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 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 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

3 key takeaways:

• • • The connection is detectable but required massive data analysis — IJM analyzed more than 1 million CyberTipline reports and matched them with mobile device data, ultimately linking sextortion reports to forced scamming sites in Cambodia, Myanmar, and Laos.
    • Forced scamming compounds exploit trafficking victims to commit crimes — Human trafficking victims are lured by fake job ads, then confined in guarded compounds where they’re coerced into running various online scams.
    • Coordinated multi-stakeholder action is urgently needed — Electronic service providers must improve account creation safeguards and detection methods, while law enforcement needs to better coordinate cross-border investigations.

New research by links hundreds of financially-motivated child sextortion reports to scam compounds in Cambodia, Myanmar, and Laos. Indeed, the research shows that significant effort was required to detect these linkages as IJM analyzed more than 1 million CyberTipline reports in the “Online Enticement” category from the National Center for Missing and Exploited Children (NCMEC).

“Our research provides the first clear evidence of this likely link, but to understand the true scale of the problem, there needs to be further urgent investigation into this troubling nexus by law enforcement, tech companies, and global governments,” says Eric Heintz, Senior Criminal Analyst at IJM.

Because forced scamming compounds now blend labor trafficking, high-volume online fraud, and financially-motivated child sextortion, it becomes critical that electronic service providers (ESPs) must harden account creation and improve detection of signals indicative of online fraud and sextortion. In addition, law enforcement must better coordinate their efforts at cross-border investigations and distinguish trafficked workers from criminal organizers.

Links between compound scamming and child sextortion

To illustrate the details of how these two fast-moving crime waves are converging online, forced scamming occurs when victims are trafficked into guarded compounds across Cambodia, Myanmar, and Laos, after responding to fake job-ads. These trafficked victims then are coerced into defrauding targets online as part of forced scams. These schemes employ deceit or trickery to defraud the online targets, often using scripted approaches, fake personas, or impersonation to elicit money or sensitive information.

You can read the IJM report here

The types of scams include romance, investment, crypto, fake loans, and impersonation scams, all of which are carried out from inside guarded compounds. Many times, trafficking victims endure confinement and abuse as part of being forced to perpetrate these scams on others.

These human trafficking victims are also trained on psychological manipulation tactics to lure in potential victims, including children in some instances, although it is not evident that children are being intentionally targeted.

Within some of the scam operations, if trafficking victims fail to elicit the desired outcome, such as an investment in a cryptocurrency fraud scheme, they are forced to pivot to sexualized chat and a request for images or a video call. The forced labor victims then use the collected sexual images to blackmail the scam target for money under threat of exposure. Since 2022, reports of such financially-motivated sextortion have surged globally and have disproportionately affected boys and young men, with devastating psychological harm including documented suicides.

Forced scamming is not just a fraud trend; rather, it is a human rights crisis that collides with child protection, cybercrime, and organized criminal groups across Southeast Asia and beyond.

Researchers from IJM combined large-scale ESP platform reports with mobile ad-tech telemetry to trace overlap between child sextortion and forced scamming. They analyzed nearly 1.2 million reports from NCMEC that covered 3.17 million IP addresses and paired them with more than 300 million advertiser ID rows, which included mobile devices used in these locations, the device’s latitude and longitude, and the IP address and date and timestamp (UTC) of an internet connection by the device. These were collected from 44 confirmed scam sites in Cambodia, Myanmar, and Laos, resulting in 493 reports tied to devices at 40 sites in these countries.

The strongest links centered in hotspots in Cambodia and Myanmar, and some IP addresses traced back to internet service providers in Thailand. This reflected cross-border routing and service reliance and occurred when activity originated in neighboring countries or special economic zones.

