Key insights:

• • • AI is supercharging old fraud schemes��— By making synthetic identities, deepfake scams, and customer fraud faster, more credible, and harder to detect, AI is amplifying fraud and crime.

    • The real vulnerability may be internal silos��— Institutions need to be on the lookout, because what looks like a credit loss, an HR issue, or a payment request may actually be part of a wider multi-vector AI-enabled attack.

    • Institutions already have the tools to respond��— Through KYC and internal and behavioral data, financial institutions have the ability to respond to fraud threats — but only if teams connect and act together.

Fraud and crime existed long before AI, of course, but today’s technology delivers an acceleration in speed, scale, and success rate for fraudsters, resulting in billions of dollars in losses for victims. AI-enabled frauds on financial institutions by 2027 in the United States alone, and of detected fraud attempts on financial institutions use AI – and of these, 29% are successful.

To respond effectively to these threats, institutions need to implement a unified response that brings together departments that may not traditionally be partners. This cross-functional coordination should include not only the institution’s fraud and financial crime risk teams but also its credit risk, cybersecurity, and human resources functions.

And this response is critical, because today, financial institutions are being targeted by multiple types of AI-enabled attacks, including tactics such as:

• • • use of synthetic identities to circumvent know your customer/customer due diligence (KYC/CDD) controls and perpetrate fraud or launder money;
    • use of deepfake identities to gain employment, particularly by North Korean IT workers;
    • AI-enhanced “CEO frauds” to deceive staff into taking unauthorized actions; and
    • Bank customers may be targeted by fraud too, presenting further risk to financial institutions.

Let’s look at these threat vectors individually:

Vector 1: Synthetic identities and KYC/CDD

Synthetic identities can be entirely fabricated or may use combinations of real and fabricated personal information to create a new identity. For example, a fraudster may construct a synthetic identity using a Social Security number exposed during a data breach combined with an AI-generated passport.

This threat is real and happening now: identifies that criminals have already used AI to successfully open accounts using falsified documents, photographs, and videos. And according to , synthetic identities were used to open as many as 3% of US bank accounts, representing millions of identities. Not surprisingly, these illicit accounts are used to commit fraud and launder the proceeds of money laundering.

Vector 2: North Korean IT workers

North Korean individuals have successfully gained employment as remote IT workers at American companies, often passing themselves off as US nationals using AI-generated face-swapping technology combined with proxy computers and false identity documents. North Korean IT workers are almost $800 million annually for the regime.

Institutions deceived into employing these workers are not only against North Korea, but they are also exposing commercially sensitive data and systems to an adversary state, increasing the possibility of theft, cyber-attacks, and extortion.

Vector 3: CEO Fraud

A “CEO fraud” is a cybercrime in which an attacker impersonates an executive to deceive an employee into taking actions such as sending unauthorized wire transfers or disclosing sensitive information. AI accelerates these frauds by making them more personalized and credible.

In one of the more well-known examples, in an AI-enhanced CEO fraud in 2024 after the fraudster impersonated Arup Engineering’s CFO and requested a staff member to make several financial transfers. The criminals added credibility to the fraud by using a in which the target recognized many of their colleagues – unfortunately, all of them were deepfakes.

Vector 4: Frauds targeting customers

Where customers are targets, AI provides the scale, speed, and personalization to allow illicit actors to deliver individualized fraud. For example, whereas romance scams previously used repetitive scripts and re-used the same images of the romantic “partner,” fraudsters can now use AI-generated messages, images, or videos, continuously adapting the execution of the scam to the target’s responses and behaviors.

Creating a cross-functional and unified response

The examples above demonstrate the diverse and highly sophisticated uses of AI by illicit actors, both adversary states and criminal networks. Detecting and responding to these illicit activities requires joint action between teams that may not traditionally work closely together.

For example, if an account holder fails to repay a loan, the credit team may consider it to be a default by a legitimate customer and write it off as a credit loss. However, if the account was opened using a synthetic identity, investigation may reveal other accounts that share similar customer data points or transactional patterns. This could reveal a network of accounts that are perpetrating a fraud or money-laundering scheme. To detect and respond effectively, joint action is needed between KYC/CDD on-boarding teams, financial crime investigators, and fraud and credit risk professionals.

Alternatively, for HR teams to effectively identify use of face-swapping videos during a hiring process, knowledge from the organization’s cybersecurity team, especially of deepfake indicators, would be valuable. If a North Korea IT worker is hired and only later identified, cybersecurity and sanctions teams must be involved in the response to mitigate data, network, and compliance exposures.

Detecting and responding to all illicit activities requires joint action between teams that may not traditionally work closely together.

Finally, all staff may be targeted by deepfake fraud, but those in senior positions or departments with financial authority are the most vulnerable. This means it is essential for institutions to deliver employee training using real-life case studies, “near misses,” and scenarios drawn from across the institution and industry. This type of training will increase vigilance and minimize the likelihood of a successful attack.

For customers, financial institutions are well-positioned to identify indicators of fraud due to their extensive datasets of KYC/CDD records, transactional, and behavioral information. Institutions should enhance their customer relationships (as well as meet applicable regulatory requirements) by taking proactive measures to inform and protect their customers.

While AI has accelerated fraud and crime, financial institutions also hold valuable and relevant assets: the knowledge distributed across their cybersecurity, HR, credit risk, financial crime compliance, fraud, and KYC/CDD teams. By connecting these teams together, even in contexts in which these departments have not traditionally been partners, institutions will be well-positioned to protect both themselves and their customers from illicit actors’ sophisticated AI-enabled threats.

You can learn more about the fraud-fighting challenges faced by financial institutions and other organizations here

Key insights:

• • • Define your risk appetite — A clearly defined fraud risk appetite aligns prevention efforts with strategic objectives and ensures accountability by establishing acceptable levels of fraud risk across the organization.

    • Create a fraud-specialized team — Dedicated ownership of the vendors that supply fraud solutions by a fraud-specialized team — rather than by the procurement function — is critical to maximizing technology performance and adapting to emerging threats.

    • Establish a specialized prevention division — The rise of sophisticated scams demands the creation of a separate, specialized prevention division to avoid overburdening core fraud teams and ensure targeted, effective responses.

Corporate fraud represents one of the most significant risks facing organizations today. Yet many companies lack the structured governance and technology infrastructure needed to combat fraud effectively.

