Financial Crimes: Types, Examples & Prevention Tips

Financial crime, commonly shortened to FinCrime, has become a global epidemic affecting institutions far beyond the financial sector. Its impact isn’t just disruptive; it’s costly.

In 2024, global fines for financial crime and compliance breaches soared to a record-breaking $19.3 billion, underscoring the high stakes for organizations that fail to prevent illicit activity. Regulators worldwide are making it clear: whether misconduct is deliberate or due to negligence, the price of weak controls is steep.

Understanding the scope and mechanics of financial crime is the first step toward combating it. Here’s what you need to know.

What Is Financial Crime?

Financial crime refers to any illegal activity involving money, markets or financial systems, from fraud and insider trading to money laundering and terrorist financing. It affects a wide range of entities, including banks, fintechs, lenders and even individual investors, often through schemes like pyramid scams or pump-and-dump stock manipulations.

Its impact is far-reaching: victims span from individuals and corporations to governments and the economy itself. Because of these systemic risks, regulators worldwide remain hyper-focused on prevention and enforcement, treating every lapse as a threat to financial integrity.

Financial crime can have many a victim, including: 

• banks and neobanks
• fintechs of any type
• private individuals or groups of individuals
• public and private companies
• the government or other authority
• the economy at large

Because of the ripples every instance of financial crime can send through the economy, legislators are especially vigilant about addressing it, as we’ll see below. 

The Main Types of Financial Crime

Financial crime is a broad category that includes any illegal act involving money or financial systems. Whether committed by insiders, outsiders or through collusion, these crimes damage trust, disrupt markets and lead to severe regulatory penalties. Below are its most common types:

1. Money Laundering

Money laundering is the process of making illegally obtained money appear legitimate by disguising its origins. Criminals typically do this through a series of complex transactions that obscure the source of funds, including shell companies, offshore accounts and layered banking activities. It’s a central component in organized crime operations and often intersects with drug trafficking, human trafficking, and corruption, making it a top enforcement priority worldwide.

2. Tax Evasion

Tax evasion involves illegally avoiding tax liabilities through deceitful means such as underreporting income, inflating deductions or hiding assets offshore. It undermines public funding and weakens national economies. Unlike tax avoidance, which is legal, evasion breaks the law and often leads to hefty fines or imprisonment. It’s a widespread issue among individuals, corporations, and even high-net-worth entities seeking to minimize financial obligations unlawfully.

3. Embezzlement

Embezzlement is the theft or misappropriation of funds entrusted to someone, typically an employee or executive within an organization. Unlike outright theft, it usually involves someone with authorized access who manipulates accounts, invoices or payroll to siphon funds for personal use. This betrayal of trust can severely damage internal morale, investor confidence and customer trust, especially in sectors like finance, non-profits and government.

4. Forgery and Counterfeiting

Forgery and counterfeiting involve creating or altering documents, currency or financial instruments with the intent to deceive. This can include fake checks, falsified contracts, counterfeit bills or manipulated financial records. These crimes defraud individuals and businesses and destabilize financial systems and economies. Technological advancements have made these schemes more sophisticated, prompting the need for stronger authentication and verification measures.

5. Identity Theft

Identity theft occurs when someone unlawfully obtains and uses another person’s personal information, such as Social Security numbers, bank credentials or credit card details, to commit fraud. Victims often suffer long-term financial harm, including damaged credit and unauthorized transactions. With the rise of digital banking and eCommerce, identity theft has become one of the fastest-growing forms of financial crime, prompting stricter data protection regulations globally.

6. Bribery and Corruption

Bribery and corruption involve offering, soliciting or receiving something of value (usually money or favors) to influence a decision or outcome. These practices are especially damaging in public procurement, corporate bidding and regulatory oversight. Corruption skews markets, deters investment and erodes public trust in institutions. It is often a gateway for other financial crimes and has been a focus of global anti-corruption initiatives such as the OECD Convention and FCPA.