Required actions to protect children

Coordinated action by platforms and law enforcement is essential to expose, disrupt, and prosecute the intertwined machinery of forced scamming and financially-motivated child sextortion. ESPs, such as social media networks, messaging apps, email providers, cloud services, and dating platforms, submit CyberTipline Reports to NCMEC when they detect suspected child sexual exploitation. While this is helpful, more efforts are required, which include:

• • • Cross-referencing account creation and activity with known scam hotspots and scripted patterns
    • Including precise timestamps, IP addresses, and geolocation context in CyberTipline submissions
    • Flagging and disrupting account creation that originates from suspicious infrastructure, beyond simple VPN indicators

At the same time, further law enforcement action is needed to improve disruption and prosecution of these networks, including:

• • • Examining sextortion cases for signs of forced scamming, which may include scripts, crypto addresses, or investment lures
    • Studying evidence for indicators of sextortion as a tactic, such as the use of sexually explicit scripts or imagery
    • Considering that some suspects are themselves trafficked victims who have been coerced into scam operations
    • Using advertiser ID data and timestamp matching to pinpoint devices and compounds
    • Devising ways to coordinate cross-border law enforcement actions in hotspot countries, known scam regions, and local jurisdictions.

Forced scamming is not just a fraud trend; rather, it is a human rights crisis that collides with child protection, cybercrime, and organized criminal groups across Southeast Asia and beyond.

The nexus between forced scamming and financially-motivated sextortion of children is detectable — as demonstrated by IJM’s new research. Now is the time for action among ESP platforms, law enforcement, and NGOs to align data and coordinate cross-border responses to better identify devices, compounds, and networks in real time.

You can learn more about how organizations can reduce and mitigate child exploitation in the TR Institute’s human rights crime resource center

Key insights:

• • • Debanking can have harsh consequences — Losing a bank relationship can abruptly cut off finances and damage reputations, often excluding people and firms from basic economic life, often without a clear explanation.

    • The core tension for banks — Financial institutions need to balance the risk between AML/KYC and fraud versus preserving fair access to financial services. As reputational and ideological factors enter into decision-making, concerns about discretion and due process grow.

    • Policy is moving toward guardrails — Already many policymakers are pushing for clearer documentation, transparent notices, a common-sense path to appeal, and a bright line between financial‑crime risk and other risks.

Financial institutions serve as the foundation of the modern economy. Nearly every transaction — from paying for services to buying a cup of coffee — depends on an institution that facilitates or underwrites these exchanges. In this interconnected system, access to banking relationships has become essential for meaningful economic participation for individuals and organizations.

This dependence creates significant consequences for society. Without access to banking services, both businesses and individuals face significant barriers to participating in the economy. Businesses cannot easily pay their employees, fulfill tax obligations, or conduct basic commercial activities. Similarly, individuals struggle to receive payments and manage their personal finances. When institutions terminate these relationships, they effectively exclude people and businesses from the broader economic system. This reality applies to both traditional banks and modern FinTech companies.

Given banking relationships’ critical role in economic participation, the circumstances under which these relationships end deserve careful examination. Financial institutions face ongoing challenges in determining which customers they can serve while meeting regulatory obligations and business objectives. This decision-making process has evolved and can ultimately lead to what experts call debanking — a practice that involves closing accounts and terminating interactions between debanked individuals or organizations and the financial institutions doing the debanking.

What debanking is — and isn’t

The impact of debanking extends far beyond the inconvenience of closing an account. Affected individuals may face extended periods without access to essential funds needed for survival, and they often suffer lasting reputational damage that may cause other financial institutions to reject them as well. Most concerning, however, is that banks rarely provide clear explanations for debanking decisions, leaving individuals unable to address potential misunderstandings or prevent future occurrences.

Without access to banking services, both businesses and individuals face significant barriers to participating in the economy.

This lack of transparency and the cascading effects of banking exclusion demonstrate the profound power that financial institutions hold in determining who can fully participate in the modern economy. This also causes concern about who holds this power and how it can ultimately be kept in check.

Not surprisingly, the concept of debanking has become a contentious issue in the financial sector, with proponents and critics presenting varying perspectives on its implications. At its core, debanking most often occurs when financial institutions terminate or refuse to establish customer relationships, often due to concerns about risk management or regulatory compliance.

Financial institutions argue that debanking is a necessary measure to mitigate potential risks, such as money laundering, terrorist financing, and other fraudulent activities by certain individuals or businesses. By terminating these illicit customer relationships, banks aim to protect themselves from reputational damage, financial losses, and regulatory penalties while maintaining financial system integrity and adhering to anti-money laundering (AML) and know-your-customer (KYC) regulations.

Critics, on the other hand, argue that debanking can have unintended consequences, particularly for marginalized communities and individuals who may not have access to alternative financial services. This can lead to financial exclusion, making it difficult for people to access basic banking services, such as deposit accounts, credit, and payment processing services.