The solution requires that comprehensive fraud prevention frameworks be built on clear governance, proper technology deployment, and data-driven insights, according to Aaron Frye, Founder & CEO of Lucid Point Consulting. Organizations that implement these five pillars create resilient fraud prevention functions capable of identifying and preventing fraud before it impacts results. These five pillars include:

1. Develop a fraud risk appetite

Effective fraud prevention begins with a well-defined fraud risk appetite that tells the right story to the right stakeholders. Your framework must communicate to your board, executive leadership, and operational teams the level of fraud losses your organization should tolerate, and in which areas you should prioritize fraud prevention investments.

The fraud risk appetite framework must address several key considerations; for example, it should define the level of fraud risk that aligns with the organization’s growth objectives, identify the areas of greatest vulnerability, and evaluate which investments will yield the strongest return. Equally important is the ongoing monitoring and communication of progress through regular reporting on fraud risk metrics, vendor assessments, and investigation outcomes. These actions demonstrate to stakeholders that fraud prevention remains an active priority for the organization and ensures that fraud risk continues to inform organizational decision-making.

2. Establish clear ownership of risk-solution vendors

Many organizations invest significantly in fraud detection tools only to see disappointing returns. The problem often lies not in the tools themselves, but in unclear ownership and accountability for their performance.

Organizations that implement these five pillars create resilient fraud prevention functions capable of identifying and preventing fraud before it impacts results.

If your organization lacks a designated person or team within your fraud strategy function whose job it is to ensure the risk-solution tools you’re getting from vendors are the best for your enterprise, you likely aren’t getting the most out of your vendors. This dedicated fraud service ownership role must act as your internal champion, evaluating vendor performance, staying current with product enhancements, and ensuring integration with other fraud prevention initiatives.

Critically, procurement, sourcing, and vendor management functions should never own this role. These teams, by the nature of their titles and responsibilities, don’t prioritize fraud. They lack the specialized knowledge required to assess whether your fraud detection technology is performing optimally or adapting to emerging threat landscapes. Without dedicated fraud expertise overseeing your technological investments, advanced tools sit underutilized and critical fraud signals go undetected.

3. Develop a fraud governance function

Every organization should have a dedicated fraud risk governance team within its fraud risk management organization. This governance function serves as your second line of defense, working proactively to reduce operational chaos within your fraud strategy, operations, and investigation groups.

If a non-fraud governance function owns fraud governance, you are guaranteed not to be getting the best form of governance. Fraud is a specialized discipline requiring dedicated expertise and focus; and your governance team must develop policies, establish standards, monitor control effectiveness, and ensure consistent application of fraud prevention practices across the enterprise.

4. Document existing risks and resource gaps

One of the most important responsibilities of your fraud governance function is identifying and documenting the areas related to fraud risk that your current fraud risk teams don’t have time to review. Due to capacity constraints, it is impossible for many fraud risk teams to cover all open gaps. Your organization must understand those open gaps and not be ashamed to address them.

Create an action plan that documents open risk and self-identified issues that your current team cannot adequately address. This transparency demonstrates clear-eyed realism about your organization’s limitations and creates the business case for requesting additional resources or engaging external consultants to help close these risk gaps.

5. Address the growing scam-prevention challenge

needs its own prevention strategy division within your fraud risk function. Compromised business email, investment scams, and vendor fraud schemes represent an entirely new category of fraud risk that demands specialized attention.

Every organization should have a dedicated fraud risk governance team that serves as its second line of defense, working proactively to reduce operational chaos within corporate strategy, operations, and investigation groups.

There has never been a full manageable grip on fraud prior to the spike in scams. Therefore, you cannot expect your existing fraud risk teams to tackle a new wave of scams as a priority as well as to manage traditional fraud prevention responsibilities. Your core fraud function manages internal control systems, transaction monitoring, and investigation protocols. Adding comprehensive scam prevention to this workload without dedicated resources guarantees that identifying and preventing scams will receive insufficient attention.

Establish a dedicated scam-prevention division focused specifically on emerging scam threats, employee education, scam-specific prevention technology, and response protocols. This specialized approach ensures sophisticated scam schemes receive the expertise and resources necessary while your core fraud function continues addressing traditional fraud prevention requirements.

Going forward into the fight against fraud

In an era of escalating fraud threats, reactive detection is no longer sufficient. Organizations must adopt a proactive stance grounded in strong governance, clear accountability, and strategic resource allocation.

By defining a fraud risk appetite, assigning ownership of fraud prevention tools, strengthening governance, documenting unaddressed risks, and establishing a dedicated scam prevention function, companies can build resilient, forward-looking fraud prevention frameworks. These five pillars enable organizations to anticipate threats, allocate resources effectively, and protect both financial performance and reputational integrity.

Today, the path to fraud resilience begins not with technology alone, but with deliberate, enterprise-wide commitment to proactive risk management.

You can find out more about ways to

Key insights:

• • • Prediction markets sit in a regulatory gray zone — Prediction markets’ economic function often looks much closer to gambling than traditional finance.

    • That ambiguity creates an AML blind spot — This blind spot allows potentially weaker controls around KYC, source of funds, sanctions screening, and suspicious activity reporting.

    • Banks and payment processors should focus on actual risk, not labels — Reputational, legal, and financial crime risk exposure can arise long before regulators clarify the rules.

Prediction markets have grown into a multi-billion-dollar ecosystem, offering the ability to enter into a contract to predict the outcomes on everything from elections and sports games to economic data and weather events. Yet as these platforms expand, they operate in a regulatory gray zone that raises serious questions for banks, payment processors, and compliance professionals.

Yet, the classification question that regulators and financial institutions continue to debate is not merely academic. It determines whether prediction market platforms will face the same anti-money laundering (AML) and know-your-customer (KYC) obligations as casinos and sportsbook venues, or whether prediction markets can continue to operate with minimal compliance oversight. This distinction has real consequences for the financial system.

“Prediction markets are not just a classification problem, they represent a structural gap in how financial crime risk is currently understood and managed,” says James Lephew, Founder & CEO of , a Charlotte-based consulting firm that serves major gambling operators and financial institutions globally.

Clarification is required in classifying this sector

Prediction markets occupy an ambiguous middle ground. Market operators position their platforms as financial derivatives or forecasting tools rather than gambling venues, emphasizing price discovery and statistical analysis over chance-based wagering. A contract on the outcome of a presidential election or a sports event, they argue, reflects crowd-sourced probability estimates grounded in information aggregation, not gambling luck.

Yet the fundamental mechanics raise legitimate questions. A user who buys a contract predicting that a candidate will lose an election is, in economic terms, wagering money on an uncertain outcome. The distinction between betting on a football game and trading a contract on the outcome of that same game becomes difficult to defend from a regulatory standpoint — and this classification matters enormously.

