Anti-fraud laws and regulations are legal frameworks designed to detect, prevent and penalize illegal and deceptive activities. They act as the primary defense against business failure and financial ruin, so are incredibly important.
Companies like Trustpair help organizations stay compliant with anti-fraud laws by automating vendor and payment verification. By monitoring and validating the data in real-time, companies can ensure that every transaction aligns with regulatory and internal compliance standards.
Key Takeaways:
- Anti-fraud laws focus on anti-money laundering, bribery and anti-corruption, and aim to prevent fraud and third-party account access
- Comply with these laws or face major financial penalties, reputational damage from business claims and potential operational collapse
- Technology is essential in fighting against fraud, not only for compliance but in managing the data, and the threats, in real-time
What are the main types of anti-fraud laws and regulations?
Every regulatory jurisdiction has laws to prevent the risk of fraud. But they can significantly vary, both in subject matter and requirements, so it’s important to understand the types of anti-fraud regulations, including:
- Anti-money laundering
- Bribery / anti-corruption
- Laws aiming to prevent third-party (identity and account) fraud
Anti-money laundering
Anti-money laundering (AML) laws and regulations are designed to prevent organized crime groups from disguising funds that are illegally obtained, as a legitimate income source.
The primary goal of AML laws is to disrupt the financial flow of illegal activities like drug trafficking or terrorist financing. By making it harder for criminals to “clean” their money, these regulations preserve the integrity of global financial systems.
Some of the requirements of AML regulations in the United States code include:
- Verifying customer identities, typically through Know Your Customer (KYC) or Ultimate Beneficial Ownership (UBO)
- Monitoring transactions for suspicious activity
- Reporting suspicious activities to the correct authorities
FINRA 3110 is one example of a regulation focused on AML, as part of the wider Bank Secrecy Act. It asks that financial institutions create a risk-based compliance assessment for money laundering, submit suspicious activity reports (SARs) and maintain internal controls for oversight into potentially criminal activities.
Anti-bribery and anti-corruption regulations
Anti-bribery and anti-corruption (ABC) regulations target the use of illegal incentives, like gifts or payments, in exchange for a business advantage (such as information transmitted). Many of the laws surrounding this form of pay-for-access fraud focus on government agencies, federal programs, military services and the private sector.
Examples of ABC laws are the Anti Kickback Statute, Accountability Act and the Foreign Corrupt Practices Act, focusing on financial relationships.
ABC laws are designed with the following in mind:
| Design | Reasoning |
| Promote fair competition | Bribery undermines free and fair markets by allowing dishonest companies to win contracts based on payments, rather than the merits of their products and services |
| Ensure government integrity | Build public trust and ensure that government functions, like issuing licenses, enforcing laws and awarding contracts, are carried out impartially |
| Prevent financial misstatements | Many ABC laws require accurate record-keeping, making it harder for companies to hide bribes by disguising them as business expenses |
The US Foreign Corrupt Practices Act (FCPA) was one of the first major laws introduced to target bribery. It was brought in as a response to scandals where companies admitted to making hundreds of millions of dollars in questionable willful payments to foreign officials. The original goal was for the criminal division to prevent US companies from exporting corruption abroad.
But it doesn’t always look obvious. Some historic cases reference payments to an immediate family member for their emergency medical condition, in exchange for contracts.
Third party fraud prevention laws
This group of laws aims to protect consumers and businesses from external parties that attempt to gain unauthorized access to their accounts. The regulations therefore focus on applying the correct controls, ensuring the security of data and the integrity of digital transactions.
One such rule is the False Claims Act (USA), which aims to maintain financial integrity against all types of false claims. For example, it can help protect health care providers against false or fraudulent claims that lead to patient abuse and health care fraud, while protecting health insurance portability and patient referrals.
This guidance achieves a dual purpose:
- Protecting personal data – minimizing data breaches and limiting financial liability
- Maintaining consumer trust – ensuring due diligence is completed properly and preserving the privacy of users
The Red Flags Rule is one example of a law targeting third party fraud. Under the Fair and Accurate Credit Transactions Act (FACTA), any business that regularly extends credit must implement a written Identity Theft Prevention Program.
This involves identifying and incorporating ‘red flags’, such as:
- Documents presented for identification that appear altered or forged
- A notice from a customer that they didn’t open the account
- Attempts to open an account using an address that matches the address of a previous fraudulent application
- Suspicious account activity, like the sudden and significant increase in the use of a credit card
The red flags rule essentially ensures that both front-line employees, and automated systems are well-trained and equipped to recognize the early warning signs.
How do these regulations protect businesses from financial crimes?
Some businesses view anti-fraud laws as compliance burdens, but they are fundamental to a business’ financial health, reputation and long-term sustainability.
Following these regulations can have the following benefits:
| Benefit | Details |
| Mitigating direct fraud losses | These regulations force businesses to implement systems that catch fraud attempts before significant funds are lost |
| Insurance and recovery | Adherence to established anti-fraud protocols can be a requirement for corporate insurance policies, and often strengthen a business’ position when attempting to recover losses |
| Avoiding fines, criminal penalties and civil monetary penalties | Government and federal regulators can impose severe financial penalties, while proactive compliance is vastly cheaper |
| Maintaining public image | Business practices associated with a data breach can lead to public backlash, boycotts, and major contract loss |
| Building consumer confidence | Strict adherence to the rules assures customers that their money and personal data are safe, crucial for attracting new business and retaining current customers |
| International trade and partnerships | Many organizations require their business partners to certify compliance with their own AML and ABC standards |
| Facilitating cross-border operations | Compliance to the highest certifications ensures for smooth operations across multiple jurisdictions without major operational changes or the threat of restriction |
| Protecting employees | Compliance protects employees from personal liability, especially in cases where the company’s controls were deliberately weak or circumvented |
What are the key compliance requirements for organizations?