However, the scope and application of debanking practices have expanded beyond traditional risk-based criteria. Questions have emerged regarding the appropriateness of account closures based on reputational concerns, political associations, or ideological considerations. This broader application has intensified public discourse about the boundaries of institutional discretion and the potential implications for financial inclusion.

Policymakers now are working to ensure that banks can address genuine risks without discriminating against customers based on their lawful views.

To navigate this issue, financial institutions need to follow a balanced approach. This involves enhancing transparency, providing channels for appeal or alternative services, and refining regulations to define acceptable grounds for debanking. The goal is to maintain a secure and inclusive financial system that effectively manages risk while protecting the interests of ordinary citizens and legitimate businesses.

Policymakers get involved

In response to concerns that non-financial factors may influence these decisions, an Executive Order was issued by the Trump administration in August to establish clearer guidelines for banking institutions, requiring that account management decisions be based primarily on financial and risk-related criteria. The order seeks to standardize practices across the industry and provide greater transparency in the decision-making process for account closures and financial service terminations.

In September, at the Association of Certified Anti-Money Laundering Specialists (ACAMS) Assembly held in Las Vegas, Mike Greenman, Senior Vice President and Chief Counsel of Financial Crimes Legal at US Bank, emphasized the critical importance that financial institutions present clear documentation for when and how debanking decisions were made about specific industries. Greenman strongly advised institutions to “always separate financial crime risk from other risks.”

Looking ahead at debanking

The issue of debanking has garnered attention due to high-profile cases and concerns about potential misuse. Investigations in several countries have found no evidence of widespread politically motivated debanking, but the perception of potential abuse has led many critics to re-examine this practice. Policymakers now are working to ensure that banks can address genuine risks without discriminating against customers based on their lawful views.

To navigate this issue, a balanced approach is necessary, one that involves enhancing transparency, providing channels for appeal or alternative services, and refining regulations to define acceptable grounds for debanking. The goal for financial institutions should be to maintain a secure and inclusive financial system that effectively manages risk while protecting the interests of ordinary citizens and legitimate businesses.

You can find out more about the regulatory challenges that financial institutions face here

Key takeaways:

• • • Navigating regulatory change — The Trump administration is introducing many regulatory changes that will affect how financial institutions meet their reporting obligations under the BSA.

    • AI helps and harms both sides — Advances in AI offer the promise of more accurate, efficient BSA compliance processes, but they also give criminals an ever-expanding toolkit for committing fraud and other types of financial crime.

    • Compliance pros are optimistic about AI — Corporate compliance personnel are cautiously optimistic about using AI, but insist that better guardrails, usage standards, and agreed-upon best practices still need to be developed.

LAS VEGAS — Those who assess and manage risk at financial institutions are caught in a whirlwind of change, and the health of the global financial system may very well depend upon how they manage the fallout.

At of the Association of Certified Anti-Money Laundering Specialists (ACAMS), the word disruption was used frequently to describe the kind of systemic change that experts in Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance are up against. And this change is coming at them in many forms: regulatory, technological, geopolitical, digital, ethical, and criminal, just to name a few.

Dissatisfaction with the status quo

In his opening keynote address, John K. Hurley, the U.S. Undersecretary of the Treasury for Terrorism and Financial Intelligence, expressed the Trump administration’s dissatisfaction with the current state of financial crime enforcement. Hurley also outlined several reforms the administration is pursuing, all of which are aimed at delivering targeted, actionable intelligence to law enforcement much faster than the current system allows.

Hurley decried the proliferation of burdensome regulations and “not-so-useful” Suspicious Activity Reports (SARs), the main method that financial institutions use to report suspicious financial activity to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

To address these problems, Hurley said the administration intends to simplify the SARs filing process and overhaul the government’s regulatory oversight of financial institutions to focus on “outcomes”, such as how effectively financial institutions identify criminal activity, rather than examiner evaluations (and criticisms) of an institution’s BSA and AML compliance processes.

One of the motivations behind these moves, Hurley said, is to encourage BSA compliance personnel to apply their “experience and creative talent” to devise better crime-detection methods using new technologies.