The distinction between betting on a football game and trading a contract on the outcome of that same game becomes difficult to defend from a regulatory standpoint — and this classification matters enormously.

If prediction markets are treated as gaming operations, they trigger Title 31 obligations under the Bank Secrecy Act, including currency transaction reporting, suspicious activity reporting (SAR) requirements, and comprehensive KYC procedures. If on the other hand, prediction markets are classified more akin to financial markets, these requirements may not apply. Currently, many prediction market platforms claim financial market status, allowing them to operate outside gaming regulations and with potentially weaker AML controls.

There is a compliance gap

Without clear regulatory classification, prediction markets create a significant AML blind spot. Casinos must report cash transactions exceeding $10,000, conduct source-of-funds reviews, and maintain detailed customer profiles. Sportsbooks face licensing requirements, geolocation checks, and responsible-gaming safeguards. Prediction market platforms, by contrast, often operate with minimal reporting obligations.

This gap introduces concrete risks. Digital wallets and cryptocurrency channels can obscure the source of funds. Structuring and layering of sources become easier without robust verification, further clouding who exactly playing in these markets. Collusive trading through multiple accounts allows value transfer that may go undetected. And VPN use and foreign payment channels can enable sanctions evasion.

Further, without mandatory SAR reporting, suspicious patterns tied to money laundering, terrorist financing, or market manipulation may never reach law enforcement.

“What we’re seeing is an AML blind spot,” says Lephew. “Platforms enabling financial flows with characteristics of gambling, but without the controls that regulators would normally expect.” Until classification catches up with the technology, he adds, this blind spot remains open — and exploitable.

Why this matters for banks and processors

Banks and payment processors that support prediction market platforms may carry significant reputational and legal risk if they haven’t conducted thorough due diligence — and they cannot rely on a platform’s self-classification as a financial market or forecasting tool. Nevada and other jurisdictions are actively examining whether these platforms constitute gambling, echoing concerns from the American Gaming Association that products carrying similar economic risks deserve similar regulatory treatment.

If a product allows participants to wager on uncertain outcomes and creates risk that is substantially similar to gambling, it should face AML and customer identification requirements proportionate to that risk.

“Risk must be assessed based on how the product actually behaves, not how it is marketed,” Lephew explains. And that means evaluating whether a platform applies robust KYC procedures, verifies the source of deposits and beneficial ownership, screens against sanctions lists, reports SARs to the government, prohibits contracts on high-risk events such as assassinations or terrorism, and uses geolocation controls to block users in restrictive jurisdictions. Those answers matter far more than whatever label the platform chooses, Lephew says.

The path forward

Regulators have several options. One approach applies gaming regulations uniformly, treating all prediction markets with economic characteristics similar to gambling as gaming operations subject to Title 31. A second approach creates explicit financial market classification with statutory AML obligations and enhanced scrutiny of high-risk contracts. A third option adopts a tiered or risk-based framework, classifying contracts on lower-risk events such as economic data or weather under financial market rules, while sports and election markets could face enhanced scrutiny. Violent outcome markets would be prohibited entirely.

Regardless of which path regulators choose, the principle should be the same: Classification should follow economic function. If a product allows participants to wager on uncertain outcomes and creates risk that is substantially similar to gambling, it should face AML and customer identification requirements proportionate to that risk.

Financial institutions should not wait for regulatory clarity. They should apply rigorous due diligence now, treating prediction markets with a heightened level of scrutiny appropriate to their actual risk profile rather than their claimed legal status.

The goal is not to eliminate prediction markets, but to ensure they operate within a framework that prevents money laundering, terrorist financing, and market abuse. “If it looks like gambling, behaves like gambling, and carries the same financial crime risk, it should be regulated accordingly,” Lephew notes. “Anything less creates systemic exposure.”

You can find out more about the challenges financial institutions face in their anti-money laundering efforts here

Key insights:

• • • AI as a force multiplier — Advanced analytics now reveal financial and behavioral anomalies that traditional monitoring systems routinely miss, giving executives a clearer view of emerging risks.

    • Geospatial and digital intelligence converge — Intelligent networks like OSINT, ADINT, and location-based data expose hidden networks and movement patterns, improving the detection of money laundering, trafficking, and smuggling operations.

    • Enterprise risk strategies must evolve — Organizations that integrate AI-driven intelligence across compliance, security, and operations can respond faster, reduce blind spots, and operate with greater resilience during high-risk events.

Illicit financial activity has always evolved faster than the systems designed to stop it. And today, the speed and sophistication of criminal networks are accelerating in ways that traditional compliance processes can no longer match. Major international events, such as the 2026 FIFA World Cup, bring millions of visitors, heightened commercial activity, and a surge in cross‑border movement, all creating fertile ground for exploitation.

AI as an intelligence multiplier

In this environment, financial institutions are on the front lines of detection and mitigation, and corporations must strengthen their ability to detect hidden risks. AI — particularly when combined with digital intelligence sources, behavioral analytics, and geo-referenced data — has emerged as the most powerful accelerator of that transformation.

Among all of this high-volume activity, AI is redefining how institutions detect early-stage indicators of illicit activity. Instead of relying solely on manual reviews or rule-based monitoring, organizations are increasingly deploying systems capable of analyzing vast volumes of structured and unstructured data at once. Three capabilities are shaping this new frontier:

Open-source intelligence (OSINT) — Criminal activity, even when intentionally concealed, tends to leave trace signals online. OSINT tools can examine social platforms, online marketplaces, media sources, forums, and digital discussion channels to uncover suspicious behavioral patterns, potential recruitment or exploitation signals, inconsistencies between official identification and online presence, or clusters of accounts linked by shared attributes. For many executives, OSINT has become an indispensable layer of enhanced due diligence, risk scoring, and early threat detection long before suspicious activity appears in financial records.

Advertising intelligence (ADINT) — ADINT focuses on metadata produced by mobile applications and digital advertising ecosystems. While it does not expose personal identifiers, it reveals mobility patterns, device behavior, and clustering anomalies. This type of intelligence becomes particularly powerful during large-scale events because of the ability to monitor the movement of devices across high-risk corridors, identify unusual concentrations of activity near event venues or border regions, or detect digital behavior consistent with organized criminal logistics. ADINT introduces a geographic and behavioral dimension to risk that enables institutions to understand not only who a customer appears to be, but where they go, how they behave, and whether those patterns align with legitimate economic activity.

