Fraud

Fraud directly generates new illicit proceeds through deceptive means such as false invoices, sham claims, or forged documentation, making it a core predicate offense for money laundering. Criminals use these methods to obtain unlawful funds at the outset, positioning fraud as the initial source of launderable capital.

Fraudsters frequently present false or manipulated customer details—such as forged identities, sham business registrations, or nominee arrangements—to financial institutions, lenders, or government programs. By obscuring beneficial ownership and misrepresenting their credentials, criminals bypass standard KYC checks and secure fraudulent loans or payouts, thereby compounding the primary product vulnerabilities.

This technique exploits the inherent features of various financial products and services—such as invoice financing, trade finance, loan programs, and donation platforms—by submitting fraudulent invoices, forged documents, or fabricated eligibility data. Criminals generate new illicit proceeds under the guise of legitimate product usage, relying on weak or easily circumvented product controls to secure financing, government disbursements, or donations. This vulnerability is central to how fraud creates newly launderable funds from the start.

• Aggregates negative news coverage, legal actions, and court proceedings.
• Identifies individuals or entities previously implicated in fraud or misrepresentation, revealing heightened risk.
• Helps corroborate suspicious applications or transactions with prior legal disputes or criminal charges for fraud.

• Holds financial statements, profit-and-loss reports, and tax filings for entities.
• Enables validation of reported income or expenses against actual business performance, highlighting potential fraud.
• Helps spot discrepancies in revenues or asset flows that do not align with ordinary business operations, revealing artificial inflation or false documentation.

• Contains information on contracts, invoices, payment terms, and relevant transaction references.
• Supports comparison of stated invoicing details against actual goods or services delivered, revealing potential false-invoice fraud.
• Assists in tracing the flow of generated proceeds from bogus invoicing and verifying the legitimacy of supporting documents.

• Provides comprehensive details on financial transactions, including timestamps, amounts, parties involved, and account references.
• Enables detection of unusual or repetitive transaction patterns that may indicate fraudulent funding or layering of newly acquired proceeds.
• Facilitates verification of transaction authenticity and cross-checking against reported invoices or contracts in fraud schemes.

• Logs contributions made via online fundraising or charitable platforms, including donor identities, amounts, and timestamps.
• Exposes suspicious or fabricated charitable campaigns used to solicit fraudulent donations.
• Enables cross-checking of donation patterns against known fraud markers (e.g., misappropriated funds, repeated small deposits).

• Specializes in authenticating official documents such as passports, IDs, and business registrations.
• Highlights potential forgeries or tampered identification used to submit fraudulent claims or applications.
• Supports investigators in confirming legitimate documentation for loans, invoices, and government program eligibility.

• Includes formal contracts and supporting details for loans, credit cards, and other financing.
• Helps confirm whether submitted documents (e.g., invoices, applications) align with legitimate funding needs or signal fraudulent borrowing.
• Allows investigators to cross-reference financed amounts with identified bogus claims, revealing potential false documentation or repetitive fraud patterns.

• Consolidates reports of known or suspected fraud incidents, alert lists, and scam patterns.
• Helps institutions detect repeat offenders, suspicious methodologies, or new fraud typologies.
• Enables more targeted investigations where similar or identical fraud indicators appear (e.g., false invoicing patterns).

• Contains verified identities, addresses, and beneficial ownership information.
• Facilitates detection of synthetic or falsified customer profiles used in fraudulent schemes.
• Supports ongoing monitoring of customer activity against stated business or personal backgrounds, revealing red flags if behavior diverges from legitimate profiles.

• Provides official ownership and registration details for companies, including shareholding structures and directorships.
• Assists in uncovering shell entities or undisclosed ownership used to channel fraudulent proceeds.
• Enables cross-verification of declared business activities against actual corporate records, identifying potential misrepresentations in fraudulent setups.

Require deeper scrutiny of documents (e.g., invoices, shipping records, licensing) and thorough source-of-funds reviews for high-risk or suspicious customers. By verifying the authenticity of claimed transactions and investigating contradictory financial or ownership details, enhanced due diligence (EDD) exposes newly generated proceeds from illicit activities—particularly those involving fabricated documentation or false claims—before they fully enter the banking system.

Conduct thorough identity and business verification from the outset, targeting red flags such as contradictory legal documents or nonexistent corporate addresses. Cross-reference client data with public records and watchlists to ensure the individual or entity is not using sham credentials to claim eligibility for government funds or to submit forged invoices. CDD prevents fraudulent actors from easily onboarding under false pretenses to launder newly created illicit proceeds.

Implement scenario-based rules and analytics specifically designed to detect patterns indicative of fraudulent activity, such as repeated invoicing with identical references across multiple accounts or unusual government disbursements that do not match a customer’s stated business. By flagging mismatches in the declared purpose and frequency of transactions, financial institutions can spot newly generated illicit proceeds that perpetrators attempt to layer or integrate through routine channels.

Train frontline and compliance staff to identify fraudulent documentation, such as falsified invoices or manipulated relief payout records, and to check for inconsistencies. Emphasize protocols for swiftly escalating questionable transaction requests, highlighting the importance of detecting funds sourced directly from fraud at an early stage. By equipping employees with targeted fraud-recognition skills, financial institutions reduce vulnerabilities in customer-facing processes and increase detection rates.

Provide targeted alerts and guidance highlighting common fraud tactics, such as bogus charitable drives or advanced-fee scams. Educate business clients on recognizing red flags for false invoicing or sham delivery claims, and encourage immediate reporting of suspicious requests. By proactively informing customers about typical fraud indicators, financial institutions reduce opportunities for fraudsters to generate illicit proceeds through deceptive solicitations.