“I believe fully that well-governed technology is a force multiplier,” Hurley explained. “When a financial institution invests the time and money to experiment with AI and successfully drops its false-positive ratio [of SARs] and escalates vital information to law enforcement more rapidly, their team should be celebrated, not written up because this new approach reveals gaps in their previous manual method.”

AI in BSA/AML compliance: A double-edge sword

Indeed, the use of AI-enhanced technologies to improve know-your-customer (KYC) protocols and other risk-management practices was another main theme of the conference. During several sessions dedicated to AI, panelists and conference attendees expressed both optimism and wariness about the use of AI in BSA/AML compliance activities.

For example, the use of agentic AI — a form of AI that essentially thinks for itself and can proceed without constant human prompting — could be extremely useful for first-level KYC risk screening, but it remains to be seen whether the technology can be adequately controlled for BSA/AML compliance purposes.

The double-edged nature of new technologies was also discussed in-depth. Carole House, an ACAMS Distinguished Senior Fellow, pointed out that while new technologies may improve our ability to detect and deter financial crime, they also give criminals a robust set of high-tech tools to use to help subvert the financial system.

“When you democratize access to these systems, it opens to the door to illicit uses,” House said, adding that new and better forms of digital malfeasance — such as fake IDs, bogus credentials, deep fakes, identity scams, crypto-based money-laundering, ransomware, and more — are all on the rise, and ever-improving forms of generative AI (GenAI) will empower criminals even more.

Despite these caveats, there was almost unanimous agreement that AI will play an increasingly important role in BSA compliance and risk management, because there is no other way to keep up with criminals in the digital economy. And because AI adoption is inevitable (and is, in fact, already happening), efforts now need to be focused on building adequate regulatory guardrails, improving digital skillsets, and establishing AI best practices to ensure responsible use of advanced technology.

New rules, old problems

On the regulatory front, several recent changes that likely will impact how AML compliance personnel do their jobs were also discussed at length during the conference.

In March, for example, FinCEN issued a new rule exempting certain United States-based companies and citizens from their previous obligation under the Corporate Transparency Act (CTA) to report beneficial ownership information to FinCEN. (Foreign entities doing business in the US still have to file beneficial ownership information.)

FinCEN claims the rule change is intended to reduce the reporting burden on small companies, but AML experts are concerned because it gives financial institutions less information to assess the legitimacy of their customers, potentially re-opening a window to fraud that had previously been closed and hindering attempts to assist law enforcement.

Support for crypto-regulation

On another matter, AML experts are generally supportive of recent efforts to regulate cryptocurrency assets. For example, creates new regulatory framework for stablecoins, which are a type of cryptocurrency whose value is backed a fiat currency such as the US dollar.

Congress is also considering passage of the Digital Asset Market Clarity Act, which would create guidelines for the classification, sale, and oversight of digital assets. And a series of new policy directives collectively known as The Blanche Memo (because they were issued by Deputy U.S. Attorney General Todd Blanche) aims to end so-called “regulation by prosecution” of crypto exchanges and shift the emphasis of law enforcement to individuals who use digital assets to support “terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.”

In addition to these changes and concerns, BSA/AML compliance professionals are also contending with Chinese money laundering, ever-shifting sanctions, tariff evasion, global regulatory volatility, worldwide financial threats, lack of institutional trust, and pervasive economic uncertainty — so by any measure, they have very full plates.

As Dan Stipano, a partner at Davis Polk & Wardwell, remarked during one panel discussion: “The big problem with the BSA is that if everything is a priority, nothing is a priority,” — and that too must change.

You can find more of our coverage of ACAMS events here

Key insights:

• • • 4 pillars of surveillance — Casinos operate under a comprehensive BSA and Title 31 anti-money laundering framework, anchored by four pillars that together create a surveillance network to detect and deter illicit activity.

    • Significant gap in enforcement — Despite a massive surge in SAR filings, enforcement actions were virtually nonexistent, revealing a significant enforcement gap that undermines deterrence.

    • Balancing regulatory rules and risk — Effective CTR and SAR practices are both a regulatory obligation and a risk signal: Strong, timely, accurate reporting and a compliance-first culture help avoid penalties and protect reputation, while weak programs invite costly, rigorous enforcement.