AI-enhanced investigations — Modern platforms now merge financial data with OSINT and ADINT inputs and then apply descriptive and generative AI (GenAI) to draw connections that would be impossible to detect manually. These systems can classify digital communications by sentiment or intent, identify unusual financial behavior within seconds, convert large datasets into actionable intelligence summaries, translate and interpret foreign-language content, and map networks through recurring metadata or visual similarity. For decision-makers and organizational stakeholders, this shift represents a dramatic reduction in blind spots and a faster escalation pathway when emerging threats surface.

Why financial institutions and corporations must lead

Human trafficking, migrant smuggling, and money laundering cannot function at scale without the financial system. Even when exploitation occurs offline, profits eventually make their way into the formal economy through remittances, structured cash movements, shell companies, digital wallets, recruitment payments, or short-term rental arrangements.

AI enhanced investigations can help institutions identify subtle but meaningful indicators, such as coached or inconsistent customer responses, accounts linked through shared devices or addresses, rapid deposits followed by immediate withdrawals, purchases that do not correspond to a customer’s risk profile, payments directed to unverifiable recruiters, unusual patterns of short-term housing across multiple individuals, or transaction flows that follow established exploitation routes.

Illicit financial activity has always evolved faster than the systems designed to stop it. And today, the speed and sophistication of criminal networks are accelerating in ways that traditional compliance processes can no longer match.

All this information already exists inside institutional data today; AI simply makes it visible and usable much more easily and quickly.

While financial institutions are central in detecting illicit finance, companies across multiple sectors face heightened exposure during large events. Hospitality, logistics, transportation, construction, real estate, and digital services all see risk intensifying as demand surges and oversight becomes more complex.

Those senior leaders who responsible for operational continuity should integrate AI-powered monitoring into their internal controls. This can help detect unusual workforce recruitment patterns, unexpected badge or access activity, subcontractor behavior that conflicts with declared operations, repeated presence in high-risk zones, or digital communications that hint at coercive or exploitative conduct.

In the fight against illicit finance, technology is no longer optional. Indeed, it is our most powerful ally.

You can find out more about the fight against illicit finance and money laundering here

Key insights:

• • • Big sporting events create perfect cover for sex trafficking — The World Cup’s massive crowds, temporary workers, and stretched local infrastructure make it easier for traffickers to blend in and exploit vulnerable people while staying largely out of sight.

    • Money trails and online ads are where traffickers slip up — Trafficking often leaves patterns, such as payments tied to commercial sex ads, round‑dollar peer‑to‑peer transactions, and repeat phone numbers or language across online ads. Banks and investigators can spot these red flags, if they know what to look for.

    • Early, cross‑sector collaboration is what actually makes a difference — The strongest prevention efforts happen before kickoff, when law enforcement, financial institutions, and nonprofits share intelligence, use formal information‑sharing tools, and build trusted local networks to respond quickly and protect victims.

As millions of soccer fans descend upon stadiums across North America for the 2026 FIFA World Cup in June and July, perpetrators of human rights crimes also are getting ready to operate in the shadows of host cities. Criminal networks are preparing to exploit the crowds, traffic, and chaos during the event by trafficking vulnerable individuals for commercial sex.

Human traffickers and organized crime groups often exploit major sporting events as opportunities to make quick money because the massive influx of visitors, temporary workers, and strained infrastructure creates perfect conditions for traffickers to operate while being largely undetected. At the same time, the stakeholders involved in countering this illegal activity — including law enforcement, civil society organizations, and financial institutions — stand ready to detect it, disrupt it, and protect vulnerable individuals who are exploited by criminal actors.

Indeed, close coordination and collaboration among these entities in advance of the games is key. To that end, the Association of Certified Anti-Money Laundering Specialists (ACAMS) and �������� are collaborating on a virtual and live event series to support these planning counter-trafficking efforts among stakeholders in several local cities this Spring.

Why major sporting events attract human trafficking activity

Not surprisingly, large crowds draw business opportunities whether they are legitimate or illicit. Collaboration between public and private entities underscore spikes in human trafficking activity. For example, during a recent large sporting event in 2025, �������� Special Services partnered with federal law enforcement and other partners to identify nine adult encounters & services offered, which led to the recovery of two juveniles from sex trafficking and three state arrests

Common industries that involve the exploitation of vulnerable individuals include hospitality, construction, illicit massage businesses, escort services, and adult content production. The chaos of events and large influx of people mask the reality that exploitation is happening and makes detection significantly more challenging during these high-traffic periods.

Human traffickers and organized crime groups often exploit major sporting events as opportunities to make quick money because the massive influx of visitors, temporary workers, and strained infrastructure creates perfect conditions for traffickers to operate while being largely undetected.

Critically, understanding human trafficking as a business model depends on the recruitment of vulnerable people and access to money flows. These aspects of the business are also where detection can occur. Financial institutions and money service businesses can identify suspicious transactions related to human trafficking by understanding and recognizing specific transactional patterns, including payments to commercial sex advertisement websites, round-dollar peer-to-peer transactions, and merchant services linked to illicit massage businesses.

This online footprint left by traffickers proves invaluable for detection. Investigators track advertisements across adult services websites, identifying criminal networks through repeated phone numbers, distinctive emojis, and similar wording that may appear across multiple cities. However, smaller-scale operations present significant challenges as well. When the trafficker is an intimate partner or family member with limited transaction volumes, detection becomes exponentially more difficult without external intelligence.

Collaboration is key for prevention and detection

The most critical element for combating human trafficking at major sporting events is collaboration among anti-trafficking experts and employers of these professionals. Effective prevention requires building strong partnerships before these major events occur. Specific actions that can be taken include:

Establishing multi-sector task forces — The most successful anti-trafficking efforts involve joint task forces that combine federal, state, and local law enforcement with trusted private sector partners and supportive nonprofits or non-government organizations (NGOs) that offer victim services. This toolkit for large scale public events and other anti-trafficking toolkits are excellent resources for local host cities to use to execute these partnerships. These collaborative mechanisms allow different entities to share information in a timely manner.

Leveraging information sharing mechanisms — Financial institutions can use Section 314(b) authority for peer-to-peer information sharing between banks. This allows financial institutions to piece together fragments of suspicious activity that individually might seem insignificant but collectively reveal trafficking networks. Large federal agencies are consumed by multiple priorities and benefit from information sharing through Section 314(a) and assistance from financial sector partners during special operations to act as a force multiplier. Law enforcement also can benefit from detailed Suspicious Activity Reports (SARs) that contain specific dollar amounts, clear timelines, behavioral observations, and explicit keywords like human trafficking.

Preparing host cities by building networks and outreach in advance — Some World Cup host cities have already established human rights plans with robust collaborative systems within local task forces, government awareness campaigns, QR codes that link to support services, and multidisciplinary safety plans.

