8 Types of Financial Fraud to Look Out for in 2025

In 2024, consumers reported losing over $12.5 billion to fraud—a staggering 25% increase from the previous year. Investment scams accounted for the largest share of losses, followed by imposter scams, according to the Federal Trade Commission (FTC) preliminary data and projections.

But fraud isn’t just about financial loss. It takes many forms, from identity theft to payment fraud, various scams, and synthetic identities. Each type has unique risks, making it crucial to understand how fraud works and how to prevent it.

In this article, we’ll explore the most common fraud types, how they impact individuals and businesses, and what can be done to stay ahead of fraudsters.

Common types of financial fraud

As fraudsters continue to evolve their schemes, there is no universal number of financial fraud types, but they can generally be categorized into several major types. Additionally, many of these fraud types are interconnected or overlapping in some instances.

1. Identity theft

Identity theft happens when someone unlawfully acquires and misuses another person’s sensitive details—Social Security numbers, bank account credentials, or credit card data—for fraudulent purposes. Common methods of identity theft include:

• Phishing. Fraudsters send deceptive emails, text messages, or social media messages that look like they’re from legitimate sources, tricking people into providing sensitive information.
• Data breaches. Hackers infiltrate company databases and expose personal data that is later sold on the dark web or used for fraud.
• Skimming. This includes devices secretly installed on ATMs or payment terminals that capture card details when you make legitimate transactions.
• Mail theft. Criminals steal physical mail, such as bank statements and pre-approved credit card offers, to gather personal information.
• Social engineering. Scammers manipulate individuals into giving out confidential details by pretending to be a trusted entity, such as a bank representative or government official.

Suggested read: 3 Ways to Prevent Identity Theft in 2024

2. Payment fraud

Payment fraud is one of the most widespread forms of financial crime, affecting people and companies worldwide daily. Fraudsters manipulate payment systems to steal money, deceive merchants, or exploit banking loopholes—often with devastating consequences.

There are multiple types of payment fraud, including credit card fraud, chargeback fraud, invoice fraud, and many others. A notable example was a fraudster who tricked Google and Facebook out of more than $100 million by impersonating a legitimate Taiwanese electronics manufacturer.

Even traditional payment methods are not immune. Check fraud remains a problem, with criminals changing payee names or amounts on stolen checks. For example, it can be a fraud ring running a counterfeit check scheme that siphons millions from unsuspecting victims. The United States Postal Inspection Service recovers more than $1 billion in fraudulent checks and money orders each year, showing just how often these schemes happen.

3. ACH fraud

Automated Clearing House (ACH) payments deal with direct deposits, bill payments, and business-to-business transactions. However, fraudsters have found ways to use these electronic transfers for unauthorized withdrawals, payroll fraud, and business email compromise (BEC) scams.

A recent case involved a Nigerian national, Babatunde Francis Ayeni, who was sentenced in November 2024 for a cyber fraud conspiracy that victimized over 400 individuals and resulted in nearly $20 million in losses. Ayeni and his co-conspirators used phishing emails containing malicious links to compromise the email accounts of real estate businesses. They monitored these accounts to identify pending transactions and then sent fraudulent emails to purchasers, redirecting funds to accounts they controlled.

Here’s a step-by-step look at how ACH fraud works:

1. Infiltration – Fraudsters access a company’s financial systems or banking credentials through phishing attacks, malware, or social engineering. In some cases, they compromise an email account to impersonate a legitimate executive or vendor.

2. Manipulation – Once inside, they alter banking details on invoices, payroll systems, or vendor payment records. They also may change routing numbers or create fraudulent transactions that seem legitimate to bank systems.

3. Execution – The fraudulent ACH transaction is processed, appearing as an authorized payment. Because ACH transfers clear quickly, victims may not notice the fraud until it’s too late.

4. Extraction – The stolen funds are immediately withdrawn or transferred across multiple accounts, making recovery difficult. Criminals frequently use money mule networks to move the money further, which complicates law enforcement efforts.

4. Account takeover (ATO) fraud

Account Takeover (ATO) fraud occurs when someone unauthorized gains control over your online account, for example banking account, email, or social media. Attackers typically get login credentials through brute force attacks, credential stuffing, phishing, malware, or purchasing stolen data from the dark web. Once access is obtained, they can make unauthorized transactions, change account details, or exploit the account for further fraudulent activities.