Casino operators face increasingly rigorous anti-money laundering (AML) obligations under federal banking secrecy laws that require extensive reporting, customer monitoring, and record maintenance systems. These regulatory mandates, enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), establish four core pillars of compliance: i) currency transaction reporting for cash activities exceeding $10,000; ii) suspicious activity reporting for potentially illicit behavior; iii) customer identification protocols; and iv) comprehensive recordkeeping standards.

While recent enforcement data reveals significant gaps between the volume of filed reports and actual regulatory actions, casinos must prioritize robust AML programs to avoid substantial penalties and reputational damage.

Under United States federal law, casinos operate within a stringent AML framework governed by Title 31 of the U.S. Code, commonly known as the Bank Secrecy Act (BSA). FinCEN serves as the primary regulator, enforcing comprehensive requirements designed to prevent casinos from becoming conduits for financial crimes.

The 4 pillars of casino AML compliance

1. Currency Transaction Reports (CTRs)— These reports form the foundation of casino reporting obligations. When a customer’s combined cash transactions exceed $10,000 in a single day, casinos must electronically file a detailed report within 15 calendar days. These reports capture essential customer information, such as name, address, Social Security number (SSN), and other identification details.

2. Suspicious Activity Reports (SARs)— These reports, filed with FinCEN, target potentially illicit behavior. For transactions of $5,000 or more that raise red flags, casinos must file comprehensive SARs within 30 days. Crucially, customers are never informed of these confidential reports.

3. Customer identification and due diligence— These requirements ensure casinos know who they’re serving during critical transactions. While not as extensive as traditional banking’s know-your-customer protocols, casinos must collect and verify customer information — name, birth date, address, and SSN — whenever filing CTRs or SARs or establishing certain accounts. This extends to monitoring gambling patterns for suspicious patterns.

4. Recordkeeping requirements— Rules around keeping records create the documentation foundation for compliance. Casinos must maintain all CTRs, SARs, supporting documentation, account records, negotiable instrument logs, and gaming activity records for five years in organized, accessible formats. Without robust recordkeeping systems, casinos risk missing reportable transactions or a failure to document suspicious activity.

Together, these four interconnected requirements create a comprehensive surveillance network, ensuring casinos serve as vigilant gatekeepers against money laundering while maintaining the integrity of their operations and supporting law enforcement investigations.

Public enforcement

SARs and CTRs are the backbone of Title 31 enforcement. Regulators use them to assess casino activity and compliance — and when reporting lapses, enforcement follows. Casinos that neglect filings or run weak AML programs face fines and mandated overhauls, while those with strong reporting and internal controls can largely avoid penalties.

The stark disparity between SAR filings and enforcement actions reveals a troubling enforcement gap.��, financial institutions filed tens of thousands of SARs annually, yet only were completed during this entire period. This represents an enforcement rate that is virtually non-existant.

This enforcement deficit becomes even more striking when viewed historically.��As recently as 2000, fewer than 20 SARs were filed annually. Despite this dramatic 1,000-fold increase in reporting over two decades, enforcement actions have remained stagnant.

Indeed, the numbers tell a clear story: The current system generates massive volumes of reports but delivers minimal accountability. This, in turn, undermines the entire purpose of the SARs system and calls into question whether these reporting requirements are achieving their intended deterrent effect.

Enforcement revived in 2024, and the AML Act of 2020 also has raised expectations and risks. All casinos — large or small — must treat BSA compliance as core duty. That means casinos need to file accurate, timely CTRs; investigate and report suspicious activity via SARs; and then act on those insights to mitigate risk. Recent cases — from suppressed SARs to absent AML programs — show that failures are costly and reputationally damaging.

SARs and CTRs are the backbone of Title 31 enforcement. Regulators use them to assess casino activity and compliance — and when reporting lapses, enforcement follows.

Casinos have incurred multi-million-dollar fines for serious compliance violations, including deliberately failing to maintain AML programs, ignoring BSA requirements, and neglecting to report suspicious transactions. Additional penalties have been imposed for persistent AML deficiencies and the use of misleading compliance policies. Many of these violations occurred within some casinos over multiple years, demonstrating systemic, long-term compliance failures rather than isolated incidents.

These patterns reveal that the problems extend far beyond simple administrative mistakes. Instead, they represent fundamental breakdowns in comprehensive compliance programs — failures that can only be detected and addressed through extensive data analysis using information that must come directly from the casinos themselves.