In addition, anti-trafficking professionals across all sectors are accessible and willing to help. Resources include national hotlines, such as the , referral directories on website, and the for cases involving minors. The most important step is simply reaching out to establish connections before crises occur.

Preparing for a safer event

The 2026 World Cup presents a pivotal moment to strengthen collaborative efforts against human trafficking across North America’s host cities. By establishing robust information-sharing networks between financial institutions, law enforcement, NGOs, and host communities before the tournament begins, stakeholders can transform heightened awareness into meaningful action that protects vulnerable individuals.

While traffickers will undoubtedly attempt to exploit the inevitable chaos surrounding a major event like the World Cup, a coordinated, multi-sector response grounded in shared intelligence, victim-centered approaches, and proactive preparation can disrupt their operations and ensure that the world’s celebration of soccer doesn’t come at the cost of human dignity and freedom.

You can find out more about��how organizations are trying to fight against human rights crimes here

Key insights:

• • • SAR volume is significantly underreported — Continuing and amended filings add approximately 20% to the official count yet remain invisible in trend analyses.

    • Filing activity is highly concentrated — A few large financial institutions dominate SARs volume, meaning trends reflect their practices more than systemic changes.

    • Agentic AI will drive a surge in SARs — Agentic AI risks increased noise over actionable intelligence, without addressing the unresolved question of whether current filings yield meaningful law enforcement outcomes.

The Suspicious Activity Reports (SAR) that financial institutions file with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) provide valuable insight, although they may not offer a comprehensive picture.

Prior to meaningful discussions regarding the future of SARs, it is essential for the financial crime community to clarify what is being measured. In 2025, for example, SAR filings of more than 4.1 million, representing an almost 8% increase compared to the total number of SARs filed in 2024.

Every figure FinCEN has published reflects original SARs only. Continuing activity SARs, which represent roughly 15% of all filings, are submitted under the original Bank Secrecy Act (BSA) identification number and never appear as new filings. Corrected and amended SARs add another 5% on top of that. This makes the real volume of SARs activity approximately 20% higher than what is reported.

The average community bank files fewer than one SAR a week, while the largest institutions file more than 500 a day.

Recent FinCEN guidance giving financial institutions more flexibility around continuing activity SARs sounds significant on paper, but as former Wells Fargo BSA/AML chief Jim Richards points out: “It won’t change the reported numbers — because those filings were never counted to begin with.” Financial crime professionals need to keep that gap in mind every time a trend line gets cited.

2025 was steady, not spectacular

There were roughly 300,000 SARs filed every single month of 2025, and the most notable thing is that nothing notable happened. That is likely a first on the volume side and worth acknowledging, but beyond that milestone the year did not hand financial crime professionals anything noteworthy. In a space that has dealt with pandemic distortions, crypto chaos, and fraud spikes that seemed to come out of nowhere, steady volume and predictable patterns are a little surprising. A quiet data set, however, is not the same as a quiet landscape, and financial crime professionals who are reading stability as stagnation may find themselves flat-footed when the numbers start moving again.

For example, one of the most underleveraged insights in the SARs space is just how concentrated filing activity really is. The numbers are stark: The top four banks file more SARs in a single day than 80% of the rest of the banks file in 10 years, according to 2019 data from a .

The average community bank files fewer than one SAR a week, while the largest institutions file more than 500 a day. “50 a year versus 500 a day,” notes Wells Fargo’s Richards, adding that such asymmetry has real implications for how the financial industry interprets trends. Meaningful movement in SARs data, up or down, is almost entirely dependent on what a handful of mega-institutions decide to do.

Not surprisingly, money services businesses (MSBs) are the second largest filing category, and virtual currency exchanges are almost certainly driving recent growth there, even if outdated category definitions make that difficult to confirm directly. Credit unions round out the top three.

The filing philosophy hasn’t changed and shouldn’t

Regulatory noise occasionally suggests that institutions should be more selective about what they file. However, compliance and legal reality have not shifted. No institution has ever faced serious consequences for filing too many SARs, and the cases that result in enforcement actions, reputational damage, and regulatory scrutiny are consistently about missed filings or late ones.

“You’re not going to get in trouble from filing too much,” Richards says. “Nobody ever has, and I doubt if anyone ever will.” For financial crime professionals, the calculus remains exactly what it has always been — when in doubt, file. That posture isn’t going to change, and frankly it shouldn’t.

Yet, here is where the SARs space gets genuinely interesting. Agentic AI use in SARs filings — systems in which multiple AI agents work through a case from screening to decision to documentation — is beginning to move from concept to deployment. The impact on filing volume likely will be significant.

The risk is a system flooded with AI-generated SARs of variable quality, creating more noise for law enforcement to sort through rather than sharper intelligence to act upon.

Whereas a small team today might work through a handful of cases a week, AI-assisted workflows could push that into the dozens. Multiply that across institutions already inclined to file rather than miss something, and the result is a coming surge in SARs volume that could play out over the next two to four years.

“Agentic AI has the potential to be a game changer on how we do our work,” Richards explains. “But I believe it’ll guarantee that there will be more SARs filed and not necessarily better and fewer SARs filed.” Indeed, the critical point for the financial crime community to internalize is exactly that.

The risk is a system flooded with AI-generated SARs of variable quality, creating more noise for law enforcement to sort through rather than sharper intelligence to act upon. Once the largest institutions adopt agentic AI as a best practice, others will follow quickly, and regulators will likely be several steps behind.

The value question can’t wait

The has been in place since 2014. Yet after 12 years of filings, the financial crime community still lacks a clear public accounting of whether that data has produced actionable law enforcement outcomes.

So, the question Richards is asking is one the entire industry should be asking: “Has anybody asked law enforcement?”

This question reflects a larger challenge that the industry needs to confront more aggressively, especially as AI technology is set to dramatically increase filing volume across the board. Increasing the volume without improving how the information is used does not represent progress. If SARs are not generating real investigative value, the solution is not to file more of them faster — instead, the pipeline should be fixed before it grows any bigger.

You can find more about the challenges that financial institutions face in managing SARs here

Key takeaways:

• • • Human trafficking is a financial crime — Without the financial system, human trafficking networks cannot operate at scale. Banks, compliance officers, money transmitters, and casinos are uniquely positioned to detect suspicious patterns.

    • The 2026 World Cup amplifies existing risks — With 5.5 million additional visitors expected in Mexico City alone, criminal networks will exploit the surge in cash flows, new customers, and cross-border movement.

