Fraud
Also called financial fraud
Fraud is dishonestly deceiving someone to make a gain or cause a loss. In financial services it includes scams that trick customers into sending money, identity theft, account takeover, card fraud, false insurance claims and insider fraud by staff. Firms face losses, reimbursement costs and criminal liability when controls fail.
How it works
Banks and payment firms detect fraud in real time. Systems score each payment, login and new account using device data, behaviour and known fraud patterns, then block, delay or challenge risky activity. Fraud teams review cases, contact customers and recover funds where possible. Many firms run fraud and AML monitoring on shared data because mule accounts link the two.
The legal stakes have risen. UK payment firms must reimburse most victims of authorised push payment scams, splitting the cost between sending and receiving firm. Since September 2025 large organisations can also be prosecuted if an associated person commits fraud for their benefit and they lacked reasonable prevention procedures.
The rules
Creates offences of fraud by false representation, failing to disclose information and abuse of position, plus offences for possessing or supplying articles for fraud.
All persons in England, Wales and Northern IrelandMakes an organisation liable when an associated person commits a specified fraud intending to benefit it, with a defence of reasonable prevention procedures.
Large organisations meeting two of: over 250 staff, over £36m turnover, over £18m assetsRequires firms to reimburse authorised push payment scam victims up to £85,000 per claim, with costs shared between sending and receiving firms.
Payment service providers sending and receiving Faster Payments and CHAPSMakes it a federal crime to defraud a financial institution or obtain its money by false or fraudulent pretences.
All persons subject to US jurisdictionCommon questions
What is the difference between fraud and money laundering?
Fraud is the crime that generates illegal money, such as a scam or false claim. Money laundering is the separate process of hiding where that money came from. Fraud is one of the most common predicate offences for laundering.
What is authorised push payment fraud?
APP fraud happens when a customer is tricked into sending a payment to a criminal, for example through an impersonation or investment scam. The customer authorises the payment, which is why it falls outside traditional unauthorised fraud protections.
Which organisations are covered by failure to prevent fraud?
Large bodies corporate and partnerships that meet two of three tests: more than 250 employees, more than £36m turnover or more than £18m in total assets. Subsidiaries and overseas organisations with a UK nexus can be in scope.
What is first-party fraud?
First-party fraud is committed by a customer against the firm, for example lying on a loan application, falsely claiming a payment was unauthorised or inflating an insurance claim. Third-party fraud is committed by someone impersonating or deceiving the customer.
Our coverage
News and analysis on AML from RegTech Post.
Read the coverage →RegTech PostBanks Turn to AI Agents for AML, Fraud Detection and Risk MonitoringRead the article →RegTech PostRiskAlert247: How This UK Startup Transforms Companies House Data Into Real-Time Fraud DetectionRead the article →
