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Can Financial Institutions Treat Fraud, Sanctions and FinCrime Holistically?

Over the past few years, there has been a significant change in how financial institutions frame and address issues pertaining to fraud, sanctions and wider financial crime, causing what were once three separate compliance issues to become deeply interconnected and requiring a unified response.

For decades, fraud was treated primarily as an economic problem – a matter of financial loss, restitution and deterrence. But anti-fraud enforcement is now mapping networks instead of hunting individuals. Sanctions, historically deployed as instruments of foreign policy to implement force, are now being used more deliberately to underpin geopolitical objectives.

While sanctions and fraud teams historically functioned separately, coordination between governmental enforcement agencies that regulate financial institutions is becoming more structured, with cross-functional teams better positioned to escalate and act on emerging threats. Financial institutions should similarly coordinate their sanctions and anti-fraud efforts to stay abreast with regulators.

Finally, governments are increasingly reclassifying organized crime such as money laundering as a national security and even terrorism-adjacent threat, a shift that carries real consequences for how enforcement priorities are set and how institutions must respond.¹ This reclassification does not fundamentally change the compliance obligations of financial institutions, but it does change the context in which those obligations exist, specifically how governments decide to use them.

The practical implication for financial institutions is clear: Compliance programs built around siloed functions may no longer be adequate. A transaction that appears routine may be the final stage of a transnational fraud ecosystem with the backing of a foreign state actor. The institution’s compliance infrastructure must be capable of connecting those dots.

The Limits of Current Sanctions Frameworks

Despite the heightened urgency, some sanctions frameworks remain only moderately effective at disrupting organized crime networks in sanctioned jurisdictions. The challenge is structural. Sanctions were initially designed to target identifiable actors and jurisdictions, but some modern criminal networks operate through fragmented, sometimes even low-value, transactions that blend seamlessly into legitimate financial flows. By the time suspicious patterns become discernible, institutions may already face significant exposure, including inadvertent sanctions violations. While governments and certain banks have gotten better at targeting the full lifecycle of organized crime activity, some lag behind. The evolution from simple list-based sanctions to sectoral and targeted regimes has added further complexity. Institutions must maintain effective programs that support adequate due diligence on products, services and counterparties.

Those institutions with correspondent banking relationships in higher-risk jurisdictions or institutions that have heavy exposure to money movements through fintech partnerships are at greater risk. U.S. banks often bear the burden of identifying potential violations that their foreign correspondents have missed, a responsibility that demands both sophisticated controls and a clear-eyed understanding of where visibility ends.

The Critical Link: Professional Money Laundering Networks

If there is an element that ties fraud, sanctions evasion and organized crime financing together into a coherent system, it is the professional money laundering network. These are not opportunistic actors – they are sophisticated service providers that function with the operational discipline of legitimate enterprises. They consolidate proceeds from online scams, illicit trade and drug trafficking, then move those funds through shell companies, crypto channels, trade-based schemes and high-risk jurisdictions, rendering the origin of illicit money effectively invisible.

What makes these networks particularly dangerous is their ability to exploit regulatory blind spots and move illicit funds across borders undetected. Low-value, high-volume transactions and mule account flows allow fraud proceeds to mix with funds tied to sanctioned actors or cartel operations. Account takeovers – enabled by stolen or purchased identity data – allow criminals to impersonate trusted, low-risk customers, circumventing even well-designed compliance controls. The result is a unified, transnational financial ecosystem that is far greater than the sum of its parts.²

In addition, the emergence of stablecoins has introduced a new and particularly effective vehicle for sanctions evasion. Unlike more volatile digital assets, stablecoins function as actual payment instruments and hold their value, making them attractive not just to retail users but to state actors seeking to circumvent U.S. sanctions. There are already examples of stablecoins backed by Russian rubles and Chinese yuan in the market, signaling a trend that institutions and regulators must take seriously.³

Technology as Both Threat and Tool

Widespread adoption of AI, digital assets and digital platforms has fundamentally altered the scale and sophistication of financial crime. The technology barrier to entry for criminals has dropped. The ability to generate synthetic identities, exploit control vulnerabilities at scale and move value across borders with limited friction has been supercharged by the same technologies that financial institutions are deploying to manage risk and serve customers.