    • Red flags are observable in financial behavior — Human trafficking networks often leave detectable financial footprints, which is why financial institutions must update monitoring systems and stay alert to unusual transaction spikes during the tournament.

MEXICO CITY — As the 2026 FIFA World Cup get ready to hold its tournament in June and July across three North American countries, anti-human trafficking experts are meeting as well and attempting to address the challenges facing the three host countries of the largest World Cup in history.

To that end, the Association of Certified Anti-Money Laundering Specialists (ACAMS), in partnership with ��������, organized one such event, focused on the scourge of human trafficking that often surrounds large sporting events like the World Cup.

One speaker at the event noted an important clarification in the difference between human trafficking and human smuggling — two terms that are frequently confused yet carry vastly different legal and humanitarian implications. The key distinction lies in consent and the nature of the crime. In human smuggling, the individual being transported across borders consents to the movement, typically driven by socioeconomic necessity, and the offense is considered a crime against the state. Human trafficking, by contrast, is a crime committed directly against the victim, often involving exploitation through force, coercion, threats, or deception, and does not require the crossing of any international border.

The ACAMS event challenged the common belief is that human trafficking is exclusively sexual in nature. In fact, there are 10 additional forms of exploitation beyond sexual abuse, including slavery, forced labor or services, use of minors in criminal activities, forced marriage, servitude, labor exploitation, forced begging, illegal adoption of minors, organ trafficking, and illicit biomedical experimentation on human beings.

As the World Cup approaches, financial institutions’ compliance teams must recognize that the same operational conditions that make major sporting events exciting are precisely the conditions that money launderers and traffickers seek to exploit.

Still, sexual exploitation remains the dominant form of human trafficking. Indeed, it is the second most lucrative illicit business in the world after drug trafficking, with every 15 minutes of sexual abuse of a trafficking victim generating approximately $30.

Of course, without clients, there is no demand, said one speaker from the ÁGAPE Foundation, an organization that works to raise awareness against gender-based violence and human trafficking.

Financial sector as a key line of defense

When identifying human trafficking, it’s wisest to examine it from a financial perspective to find important indicators, according to several speakers. Indeed, the financial sector plays a critical role given its capacity to detect suspicious accounts and payments, shell companies, cash movements, digital platforms, and commercial operations.

For example, when a customer opens an account or conducts a transaction, certain red flags can be visible, including whether the customer needs to consult notes to answer basic questions such as their address or occupation, or that their responses are not spontaneous or natural. Also, another indicator is if the customer’s profile is inconsistent with the type or volume of transactions being conducted.

For financial institutions, there are other patterns that have triggered alerts in illicit activity in the past, including near-immediate deposits and withdrawals with no clear justification for the cash flow, or multiple individuals registered at the same address or linked to the same account.

Similarly, another red flag would be if there’s a high number of accounts opened from the same state or municipality with similar patterns, particularly in areas identified as origin points for trafficking networks; or, payment of multiple short-term rentals or payments abroad to unverifiable recruiters or employment agencies.

Financial institutions should be on the lookout for companies that file no tax returns or invoice simulated transactions, or that use of front men to open accounts or conduct operations.

Also, new businesses whose declared activity does not correspond to their financial operations should be flagged, as well as any frequent, large-volume purchases of condoms, lingerie, or women’s clothing inconsistent with the declared business activity.

Indicators at the 2026 World Cup

In the context of major sporting events such as the World Cup, existing risks are significantly amplified, several speakers pointed out. Sexual tourism, including the commercial sexual exploitation of children and adolescents, is a known and serious threat. Indicators that are relevant not only for the financial and banking sectors, but also for the real estate, tourism, transportation, hospitality, and restaurant industries including unusual accommodation requests, such as deactivating security cameras, delivering keys through third parties, or inquiring about the presence of neighboring guests.

When identifying human trafficking, it’s wisest to examine it from a financial perspective to find important indicators, and the financial sector plays a critical role given its capacity to detect suspicious accounts.

These industries should also be on the lookout for any adult or group of adults traveling with an unusually large number of minors, or individuals who travel in silence and are accompanied by someone who appears to exercise visible control over them.

As the World Cup approaches, financial institutions’ compliance teams must recognize that the same operational conditions that make major sporting events exciting — high transaction volumes, new customers, cross-border flows, and institutional attention diverted toward the event itself — are precisely the conditions that money launderers and traffickers seek to exploit.

For these compliance teams, monitoring systems must be updated, know-your-customer processes must go beyond documentation and reflect a genuine understanding of the client’s activity and context, and on-site verification visits must be conducted by personnel who know exactly what they are looking for.

The financial sector does not need to become an investigative body; however, it does need to remain alert, informed, and willing to report. Indeed, this is exactly what the compliance function exists for, and in the context of human trafficking, the cost of silence is measured not in fines or reputational damage, but in human lives.

You can find out more about the��challenges of hosting the 2026 FIFA World Cup here

Key insights:

• • • Convenience has outpaced consumer understanding —��Many users treat apps, prepaid accounts, and rewards programs as simple payment tools, remaining unaware they are entrusting their money to entities with few safeguards.

    • Risk is no longer confined to traditional banks — Some of the most significant financial activities now occur within platforms and brands that do not resemble banks at all.

    • Opacity enables systemic vulnerability — The less transparent an institution’s obligations, leverage, and oversight, the easier it is for financial fragility, misconduct, and systemic risk to grow unchecked.

When you think of where money is held, you generally think of a bank. However, as we look at the financial landscape today, money is being held at a wide range of institutions that often have varying levels of safety and oversight. Entities from Starbucks to Visa to Coinbase hold money for individuals, effectively serving as a bank, but often without the regulatory framework that comes with it.

Behind the scenes, it can seem like . In its daily operation, it collects prepaid funds that resemble deposits, holds them as liabilities, and uses them internally — all without offering interest, cash withdrawals, or FDIC insurance. Starbucks’ rewards program holds $1.8 billion in customer cash, and if it were a bank, that would make it bigger, , than 85% of chartered banks, making the coffee chain one of the .

This dynamic extends well beyond coffee shops. “Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe,” warns the . If a nonbank payment app’s business fails, your money is likely lost or tied up in a long bankruptcy process.

Shadow banking

Think of a Starbucks gift card as a financial instrument. Technically it is one, but no one seriously worries about it being weaponized for any large-scale financial crimes. Most people’s concerns about a gift card is either losing it. The real concern lies not in lost gift cards, however, but in the broader trend: Nonbank institutions managing vast sums without commensurate oversight — and scale matters. A lost gift card is a personal inconvenience; but an unregulated institution managing billions of consumer dollars in leveraged capital is a systemic one.