7. Terrorist Financing

Terrorist financing refers to the act of providing funds to individuals or groups that engage in terrorism. Unlike other financial crimes driven by profit, this form of crime aims to fund violence and political disruption. Funds may come from both legitimate and illegitimate sources, including donations, front organizations or illicit trade. It poses significant threats to national and international security, prompting coordinated counter-terrorist financing (CTF) measures across borders.

8. Market Abuse and Insider Trading

Market abuse includes activities that distort financial markets, such as spreading false information or manipulating prices. Insider trading, aka trading based on non-public, material information, is a common form. These offenses undermine investor confidence and market integrity. Regulators closely monitor trading activity to detect suspicious behavior and enforce transparency rules. Violators can face substantial fines, revoked licenses and even imprisonment.

9. Pump-and-Dump Schemes

A pump-and-dump scheme involves artificially inflating the price of a stock or asset through misleading or false statements to attract unsuspecting investors. Once the price peaks, the fraudsters sell off their holdings for a profit, causing the asset’s value to crash and leaving others with significant losses. These schemes are particularly prevalent in unregulated or low-volume markets and are commonly seen in crypto and penny stocks.

Financial Crime Trends: Is It Becoming More Dangerous? 

Experts agree that financial crime risk has escalated sharply in recent years. The United Nations Office on Drugs and Crime (UNODC) estimates that only 1% of illicit financial flows are detected and seized, leaving trillions in criminal proceeds circulating freely through global markets.

The pandemic further accelerated this trend, as fraudsters exploited rapid digital adoption and economic volatility. Cyber-enabled scams, synthetic identities and payment fraud surged in scope and sophistication.

Digital and challenger banks add to the challenge, with users projected to make up nearly a quarter of global banking customers within five years. While offering speed and accessibility, these platforms’ streamlined onboarding processes are also ripe for abuse.

Meanwhile, cryptocurrencies, decentralized finance (DeFi), NFTs and emerging digital ecosystems like the metaverse provide new channels for laundering and asset manipulation. With their anonymity and global reach, they allow criminals to outpace traditional oversight and enforcement.

Financial Crime and Money Laundering

Money laundering, addressed globally through AML in banking and other financial sectors, is one of the most critical challenges in fighting financial crime. AML frameworks focus on detecting and disrupting illicit money flows through the classic stages of placement, layering and integration. Without these safeguards, stolen or illicitly earned funds can easily infiltrate the legitimate economy.

Most financial crimes eventually generate proceeds that require laundering, whether from drug trafficking, fraud, tax evasion, cybercrime or corruption. These underlying crimes are known as predicate offenses, and regulators worldwide are tightening rules to ensure they are effectively prosecuted. The EU’s 6th Anti-Money Laundering Directive (6AMLD), for instance, expanded the list of recognized predicate offenses and imposed tougher accountability standards across institutions.

A persistent issue is the use of money mules, individuals who transfer illegally acquired funds on behalf of criminals, sometimes knowingly but often after being deceived. Regulators and law enforcement treat mule networks as critical nodes in laundering operations, putting pressure on banks, fintechs and payment providers to identify suspicious activity early.

Authorities are scaling up their oversight: the EU’s new Anti-Money Laundering Authority (AMLA), launhed in Frankfurt in 2025, is coordinating enforcement across member states, with a strong focus on high-risk areas like cryptocurrency, where anonymity and speed make illicit flows harder to track. 

Measures to Battle Financial Crime

Preventing financial crime requires a layered approach that combines regulation, technology and strong risk management practices. International and national authorities set the framework through legislation, requiring banks, fintechs, estate agents, iGaming platforms and other high-risk businesses to know their customers, monitor transactions and block criminal activity. Failure to do so not only facilitates crime but also exposes organizations to heavy fines and reputational damage.

On the institutional side, a variety of tools and strategies are deployed for the prevention of economic crime:KYC and Onboarding Tools: During onboarding, Know Your Customer (KYC) procedures prevent criminals from accessing services with false identities. Specialized AML software supports this process, helping financial institutions comply with due diligence obligations.