Effective filings of SARs and CTRs serve as a double-edged sword: They not only fulfill a critical regulatory obligation but also act as a barometer of a casino’s commitment to compliance. When done well, these filings protect the institution from potential sanctions and reputational damage. Conversely, poor execution can lead to severe penalties and, more alarmingly, enable illicit activities.

The requirements are straightforward. Casino operators need to prioritize compliance investments, thoroughly know their customers, submit accurate reports, and cultivate a culture that encourages the identification of suspicious transactions. The consequences of non-compliance are steep, both financially and in terms of facilitating crime.

As FinCEN underscores, a robust compliance framework is essential to maintaining the integrity of the financial system. By embracing this responsibility, casinos can establish a strong foundation for regulatory adherence — and those that fail to do so can expect rigorous enforcement action.

You can find out more about how businesses, like casinos, are managing the threat of fraud here

Key insights:

• • • Auditors are critical in initial financial crime detection��— Professionals responsible for auditing transactions are the primary line of defense in identifying suspicious activity, such as irregular deposits or transactions inconsistent with an account’s purpose.

    • CI-FIRST enhances SAR effectiveness and collaboration��— The new CI-FIRST initiative by IRS Criminal Investigation marks a significant shift by providing financial institutions with feedback on SARs, fostering a more transparent and collaborative partnership with federal agencies.

    • Financial crimes are evolving, requiring improved SAR quality��— Recent trends show a troubling rise in sophisticated financial crimes like account takeover fraud, elder exploitation, and resilient check fraud, underscoring the urgent need for enhanced clarity and improved quality in SARs preparation.

The financial professionals responsible for auditing transactions are integral to the detection of financial crimes. These individuals serve as the initial point of contact for identifying transactions that may be cause for concern, including patterns such as irregular recurring deposits or activity inconsistent with the account’s intended purpose.

Upon detection of potentially suspicious financial activity, a bank initiates a thorough internal review to assess whether the circumstances warrant the submission of a Suspicious Activity Report (SAR). If the criteria for suspicion are met, the electronically with the Financial Crimes Enforcement Network (FinCEN) within 30 to 60 days. The report is housed in a secure government database, accessible to authorized agencies such as the FBI, DEA, and IRS for further analysis. While this reporting mechanism plays a vital role in combating financial crime, it is not without limitations.

A significant challenge of the SARs system historically has been the absence of feedback provided reporting to banks regarding the outcomes of their submissions, resulting in a unilateral flow of information. To address this issue, the IRS Criminal Investigation launched a new initiative known as Feedback in Response to Strategic Threats (CI-FIRST).

The CI-FIRST initiative

In early 2025, the initiative was introduced, aiming to establish a transparent and effective partnership between federal agencies and private financial institutions. This program enhances transparency around SARs filings, providing financial institutions with clearer insight into how their submitted SARs are utilized in federal investigations. By doing so, it marks a significant shift in the way SARs are handled.

CI-FIRST fosters a more collaborative relationship between financial institutions and federal investigators, allowing for direct feedback and communication. This open dialogue could lead to more efficient and effective SARs processes. Moreover, the program has the potential to be a blueprint for other agencies, demonstrating a successful model for improving data quality and facilitating more robust information sharing. The success of CI-FIRST could have far-reaching implications for the way financial crimes are investigated.

Within this fraud landscape, several troubling patterns emerged that underscore the sophistication and persistence of financial criminals. For example, check fraud has demonstrated resilience despite the digital age, with financial institutions filing 682,276 SARs related to this traditional form of fraud, representing a notable uptick from previous periods.

CI-FIRST fosters a more collaborative relationship between financial institutions and federal investigators, allowing for direct feedback and communication.

Even more alarming was the dramatic 36% surge in account takeover fraud, a cybercrime that reflects criminals’ increasing ability to exploit digital vulnerabilities and compromise customer accounts. This surge resulted in nearly 178,000 reports, underscoring how criminals are adapting their methods to target online banking and other digital financial services.