The fragmentation of transaction values is one of the most telling indicators of this shift. Where illicit flows may have once moved in large, detectable amounts, new typologies have emerged where they may now circulate in increments of $100 to $200, embedded in transaction data that requires significant analytical sophistication to interpret.⁴ The keywords and patterns that signal criminal activity may not be legible to the untrained eye, and manual review processes are simply not sufficient to keep pace.

Although technology is a threat vector, it can also serve as the most promising avenue for a more effective response. The consolidation of fraud, sanctions and wider financial crime data, enabled by advanced analytics and AI, is creating new opportunities to identify network-level patterns that would be invisible to siloed teams. Larger institutions and clearing banks, with broader visibility into transaction flows, are better positioned to leverage these capabilities. But the benefits are not limited to scale. The key is investment in the right infrastructure and the willingness to break down the organizational barriers that have historically kept compliance functions apart.

Public-Private Partnership: A Necessary Evolution

Perhaps the most important structural shift underway is the deepening of public-private partnerships between financial institutions and law enforcement. Both sides have historically operated with incomplete information. Banks see the financial flow and law enforcement understands the typologies, the networks and the evolving methods that criminals use to stay ahead of detection. Neither can fully solve the problem alone.

The conviction of Al Capone for tax evasion was an early demonstration of a principle that remains as relevant today as it was a century ago: following the money is the most reliable path to disrupting a criminal enterprise. What has changed is the complexity of the financial system and the speed at which the money moves through it. In cases involving human trafficking, for example, the timing of information sharing is not merely a compliance consideration; it is a matter of whether intervention is possible at all.

Real-time information sharing, coordinated intelligence and genuine collaboration between institutions and law enforcement are not aspirational goals. They are operational necessities. The institutions that invest in these partnerships, and in the technology and organizational structures that make them possible, will be better positioned not only to meet their regulatory obligations, but to play a meaningful role in disrupting the criminal networks that depend on the financial system to function.

The Path Forward

The convergence of fraud, sanctions and financial crime is not a temporary phenomenon driven by a particular geopolitical moment. It reflects a structural transformation in how criminal enterprises operate and how they exploit the financial system. North Korea’s reliance on IT worker fraud and cryptocurrency theft for a significant share of its national income is a stark illustration of how thoroughly these threats have become embedded in the global financial architecture.⁵

For financial institutions, the response requires more than incremental improvements to existing compliance programs. It requires a fundamental rethinking of how fraud, sanctions and financial crime functions are organized, how data is shared across those functions, and how institutions engage with the broader ecosystem of regulators, law enforcement and peer institutions. The front line in the never-ending fight against crime has always run through the financial system. The question now is whether institutions are equipped to hold that line or whether they will they struggle to deal with the complexities of this changing landscape.

Footnotes:

1: FTI Consulting, “Beyond Compliance: The Business Impact of U.S. Terrorist Designations in Brazil” (June 19, 2026).

2: U.S. Department of the Treasury, “2026 National Money Laundering Risk Assessment,” (Mar. 2026).

3: Pluang, “A7A5 stablecoin, used by Russian firms to bypass sanctions, collapsed after coordinated Western crackdowns,” (Aug. 2, 2026).

4: Financial Action Task Force (FATF), “Targeted Report on Stablecoins and Unhosted Wallets – Peer-to-Peer Transactions” (Mar. 2026).

5: U.S. Department of Justice, Press Release, “Justice Department Announces Coordinated, Nationwide Actions to Combat North Korean Remote Information Technology Workers’ Illicit Revenue Generation Schemes,” (June 30, 2025).

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.