Segment customers or counterparties who frequently file invoices, claim government rebates, or handle unusually high volumes of refunds into higher-risk categories. Assign more frequent reviews and tighter transaction thresholds to those with elevated fraud risk profiles. By tailoring scrutiny to these segments, institutions can more promptly detect newly generated illicit proceeds from deception-based schemes.

Use open-source data, official registries, and external databases to validate the authenticity of invoices, shipping manifests, or business identities involved in transactions. For example, confirm declared delivery routes against public customs records or verify corporate registration details through government portals. This external cross-checking uncovers false representations used to fabricate or inflate receipts, thus exposing fraudulent proceeds at their origin.

Scrutinize shipping, customs, and trade documentation for inconsistencies between billed amounts and the actual goods or services delivered. Focus on re-invoicing patterns, mismatched delivery dates, or nonexistent shipments that may signal fraudulent claims. By cross-checking declared values and product information against official trade data, financial institutions can detect artificially inflated or entirely fictitious transactions used to create illicit funds through fraud.

• Fraudsters commonly open or misuse bank accounts under real or fictitious names, often using forged identities or shell company registrations, to deposit newly generated fraudulent proceeds.
• These accounts receive funds from bogus invoices, false government disbursements, or inflated loan payouts secured under deceptive pretenses.
• Criminals then commingle illicit and legitimate funds in the same account, rapidly transferring or layering the money to reduce traceability and obscure its fraudulent origin.

• Fraudsters submit forged or overstated shipping documents and invoices to obtain letters of credit for goods that may not exist or are artificially inflated.
• Once the letter of credit is issued, criminals extract the funds, effectively transforming fraudulent financing into ostensibly legitimate capital.
• This tactic leverages the trust-based nature of trade finance, where banks rely on documentation that fraudsters skillfully falsify.

• Criminals use fictitious or manipulated bills of lading, contracts, and other trade-related instruments to justify non-existent cross-border transactions.
• Through repeated or carousel-style exchanges of the same goods, they fraudulently claim rebates, refunds, or trade financing multiple times, generating illicit funds.
• The volume and complexity of trade documentation enable the layering of fraudulent proceeds under what appears to be legitimate import-export activity.

• Perpetrators generate false or inflated invoices to claim payment for non-existent goods or services, creating illicit funds at the source.
• These fraudulent receivables can be presented to lenders for factoring, securing immediate cash that is subsequently diverted to the fraudsters.
• By misrepresenting or repeatedly invoicing the same transactions, criminals obscure legitimate trade flows, disguising the illicit nature of the proceeds.

• Criminals leverage automated invoice creation and tracking tools to generate multiple false invoices for the same goods or services.
• This supports schemes in which repeated or manipulated documentation is used to justify fraudulent claims or inflows.

• Fraudsters misrepresent financial standing or submit counterfeit records to qualify for loans or relief funds.
• They quickly channel disbursed amounts into personal or third-party accounts, commingling the fraudulent loan proceeds with legitimate funds.

• Perpetrators furnish forged shipping documents or customs declarations to support fictitious or overstated trade transactions.
• Such documents justify unwarranted rebates, refunds, or credit lines, masking the true origin of newly generated criminal proceeds.

• Criminals obtain letters of credit or other trade-financing instruments based on fabricated invoices and shipping records.
• Repeatedly rotating the same goods (or nonexistent goods) through multiple transactions allows them to collect funding or rebates multiple times (e.g., carousel fraud).

• Criminals open or misuse business accounts under false identities or shell entities to deposit funds from fabricated sales or invoices.
• The accounts also facilitate structured deposits and rapid transfers, commingling legitimate and fraudulent proceeds to obscure the source.

• Offenders set up apparent charitable appeals or relief campaigns, soliciting donations under false pretenses.
• Collected funds are swiftly routed to personal or unrelated accounts, effectively converting well-intentioned public donations into illicit proceeds.

• Fraudsters submit inflated or entirely fictitious invoices to secure immediate funding from lenders or factors.
• Once financing is obtained, funds are funneled back to the perpetrators, disguising the proceeds as legitimate receivables.

• By forming shell or front companies, perpetrators conceal ownership and produce fake invoices or documents to justify incoming payments.
• These structures mask the true origins of fraud proceeds, complicating AML inquiries into beneficial ownership.

Banks are unknowingly exploited by fraudsters who:

• Deposit or transfer illicit proceeds, mixing them with legitimate funds.
• Open accounts or submit documentation under false pretenses, making it harder for financial institutions to distinguish genuine transactions from fraudulent ones.

Trade finance institutions are unknowingly abused when fraudsters:

• Present bogus delivery notes or invoices to secure financing for non-existent or overstated transactions.
• Funnel the proceeds back to themselves, transforming fraudulent financing into newly disguised capital that appears tied to valid trade activity.

Money services businesses are unknowingly exploited by criminals to:

• Rapidly transfer funds under multiple names or accounts.
• Circumvent certain due diligence measures by using structured deposits or withdrawals.

This enables fraudsters to move newly generated illicit proceeds under seemingly legitimate remittance or exchange transactions.

Document forgers knowingly produce or alter records, enabling fraudsters to:

• Submit fabricated identity documentation or business records to financial institutions and government programs.
• Support sham accounts or false claims, thereby generating illicit funds under deceptive credentials.

Shell or front companies knowingly serve as conduits for fraudulent proceeds by:

• Issuing false or inflated invoices that justify incoming funds.
• Obscuring the true ownership and purpose of transactions, allowing criminals to quickly veil the origin of new illicit capital.

Nominee arrangements knowingly obscure beneficial ownership by:

• Holding accounts or corporate registrations under an alternate name, preventing clear attribution of fraudulent proceeds.
• Facilitating the rapid distribution of newly acquired funds without linking them to the actual perpetrators.