The SARs data also revealed that identity theft remained a persistent threat, comprising more than one-quarter of all fraud-related SARs filed in 2024. This substantial proportion demonstrates how personal information breaches continue to fuel criminal enterprises across multiple fraud categories. Perhaps most concerning from a societal perspective was nearly 10% increase in elder financial exploitation cases compared to 2023, with 171,233 SARs filed specifically addressing crimes against vulnerable older adults. This trend reflects not only the increasing targeting of seniors but also potentially improved recognition and reporting of these crimes by financial institutions.

Financial institutions face mounting challenges

These comprehensive trends collectively illustrate the mounting challenges facing financial institutions, law enforcement, and regulatory bodies in their efforts to prevent, detect, and prosecute financial crimes. The sheer volume and diversity of criminal activity captured in these SAR statistics demonstrate that traditional approaches to combating financial crime require enhancement and modernization.

It is within this context that the CI-FIRST initiative emerges as a particularly relevant and timely response. One of the initiative’s most significant contributions lies in its commitment to providing enhanced clarity and guidance on the preparation of required SARs reports.

This improvement in clarity serves multiple critical functions in the financial crime prevention ecosystem. For example, by establishing clearer standards and expectations for SAR preparation, the initiative aims to improve the quality and consistency of the information provided to law enforcement agencies and regulatory bodies.

The sheer volume and diversity of criminal activity captured in these SAR statistics demonstrate that traditional approaches to combating financial crime require enhancement and modernization.

Further, the enhanced clarity in SARs preparation has direct implications for the speed and effectiveness of subsequent law enforcement actions. When SARs contain more precise, complete, and well-organized information, investigators can more quickly identify patterns, establish connections between cases, and build stronger foundations for legal action. This improved information quality significantly accelerates the process of obtaining subpoenas, as law enforcement officials can present more compelling and comprehensive evidence to judicial authorities when requesting these critical investigative tools.

Finally, the enhanced SARs preparation standards contribute directly to more effective prosecutions of individuals engaged in financial crimes. Prosecutors rely heavily on the detailed information contained in SARs to build their cases, and when this information is clearer, more thorough, and better organized, it becomes significantly easier to demonstrate criminal intent, establish patterns of illicit behavior, and present compelling evidence to juries. This improvement in the foundational documentation makes it substantially more likely that prosecutions will be both accurate in targeting genuine criminal activity and successful in securing convictions.

The expediency gained through these improvements creates a virtuous cycle in financial crime prevention. Faster, more successful prosecutions serve as stronger deterrents to potential criminals while also providing more rapid justice for victims. Additionally, enhanced efficiency allows law enforcement resources to be deployed more effectively across a broader range of cases, potentially addressing the growing volume of financial crimes reflected in the 2024 SAR statistics.

You can find more of our coverage of SARs and related efforts to combat financial crimes here

Key insights:

• • • Accelerating bank-fintech partnerships — Acting Comptroller Hood emphasized the importance of innovation in the financial sector, advocating for more freedom for fintech companies and encouraging banks to engage responsibly with digital assets.

    • Advancing financial inclusion — Hood said he passionately supports initiatives aimed at increasing capital access for underserved communities and promoting economic participation, highlighting financial inclusion as a critical civil rights issue.

    • Modernizing regulation to stimulate growth — The Acting Comptroller stresses the need for individualized, risk-based supervision and reducing regulatory burdens to unleash growth in the financial sector.

In February, Rodney E. Hood, former chair of the National Credit Union Administration Board, became the first African American to be name Acting Comptroller of the Currency. And although his historic appointment may be temporary — as Jonathan Gould is undergoing hearings for the permanent position — Acting Comptroller Hood is living up to his assertion that, “Acting does not mean inactive.”

At the June U.S. Chamber of Commerce Capital Markets Forum, Acting Comptroller Hood for the regulatory agenda of the Office of the Comptroller of the Currency (OCC), which included these highlights:

Ready all players: Green lights for crypto & fintech

The first two of Acting Comptroller Hood’s cited priorities focused on innovation: first, by allowing fintech firms to operate more freely; and second, by expanding the ability for banks to hold digital and cryptocurrency assets.

He cited his desire to focus on “accelerating bank-fintech partnerships,” adding that “innovation is the currency of progress.” He also encouraged “expanding responsible engagement with digital assets” by participating in “the architecture of a new financial frontier.”

These priorities represent a full turn towards the modernization of the financial system, as it seems that the government now is recognizing that these technologies are not going away. Renewing and updating the regulations surrounding these issues is better than trying to put “new wine in old wineskins.” Simply put, when new things emerge, we need to create new ways to govern them.