Compliance with anti-fraud laws for US companies is not a single rule, but a complex framework of requirements enforced by multiple agencies. The SEC, Department of Justice and Financial Crimes Enforcement Network (FinCEN) all mandate certain requirements.
Examples of the key compliance requirements include:
- Developing a written AML compliance program: approved by senior management, and reasonably designed to prevent money laundering and terrorist financing. Including designating a compliance officer, ongoing employee training and independent testing periods.
- Customer Due Diligence: including KYC or beneficial ownership details to develop an accurate risk profile, and provide more scrutiny for high-risk customers
- Strict anti-bribery provisions: the prohibition of corrupt offers, along with strict policies that prevent indirect payments and promote transparency
- Accurate books and records: financial statements must be certified personally by the CEO and CFO for accuracy and completeness, and management must provide internal control reports that assess the effectiveness of the control structure
- Whistleblower protections: SOX law, in particular, provides legal protections for employees who report corporate fraud, making the existence of a confidential reporting mechanism a key compliance requirement
What are the consequences of non-compliance with anti-fraud regulations?
The consequences of non-compliance are severe, and not only because of the legal violation, but also the potential for direct consequences to the fraud itself.
Fines
Fines can reach millions per day for ongoing compliance program deficiencies. In February 2025, crypto firm OKX faced fines of over $500 million for crucial AML failings.
The regulators found that OKX had inadequate KYC and transaction monitoring frameworks, which enabled the processing of over $5 billion in suspicious transactions. And despite officially banning US users, internal documents revealed that OKX staff instructed American customers to falsify their identification documents. This was intentionally circumventing the restrictions and effectively aiding money laundering operations.
Reputational damage
Public settlements, criminal indictments and a guilty plea can severely harm public trust. Not only do end users halt their subscriptions, but third parties and partners may also walk away. This can cause prolonged and ongoing financial damage, causing investors and shareholders to also withdraw their support.
Smartmatic, a multinational technology company, was indicted in the US for an alleged bribery and money laundering scheme targeting a foreign government official. The core function of Smartmatic is to provide trustworthy voting systems, and given the sensitive nature of the product, this news immediately eroded public trust. For other governments seeking election vendors, the political risk is just too great.
Operational disruptions
Beyond the direct financial and legal hits, non-compliance results in severe collateral damage that can impair a business’s ability to operate. Investigations can disrupt day-to-day activities and draw critical resources away from planned procedures, proving to further the associated costs of the fraud.
In a sad example, a 158-year old transport company KNP Transport was forced to close just weeks after a major cyber attack. It was traced back to a single instance of compliance failure; an employee had used a weak, and easily guessed password for a key system. The attackers didn’t require a sophisticated attack, they just guessed their way in.
The entire fleet of vehicles were immediately inoperable, with logistics data inaccessible and all customer data locked. It proves that in the most severe cases, non-compliance to anti-fraud laws can result in the total and immediate shutdown of businesses.
How does technology help ensure compliance with anti-fraud laws?
Technology has been able to transform the fight against fraud from a manual, rules-based and reactive approach to an automated, intelligent risk management process. By leveraging sophisticated tools, including AI, businesses can manage the overwhelming volume of data, work in real-time and stay compliant with all of their relevant regulations.
AML transaction monitoring
Machine learning models can learn ‘normal’ customer behavior and then detect subtle deviations in real-time. Flagging this generally cuts down on false positives, but more importantly, enables the human analysts to focus their attention on the genuine, high-risk cases. From a compliance perspective, it’s far more likely to result in a positive outcome, even if a fraudster has been able to infiltrate the systems.
Financial document matching
Optical character recognition is a type of technology that ‘reads’ and matches the words on two or more separate documents. It can be useful for invoice verification before making payments and finding specific details within expense reports, for example.
Even better, AI can be applied to look for patterns that suggest disguised bribes from contextual clues, even where overt language isn’t used.
These technologies are helpful for compliance because they automate the internal controls required by the regulators, making books and records harder to manipulate.
Automated account validation
Automated account validation tools are critical tools in anti-fraud compliance, as they help to maintain the integrity of financial transfers.
Real-time account ownership checks instantly confirm the name, address, bank and wider details match those in customer or vendor databases, for example. This prevents fraudsters from changing a vendor’s details to their own.
Trustpair’s platform achieves this and instantly verifies if an account is open and active, providing signals about payment history. This moves beyond static ID verification and is far more secure than traditional and slow micro-deposit checks.
Explore more about automated account validation to verify vendor legitimacy.
Anti-fraud laws and business compliance
Anti-fraud regulations are essential frameworks introduced to stop criminals from financing illegal activities and corrupting businesses. Non-compliance leads to devastating consequences, so organizations must implement comprehensive compliance programs. Apply technology like account validation to proactively detect and prevent financial crime.
