strangers, using strong passwords when logging into online banking platforms, and not clicking on suspicious links in emails and text messages. Some Fis also recommend not logging into online bank accounts using public wifi networks.

In addition to ramping up consumer education initiatives, banks can also upgrade their systems and interfaces to prevent identity theft. For example, banks can implement two-factor authentication features and other next-level identity verification techniques such as biometrics screening. In addition, banks can choose to level up know-your-customer (KYC) compliance through AI, ML, and advanced analytics to properly vet account holders.


Embezzlement is a white-collar crime in which an individual misappropriates funds for personal use. Often, this individual has legal access to money, property, or assets owned by an employer or company. Embezzlement is considered property theft and affects many organizations and businesses.

Proper vetting of employees is the best way to prevent this serious crime. With this, it’s important to implement systems designed to aid companies in their background checks. It would help to use tools with good KYC features and strict provisions when it comes to sharing information outside of enterprise networks.


Fraud encompasses a broad range of criminal activities that involve using dishonest claims to deceive people into giving them money. Identity theft can also lead to fraud if the criminals use scams to trick people into disclosing personal details and giving access to their money. Victims of such threats fall into the trap of opening harmful files or inputting sensitive information into platforms designed to mimic authoritative interfaces.

Credit card fraud is the most common type of fraud and usually happens through scams, unprotected internet connectivity, and card theft. But aside from credit cards, criminals can also use insurance services to scam others. For example, a person may maliciously claim insurance benefits that don’t apply to them. On the other hand, criminals may pose as insurance agents and siphon people’s money for supposed insurance benefits.

Of course, banks would do well to reiterate best practices for digital hygiene to their customers to prevent fraud. Additionally, banks can also implement solutions designed to standardize data management and immediately send alerts on suspicious transactions. It would also help to invest in tools that have top-of-the-line identity verification, consumer behavior monitoring, and consumer assistance elements—especially for account holders that need help in making safe and accurate transactions.

Tax Evasion

Tax fraud is another form of financial crime in which individuals or businesses give inaccurate information to falsify tax returns. Activities related to tax fraud include false deduction claims, inaccurate reporting on income, and categorizing personal spending as business expenses. Criminals often commit tax fraud for tax evasion, which is considered a felony and a federal offense in the United States.

Although tax fraud is largely driven by personal responsibility, banks can still work to avoid this crime. For instance, banks can work with government organizations to coordinate and secure their databases. It would also help to include personalized alerts in online banking platforms that remind taxpayers to file their taxes promptly and accurately. Additionally, analytics-driven tools that help users calculate and prepare their taxes can prevent taxpayers from unknowingly providing inaccurate information, especially if they’re not working with an accountant for their dues.

A More Intelligent Way of Battling Financial Crime 

In today’s complex banking landscape, it’s not enough to ask consumers to be savvier in protecting their information and funds. Banks also need to review their whole technological ecosystem to ensure that these financial crimes are nipped in the bud. From generating comprehensive consumer profiles to sending real-time transaction alerts, there are a variety of ways that banks can help consumers protect their hard-earned money and feel empowered to make safe financial decisions.

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