Shadow banking encompasses credit and lending activities by institutions that are not traditional banks, and crucially, they do not have access to central bank funding or public sector credit guarantees. And because they are not subject to the same prudential regulations as depository banks, they do not need to hold as high financial reserves relative to their market exposure, allowing for very high levels of leverage which in turn can magnify profits during boom periods and compound losses during downturns.

The shadow banking ecosystem is diverse, and each segment of it presents distinct risks:

• • Hedge funds and private equity firms��— Firms like Blackstone, KKR, and Apollo manage vast capital pools using leveraged strategies under limited oversight. Their size and borrowing levels may mean that market reversals can trigger rapid deleveraging, spilling risk into broader markets.
  • Family offices��— A private company or advisory firm that manages the wealth of high-net-worth families, these can operate with even less transparency and often outside direct regulatory scrutiny, enabling them to engage in extreme leveraging and posing risks of sudden collapse.
  • Nonbank mortgage lenders and FinTechs��— This group faces lower capital requirements than traditional banks, leaving thinner buffers to absorb losses during downturns, which can be especially concerning considering this sector’s rapid growth.
  • Crypto exchanges��— Like much of the cryptocurrency ecosystem, these exchanges operate in jurisdictional gray zones, complicating enforcement and enabling illicit financial flows.
  • Money market funds — While these are generally perceived as safe, they can suffer runs if confidence in underlying assets erodes, which can force fire sales that destabilize related markets.
  • Special Purpose Vehicles (SPVs) and Structured Investment Vehicles (SIVs)��— These investment instruments allow large institutions to move risk off their balance sheets, rendering such activity invisible to regulators.

Shadow banking may be the single greatest challenge facing financial regulation. These non-traditional institutions act like banks, but without the safeguards that make banks accountable. And where accountability is absent, opportunity often fills the void.

The same opacity that makes shadow banking difficult to regulate also makes it attractive to those with less legitimate intentions. Without mandatory reporting requirements, standardized oversight, or the threat of deposit insurance revocation, these institutions can become conduits for money laundering, fraud, terrorist financing, and sanctions evasion in ways that traditional banks simply cannot. The question is no longer whether these vulnerabilities exist, but how they continue to be exploited.

The challenge of regulation

The global financial system has always evolved faster than the rules designed to govern it. What began as a coffee loyalty program and a few alternative lending platforms has quietly morphed into a parallel financial universe, one that moves trillions of dollars with a fraction of the transparency that traditional banking requires. That gap between innovation and oversight is not just a regulatory inconvenience, it’s an open door for illicit actors.

Closing that door will require more than periodic enforcement actions or piecemeal legislation. It will require regulators, lawmakers, and institutions to reckon honestly with how broadly the definition of a financial institution has expanded, and who bears the risk when things go wrong. Because historically, it has not been the institutions themselves; rather it has been the customers, the investors, and ultimately the public.

The first step, of course, is awareness. Recognizing that your money does not need to be in a bank to be at risk and that the custodians of that money need not be offshore shell companies to operate in shadows, can transform how we think about financial safety.

The line between a convenient app and an unaccountable financial intermediary is thinner than most realize. And in the world of financial crime, thin lines have a way of vanishing entirely.

You can learn more about the��many challenges facing financial institutions today��������

Key highlights:

• • • Tax credit transferability survived intact— The OBBBA preserved Section 6418 transferability rules despite earlier proposals to sunset or repeal them.

    • AI-driven data center boom may revive renewable energy tax credits— With data centers projected to consume 12% of all US energy by 2028, large operators have strong incentives to advocate for preserving and expanding renewable tax credits to meet massive energy demands through solar, geothermal, and battery storage solutions.

    • 2026 market conditions favor buyers due to supply-demand imbalance—Increased supply of tax credits (particularly Section 45Z clean fuel production credits) combined with reduced buyer competition from provisions like Section 174 and bonus depreciation has created advantageous pricing.

At the start of the current Trump administration, green energy tax credits were expected to be slashed or disappear altogether. In reality, significant changes emerged instead of ceasing to exist. More specifically, the One Big Beautiful Bill Act (OBBBA), passed in July 2025, kept the transferability rules around green energy tax credits intact.

As a result, the market for these credits remains robust in 2026 and 2027, says , an energy tax authority and principal at accounting firm CliftonLarsonAllen (CLA). In addition, multiple credits still have runway, and near-term dynamics in 2026 may favor buyers.

OBBBA’s changes result in shifts in marketplace conditions

When the OBBBA bill passed, the specifics revealed a more optimistic picture than many understand. According to Hill, specific examples include:

• • Wind and solar projects — Developers that begin construction by July 4, 2026, still have a four-year window to complete their projects and still claim credits. Even projects that miss this construction deadline can qualify if they’re placed in service by December 31, 2027.
  • Clean fuel production credits — Clean fuel production credits, detailed in OBBBA’s Section 45Z, received an extended runway through 2029.
  • Tax credit transferability — The tax credit transferability aspect under Section 6418 remained whole, despite previous versions of the bill proposing either a sunset date or outright repeal of transferability. This fact provides a level of marketplace certainty that can act as critical liquidity for developers that typically lack the tax liability to use credits themselves.

In addition, the legislation altered the buyer and seller environment. Provisions including OBBBA’s Section 174 and bonus depreciation generated additional deductions for certain companies, and as a result, reduced those companies’ 2025 corporate tax liability. Simultaneously, Section 45Z clean fuel production tax credits came into force and created a supply-demand imbalance that favors buyers.

Overall, in the latter half of 2025, Hill describes the marketplace as favorable for buyers because of an increased supply of tax credits that were for sale previously with fewer buyers. Into 2026 and beyond, both developers and corporate buyers still have significant opportunities to participate in the tax credit marketplace, explains Hill.

AI-related data center demand may spur new proposals for renewables tax credits

The explosive proliferation of data centers because of the growing AI demand across the United States may become the unexpected champion for renewable energy tax credits. Hundreds of facilities are currently under construction, and the energy demand implications are staggering. In fact, the projects that by 2028, data centers will consume 12% of all US energy.

Renewable energy technologies are emerging as essential solutions to meet these demands. Solar power, as a tried-and-true technology, offers ideal supplementation for data center operations; and geothermal heating and cooling systems directly address the massive temperature control challenges these facilities face. Perhaps most significantly, battery storage is rapidly becoming standard operating procedure, with both grid-based and solar-array-tied battery systems providing critical backup power.