Identity Verification Software: IDV solutions further strengthen fraud prevention by validating identity documents, biometrics or even live video calls. These safeguards reduce impersonation attempts and reinforce trust in digital onboarding.

AML Transaction Monitoring: Transaction monitoring automates the detection of suspicious patterns. Alerts are generated for unusual activity, such as large transfers or rapid cross-border payments. Combined with Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD), AML transaction monitoring forms the backbone of financial crime prevention.

Comprehensive Fraud and Risk Prevention: Comprehensive fraud solutions integrate machine learning and behavioral analytics to stop fraud before it escalates. When paired with risk management frameworks, these tools allow institutions to adapt to emerging threats in real time.

Authentication Protocols: Strong authentication prevents account takeover attacks (ATOs) by verifying that the rightful user is accessing the system. Methods include multi-factor authentication, biometrics, and behavioral checks, all of which reduce fraud opportunities.

Compliance Suites: AML tools ensure organizations meet evolving regulatory requirements while minimizing the risk of penalties. Effective compliance solutions streamline reporting and make cross-border operations safer.

Risk Monitoring Frameworks: Beyond tools, ongoing risk monitoring is essential. Organizations continuously review vulnerabilities, update controls, and refine risk management strategies to strengthen financial crime prevention over time.

How Should a Company React to Suspected Fraud?

A company that detects financial crimes or fraud as they occur is far better positioned to contain the damage than one that only realizes after the fact. Early detection allows institutions to act quickly, limiting exposure and protecting both assets and customers.

The most common response is to block the suspicious transaction immediately. If confidence is high that the activity involves a bad actor, or if the company’s risk tolerance is low, the account may be locked or even blacklisted.

In practice, organizations will also investigate what happened, how it occurred, and how to prevent a repeat. This often involves fraud investigation software, forensic analysis, and a review of existing controls.

Equally important is learning from each incident. Companies should use these investigations to strengthen their defenses—whether by updating fraud prevention software, implementing new failsafes, or adapting internal processes. Each case becomes an opportunity to improve overall prevention strategies.

How Can SEON Help Stop Financial Crime?

SEON serves as the command center for fraud prevention and AML compliance, delivering a unified, API-first solution that empowers financial services teams to safeguard customers and revenues within a single, powerful interface.

At its core, SEON combines 900+ proprietary, real‑time data signals and utilizes digital footprint analysis, device intelligence, AI & machine learning and more to offer unmatched precision in risk detection. The rich data foundation powers a comprehensive suite designed for fraud prevention and AML compliance across the customer journey, including:

• Customer Screening & Monitoring: Automate onboarding compliance by screening customers against sanctions, watchlists, PEPs, and adverse media in real time, all within the same system.
• Payment Screening: Instantly vet transactions against global sanctions lists to intercept illicit or high-risk payments before they enter your system.
• Transaction Monitoring: Real-time monitoring combines behavioral, transactional and fraud signals to detect suspicious patterns and emerging risk quickly.
• Case Management: Manage alerts, document incidents and track audit-ready cases with AI-powered regulatory reporting (e.g., SARs, CTRs to FinCEN).

SEON’s AI-powered AML Compliance Suite brings all these features together under one roof. The enhanced platform enables real-time alerting, case resolution and one-click regulatory filing, elevating speed, accuracy and compliance readiness.Beyond tools, SEON fosters collaboration between fraud and AML teams, breaking down silos and improving visibility. Shared insights, from device and IP anomalies to linked-account networks, help teams act with full context, leading to faster, more accurate investigations

FAQ

Sources

• Napier: 11 of the biggest FinCrime and money laundering facts
• FCA: financial crime
• World Economic Forum: Why we need to talk about financial crime
• PwC: PwC’s Global Economic Crime and Fraud Survey 2022
• Amdocs: The rise of neobanks