Top signs of ATO include:

• Unusual login activity. Logins from unfamiliar locations, devices, or at strange hours may indicate unauthorized access.
• Multiple failed login attempts. A surge in unsuccessful login attempts can mean that someone is attempting to breach your account.
• Unexpected account changes. Alterations to account information, such as email addresses, phone numbers, or passwords, without the account holder’s initiation are red flags.
• Unrecognized transactions. Unauthorized purchases or fund transfers signal that an account is compromised.
• New devices or locations. Access from devices or IP addresses not previously associated with your account can suggest ATO.
• Notifications of security changes. Receiving alerts about password resets or security setting changes that you didn’t initiate may mean that someone is trying to control your account.

5. Credit card fraud

Credit card fraud continues to be an ever-present concern, with millions affected annually. In 2024, US consumers reported millions in credit card fraud, with losses reaching approximately $58 million in the third quarter alone, according to industry estimates. There are a few prominent methods of credit card fraud:

• Skimming. Fraudsters install devices on ATMs, point-of-sale terminals, or fuel pumps to capture card data and record PINs. They then use stolen information to create counterfeit cards or make unauthorized transactions.
• Phishing. Attackers send deceptive emails or messages, presenting themselves as legitimate institutions, to trick people into revealing sensitive information such as credit card numbers and passwords.
• Card-Not-Present (CNP) fraud. Criminals use stolen card details to make online or over-the-phone purchases without the physical card.
• Account takeover. Fraudsters gain access to a victim’s credit card account, often through phishing or malware, and make unauthorized transactions or change account details.
• Synthetic identity fraud. Criminals create fake identities by combining real and fake personal information to open new credit card accounts. This is one of the fastest-growing financial crime types.

6. Investment fraud

Investment frauds can include many of the previously mentioned methods, and it’s often so meticulously done that it’s difficult to spot the fraud at all. In 2024, the Federal Trade Commission (FTC) reported that consumers lost over $5.7 billion to investment scams, an increase of approximately $1 billion from the previous year.

These scams often involve very tempting offers that promise high returns with little to no risk. Perpetrators use sophisticated tactics, including using AI to create convincing promotional materials and deepfake technologies to seem like trusted figures. State securities regulators predict a rise in the misuse of AI for fraud in 2025.

To effectively avoid falling for investment scams, one should be cautious of unsolicited offers, conduct thorough research, and consult with licensed financial professionals before making investment decisions.

7. Transaction fraud

Transaction fraud, including unauthorized activities during payment processes, has increased greatly along with the global shift towards digital transactions. This form of fraud includes illicit use of payment methods, manipulating transaction data, and exploiting payment systems to divert funds.

A significant contributor to transaction fraud is the rise of payment redirection scams, which surged by 66.6% in 2024. These scams often involve fraudsters passing themselves as legitimate entities to mislead organizations into rerouting payments to fraudulent accounts.

Suggested read: What is Authorized Push Payment (APP) Fraud?—Complete Guide (2024)

8. Money mule fraud

Money mule fraud involves individuals who, usually unknowingly, transfer illegally acquired funds on behalf of criminals, assisting with money laundering and other illicit activities. Unwitting people participate in unlawful operations to conceal the origins of criminal proceeds.

Criminals often recruit money mules through deceptive job advertisements, social media, or direct communication, promising easy money for minimal effort. Money mules usually end up believing they are participating in legitimate employment. However, doing this has severe legal consequences, including imprisonment and fines.

While this type of fraud is a challenge for financial institutions, there are many initiatives and increased efforts in fighting this crime. Banks are investing heavily in detection systems like machine learning models and behavioral biometrics to identify and shut down mule accounts.