Further, Hood also indicated his passionate support for initiatives designed for financial inclusion, capital access for underserved communities, and fuller economic participation. “Financial inclusion is the civil rights issue of our time,” Hood said, adding that viewing fintech companies as a way to help underserved people access banking services is critical.

In the speech, Hood mentioned modernizing regulations as his last major initiative, perhaps for impact. He hailed regulatory rightsizing as one of the OCC’s most consequential priorities, noting that each financial institution requires individualized, risk-based supervision, not a one-size-fits-all approach. (Interestingly, on the OCC website under the , however, reducing regulatory burden is listed first, indicating its true place in the priority matrix.

Modernizing regulation to unleash growth

Overall, each of Hood’s main points send us the same direction — toward modernization of the US financial system via new technologies and markets, and by opening up more ways for financial institutions to move money.

While nothing here points to reducing requirements around anti-financial crime regimes, the effect of this loosening of the spigot likely will introduce new and divergent risks into many financial institutions. The logic behind this is simple: more products, more ways to move money, and more customers is a formula that adds to proportionate increases in risk. Illicit actors are sure to be standing ready to take advantage of the situation.

Indeed, smart financial services companies will keep anti-financial crime efforts front-and-center, empowering their traditional lines of defense to ensure that business growth is from legitimate customers operating legal enterprises. One area that will affect financial crimes departments is the . This typically refers to customers or businesses that are legal but may be considered unsavory, such as firearms or adult entertainment.

Economics and opinions aside, financial crimes teams are overwhelmed and the winds are blowing more work in their direction. Monitoring legitimate businesses by applying the same kind of due diligence standards meant to stem the flow of criminal money creates more noise. Although it is possible to collate funds from illicit activity into a business that already walks close to the line of legality, being classified as high-risk is hardly a good way to evade scrutiny. These businesses will remain high-risk for reasons unrelated to reputational risk, and financial crimes teams will still review them for unusual behavior rather than because of a moral judgement.

Hood also discussed reassessing capital requirements so that such standards are not excessive. This — while it could contribute to shaky institutions that grow artificially large and risk collapse — could also just be a great way to stimulate investment in the sector. The proof will be evident over the next couple of years.

Combining all these elements that Hood outlined draws an interesting picture. Fintechs are going to be empowered to onboard new customers, especially because so many people are underbanked. At the same time, banks will be required to keep less capital on hand and will be free to lend out more to a broader definition of qualified borrowers. Speculative digital assets and cryptocurrencies will now be on the balance sheets of these same banks with fewer capital requirements.

Assessing each bank with a tailor-made, risk-based approach is wonderful in theory but in reality, it requires time, effort, and expertise. A flood of innovation and capital may continuously stimulate the economy and become the so-called rising tide that lifts all ships; but there are other potential futures that do not look quite as rosy. For example, the financial services sector could find itself drowning in customers, unable to keep up with the many requirements that will inevitably stay in place.

What can the financial industry do in response?

Innovation in the banking sector means the same in the criminal sector, and we must continue to strive for innovation in areas of law enforcement, intelligence, and anti-crime. Institution leaders need to consider acquiring targeted technological tools to make team members more powerful.

AI and automation may take away some entry-level jobs, and people must become adept at leveraging new tools and honing stronger skills to stay competitive. In collaboration with automated systems, people can do more, better. This means institutions’ compliance & risk departments, as always, must continuously train workers to stay at the cutting edge of required skillsets.

Additionally, institutions should find new ways to intelligently target criminal networks instead of just monitoring and reviewing the typical big, unusual, or fast transaction patterns. Behavioral typologies, intelligence analysis of where money is used in supporting illegal activity, and a better understanding of the humans involved, are all available to a department willing to innovate. At this point, banks and other financial services institutions cannot let the criminals out-think the financial industry.

When we hear that an administration hopes to remove regulations and shrink government, we think there will be fewer jobs in compliance. Yet, the opposite is likely true, since these priorities signal a shift to making it easier for financial institutions to do business, exploit digital technologies, and add customers. Naturally, the combination leads to increased volumes in risk, and therefore, the work of risk & compliance professionals remains important and massive.

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