Emerging Fraud Schemes: How FIs Can Stay Ahead of the UnknownThe fraud landscape is constantly shifting. From cryptocurrency investment scams to pandemic-era government program abuse, financial institutions (FIs) are being challenged by schemes that fall outside traditional fraud definitions—but cause just as much harm.
These emerging or “miscellaneous” schemes, often categorized under “Other Fraud–Type” in Suspicious Activity Reports (SARs), are on the rise. As criminal tactics evolve, FIs must stay agile, using real-time intelligence and adaptable detection frameworks to keep pace.
A Moving Target: From Pig Butchering to Tax Credit FraudOne of the most damaging schemes in this space is the so-called “pig butchering” scam—a crypto investment fraud that exploded in 2022 and 2023. Scammers initiate contact through unsolicited texts or social media messages, build rapport with the victim, and eventually lure them into a fake cryptocurrency trading platform. Early returns are faked to build trust, only for the victim to later lose significant funds, sometimes their entire savings.
These scams are often international in scope, technologically sophisticated and emotionally manipulative. And they’re growing rapidly. According to the FBI, investment scams were the highest-loss category in 2022, with crypto-related fraud accounting for over $2.5 billion in losses—a 183% increase from the prior year.
Other notable schemes include:
- Advance-fee frauds, including fake grants and foreign lottery scams
- Government benefit fraud, such as false claims under programs like the Employee Retention Credit (ERC)
- Impostor scams, where fraudsters impersonate government agencies, banks or tech support representatives to extract money from victims
The unifying theme? These scams often don’t show up as suspicious until the transaction is already in motion, if at all.
Why Detection Remains So ChallengingEmerging fraud schemes typically exploit gaps in visibility. They involve social engineering, manipulation or misinformation that occurs well before the financial transaction itself. By the time funds are wired, withdrawn or transferred to a crypto wallet, the transaction may appear legitimate on its face.
Fraudsters are also adept at adapting. When one scam loses traction or public attention, another quickly takes its place. This constant reinvention forces FIs to develop systems that are not just rules-based but capable of learning and adjusting to novel behaviors.
Even frontline staff may struggle to detect these cases. A customer may withdraw large sums to “pay taxes on a prize,” send money to a supposed love interest overseas or wire funds to a crypto exchange they believe is legitimate. Unless staff know the signs or the technology flags a high-risk profile, these transactions can pass without scrutiny.
Regulatory Attention and Law Enforcement ResponseFinCEN has responded to these rising threats by issuing targeted alerts and typology updates. Its 2023 alert on pig butchering scams (FIN-2023-Alert005) included detailed red flag indicators and emphasized the importance of clear SAR filing practices to support investigative efforts.
Regulators and law enforcement have also focused on COVID-19 relief fraud, including abuse of PPP and ERC funds. The Department of Justice has stood up task forces to investigate and prosecute these cases, while the IRS and FinCEN continue to issue guidance for FIs on how to identify potential abuse.
Public education has also become a regulatory priority. Agencies like the FTC and SEC have launched awareness campaigns warning consumers about crypto scams, social media impostors and phony prize schemes—all of which feed into the financial system in ways FIs must track.
Adapting Detection to a Rapidly Changing LandscapeThe solution is not just more rules—it’s more intelligence. Emerging fraud typologies require real-time adaptability. FIs need solutions that ingest new fraud typologies quickly, flag behavioral anomalies and facilitate interbank collaboration to identify widespread trends.
Institutions should also ensure their internal teams, from tellers to compliance analysts, are trained to recognize signs of social engineering, emotional manipulation and financial redirection. These human cues often provide the first opportunity to stop fraud in progress.
Monitoring platforms must evolve as quickly as fraudsters do. That includes tracking transaction behaviors across crypto exchanges, analyzing device and IP anomalies and assessing high-risk customer behavior that doesn’t fit historical norms.
NICE Actimize: Built for the Threats You Didn’t See ComingNICE Actimize delivers adaptive
fraud management solutions designed to identify and respond to new and emerging threats. Whether it’s identifying atypical crypto transfers, flagging behavioral inconsistencies in wire activity or
detecting the use of mule accounts across the ecosystem, our platform evolves with the risk.
We give FIs the agility to detect tomorrow’s fraud with today’s data—before the damage is done.