Suggested read: What Is Smurfing?—The Full Guide (2025)

How to detect financial fraud

Staying vigilant is key to identifying fraudulent activities before they cause you serious financial harm. Here is a table outlining key things to do and not do to help you detect financial fraud:

Do’s	Don’ts
Monitor your financial accounts regularly – Check your bank and credit card statements frequently to spot unauthorized transactions.	Ignore small, suspicious transactions – Fraudsters often test accounts with minor charges before making larger withdrawals.
Enable multi-factor authentication (MFA) – Use MFA for online banking and financial services to add an extra layer of security.	Reuse passwords across accounts – Using the same password for multiple services greatly increases the risk of your credentials being stolen.
Verify unexpected requests – If you receive a sudden payment request from a company or person, verify it through official channels before proceeding.	Trust unsolicited emails or messages – Scammers often pose as banks, government agencies, or trusted companies to trick you into revealing sensitive information.
Be cautious of urgency in financial communications – Scammers pressure victims to act quickly to bypass rational decision-making. Is that really your grandma asking for $10,000?	Click on unknown links in emails or texts – Phishing attempts often use fraudulent links to steal credentials or install malware.
Educate yourself on common fraud tactics – Stay informed about the latest fraud schemes and learn how fraudsters operate.	Delay reporting fraud – Waiting too long can make recovery more difficult and may put additional funds at risk.
Report suspicious activity immediately – Contact your bank or financial institution if you notice unusual transactions.	Assume fraud only happens to others – Fraud can target anyone, regardless of financial status or technical knowledge. It could happen to you, too!

Financial fraud prevention strategies

Financial fraud prevention is a global priority, with governments and regulatory bodies imposing strict measures to fight illicit financial activities. Companies and individuals must adhere to strict laws, such as Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, to prevent fraud risks.

Businesses globally are required to use AML/KYC practices to fight fraud and stay compliant with regulations. Additionally, solutions like transaction monitoring are mandated in a lot of places, in order to stay ahead of fraud by detecting and preventing suspicious transactions while staying compliant at the same time.

Additionally, AI-powered tools are revolutionizing fraud prevention. Machine learning models can analyze transaction patterns in real-time, flagging suspicious activity with 95% accuracy, according to a 2024 study by Deloitte.

Key Regulations in Fraud Prevention

• AML (Anti-Money Laundering) laws. These regulations require financial institutions to monitor transactions, report suspicious activities, and conduct thorough due diligence on customers. It’s an international web of regulations and has different regulatory bodies globally. These laws are meant to detect and stop fraudsters from cleaning money obtained through illegal means.

• KYC (Know Your Customer) requirements. KYC requirements mandate identity verification processes to make sure that businesses work with legitimate individuals and organizations.

• PSD2 (Payment Services Directive 2) in Europe. The directive introduces Strong Customer Authentication (SCA) to reduce fraud in online payments.

• General Data Protection Regulation (GDPR). GDPR protects consumers’ financial data and imposes heavy fines for non-compliance.

This is a non-exhaustive list of regulations.

Legal consequences of financial fraud

Regulatory agencies such as the Financial Action Task Force (FATF), the US Financial Crimes Enforcement Network (FinCEN), and the European Banking Authority (EBA) set frameworks for detecting and preventing fraudulent activities, as well as penalties for not complying with regulations. Some of the consequences include:

• In the US, financial fraud cases can lead to multi-million-dollar fines and prison sentences under laws such as the Bank Secrecy Act (BSA) and the USA PATRIOT Act.
• In the European Union, regulations like the Sixth Anti-Money Laundering Directive (6AMLD) introduce criminal liability for legal entities and stricter penalties, including up to ten years of imprisonment for severe financial fraud cases.
• The United Kingdom’s Economic Crime and Corporate Transparency Act (2023) grants law enforcement greater authority to seize illicit funds and hold financial institutions accountable for weak fraud controls.
• Singapore and Hong Kong, both major financial hubs, enforce strict AML and counter-fraud laws, with penalties exceeding S$1 million ($740,000) for companies that fail to prevent fraud-related financial crimes.

• What qualifies as financial fraud?

  Financial fraud involves getting unauthorized financial benefits like identity theft, payment fraud, investment scams, and other ways of illegally acquiring funds.

• How do you identify financial fraud?

  You can identify financial fraud through suspicious transaction patterns, unauthorized account access, inconsistencies in financial records, and unexpected changes in account details or payment recipients.

• What is a real-life example of financial fraud?

  A well-known case is the Wirecard scandal, where a German fintech company falsely reported $2 billion in assets, misleading investors and regulators before its collapse in 2020.

• How can businesses prevent financial fraud?

  Businesses can prevent financial fraud by implementing strong AML and KYC procedures, using AI-driven fraud detection systems and multi-factor authentication, and regularly auditing financial transactions.