These developments carry substantial policy implications. In fact, large data center operators have incentives to become vocal advocates for preserving and expanding renewable tax credits, says , a leader in federal tax strategies at CLA. “We want our AI, we want our cloud-based services. To do that… we need massive data centers and massive computing demands,” DePrima explains. “And that in turn requires massive amounts of energy consumption, which renewables can certainly supplement.” This, in turn, creates the potential for a renewable energy tax credit “comeback” within two to three years, he adds.

Guidance for buyers and sellers

Looking ahead to 2026 and beyond, both buyers and sellers of renewable energy tax credits should recognize that significant opportunities remain despite regulatory changes. More specifically:

For buyers — Buyers should act now to capitalize on favorable market conditions. With increased credit supply and reduced buyer competition due to provisions like Section 174 and bonus depreciation, pricing has become more advantageous. Buyers of renewable energy tax credits should consider structuring 2026 transactions to directly offset estimated tax payments throughout the year, thereby improving cash flow by making payments to sellers rather than the IRS. Financial institutions remain particularly well-positioned as buyers, as many have explored tax credit carryback opportunities to increase their tax savings even further.

For sellers and developers — Renewable energy tax credits sellers and energy project developers can use tax-credit monetization as a critical component of project financing because the ability to convert credits into immediate cash proceeds is essential for paying down debt and funding new projects. Despite initial concerns, substantial opportunities remain with credits outlined in Sections 45Z, 45X, 48E, and 45Y which are transferable and viable through 2029 and beyond.

In either case, tax credit transferability under Section 6418 offers key opportunities in the marketplace. Whether buyers are looking to reduce their corporate tax burden while supporting clean energy goals, or developers are seeking to monetize renewable projects — tax credits offer incentives to move forward.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of nontax and other tax factors if any action is to be contemplated. The reader should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

You can find out more about renewable energy tax credits here

Key insights:

• • • Geopolitical crises fuel financial volatility and illicit activity — Conflicts have traditionally accelerated capital shifts and flows, creating cover for bad actors.

    • Predictable patterns emerge — Financial institutions should watch for sudden cross-border activity, unusual cash deposits, and transactions from border areas.

    • Conflict zones enable black market expansion — They also should adapt their compliance systems to detect more sophisticated methods used by criminals, tightening screening and enhancing staff training.

While business and international politics may appear cold and calculating, these things are often driven by emotion, especially fear — and fear of instability often drives market volatility.

So it goes as the United States attacks one of the world’s largest militaries and supporters of regional terror groups, causing deepening instability in a Middle East already beset by violence. It is certain that there is already a surge of money flowing in and out of the region for different reasons. Legitimate and illegitimate actors alike will seek to both run away from the crisis and profit from it. However, there are some anti-money laundering specific thoughts that financial institutions need to consider during a time of global uncertainty.

The bottom line — lots of money is on the move. Funding will send aid groups towards the crisis; it will also send logistical supplies, war material, and other necessities. All of these cost money, and defense sectors in multiple countries will be pumping out munitions to refill stockpiles in any country that is related to or in the neighborhood of the conflict.

Not every large transaction is an unusual, reportable event, but financial institutions now need to look one or two layers below the surface. What does not seem related on the surface is always a red flag. Look at beneficial ownership of companies and vessels, look at relations of the owners, not just the ��(OFAC) results of those people themselves. The financial system will, and should, allow the legitimate funds to flow. However, financial investigators must remain diligent to catch bad actors that take advantage of the surge in non-profit activity or the urgency with which legitimate businesses operate in a conflict zone.

Risk Factor 1: Capital flight from regime change

Just as the fall of the Al-Assad regime in Syria caused family funds to flow to as regime members fled the country, you will see the same with politically exposed persons (PEPs) who are inevitably fleeing regime change in Iran. A political crackdown will come. Whether the victors are on the side of the West or not remains to be seen, but some factions are going to flee the country and take family wealth with them.

Banks and other financial services should watch for anyone connected to people moving money through neighboring countries in which they may have literally hiked or driven before depositing cash into a financial institution. There are stories of refugees leaving places with gold bands on their arms, cash and false bottom purses, and diamonds in the lining of sweaters. These things will be converted to cash in neighboring countries and put into financial systems less affected by the conflict. An influx of cash throughout the region, therefore, could indicate this type of capital flight.

Risk Factor 2: Illicit finance and black markets

Since the fall of Syria, we have also become aware of that helps fuel addiction and armed conflict. There are certainly other substances and drug trafficking networks about which we know very little on this side of the secrecy veil.

Therefore, this instability will be seen as a time of opportunity for criminal groups. Indeed, with Assad’s security forces no longer controlling middle eastern captagon and other narcotics trade and various armed groups looking for funding sources, this is an illicit business opportunity.

Financial institutions can expect rapid movement of money between unrelated shell corporations, new corporations, and shadow vessels. They also should expect the black market to boom with drugs, contraband Iranian oil, and funds tied to narcotics that they have only yet to discover. Illegal arms will also generate funding, so all of the methods, both formal and informal, used to transfer value will become active.

In fact, large portions of such funding will flow through financial institutions; and peer to peer payment providers, FinTechs, and money transmitters should be especially wary of funds moving rapidly through their platforms. A burst in conflict means a burst in activity from illicit sources; therefore, enhanced, targeted monitoring is a must.

How financial institutions’ risk & compliance teams should respond

First, all financial institutions’ risk & compliance departments need to assess their institutions’ OFAC and sanctions screening search parameters. This is a good time to dial up fuzzy logic capability and reduce match percentage thresholds. In other words, risk tolerance should go down while the metaphorical dragnet gets wider. Surge the department’s personnel capability to compensate if you have to, because that is better than a strict-liability OFAC fine. Remember, OFAC sanctions are closely tied to national security, especially when it comes to Iran. This is not an arena in which leniency can be expected. Compliance teams should look at monitoring systems and thresholds immediately, create geographical targeting models to cover the conflict zone, and consider a command center approach to deal with the fluidity of the situation until things settle.

If your institution has not already taken the hint from regulators, this also is an opportunity to double down on Customer Due Diligence and identity verification. Front line staff and embedded business compliance personnel should receive updated training and job aids to increase awareness and hone internal reporting. Indeed, it is an advanced business skill to understand complex corporate beneficial ownership, much less to detect when it may be tied to illicit activity or corrupt regimes. Now is the time to increase that level of knowledge and thereby make the culture of compliance more robust.

In every crisis there is opportunity as well as risk: Managing the risk allows every company to take advantage of the opportunity, shore up its mission, and strengthen the institution.

You can find out more about��the geopolitical and economic outlook for 2026��here