Fraud cost the global economy $485.6 billion (R8.7 trillion) in 2023 – putting it on par with the GDP of a mid-sized country.
Based on data from the Nasdaq Verafin 2024 Global Financial Crime Report, this would rank fraud, if it were a country, between 30th and 35th in the world – just below Austria and ahead of Nigeria.
The report, compiled by Celent Research and Oliver Wyman, estimates that more than $3 trillion (R54 trillion) in illicit funds moved through the global financial system last year. In addition to the funds lost to fraud, this includes $782.9bn from drug trafficking, $346.7bn from human trafficking, and $11.5bn from terrorist financing.
However, researchers caution that these figures likely understate the scale of financial crime. “The true scale cannot be accurately measured in numbers, given how much crime goes unreported by victims and undetected in the current financial system,” the report stated.
The findings are based on a proprietary model built from public and private data sources, industry trends, and input from more than 200 anti-financial crime professionals. Interviews with senior executives also informed the analysis.
When asked to identify the greatest financial crime threats, 52% of respondents pointed to fraud involving real-time and faster payments. This was followed by money mule activity (47%), terrorist financing (33%), drug trafficking (33%), and government benefit fraud (32%).
The report highlighted the inherent risks in instant payments, noting, “As customer expectations for fast, frictionless transactions increase, so does the risk for fraud.” These faster payment systems allow criminals to move money swiftly through scams or mule accounts, often avoiding detection.
Money mules play a central role in many of these schemes. “Their activities obfuscate criminals’ identities and their sources of funds, facilitate the deposit and flow of illicit proceeds around the world, and aid in funding heinous crimes such as terrorist financing – all while evading AML/CFT controls and regulatory scrutiny,” the report warned.
Terrorist financing, the report added, remains a critical enabler for extremist networks. “By abusing the financial system, terrorists can obfuscate the flow of funds that support their nefarious activities.”
Drug trafficking was also identified as a major driver of illicit finance, with $782.9bn generated globally in 2023. Criminal organisations often launder these proceeds using professional intermediaries, shell companies, trade-based methods, and money mules.
EMEA hit hard by payment scams
According to the report, the $485.6bn lost to impersonation, cyber-enabled fraud, and banking scams in 2023 came from a range of schemes, including payment, credit card, and cheque fraud, as well as advance fee, employment, and confidence scams.
The Europe, Middle East and Africa (EMEA) region, which includes South Africa, accounted for $113.1bn of the global total. Payment fraud alone made up $94bn. Other significant losses were $8.2bn from advance fee scams and $3.1bn each from credit card and cyber-enabled fraud. Smaller but still notable amounts were lost to employment scams ($1.7bn), impersonation scams ($1.4bn), confidence scams ($1.2bn), and cheque fraud ($0.5bn).
Advance fee scams were found to be the most financially damaging type of fraud affecting both consumers and businesses globally. EMEA alone accounted for more than 40% of all losses tied to this scheme. As defined by the Financial Intelligence Centre, these scams promise victims a large reward in exchange for a small upfront payment.
The report also spotlighted business email compromise (BEC), a growing form of authorised push payment fraud. In these cases, criminals impersonate trusted individuals or entities to deceive victims into transferring money to fraudulent accounts. BEC resulted in about $6.7bn in losses in 2023 – more than 15% of all consumer fraud losses.
“By dutifully monitoring for red-flag indicators of these scams and deploying effective payments fraud analytics that use consortium data to consider payor and payee risk, financial institutions can interdict to prevent major losses before payments are sent,” the report stated.
Romance scams, which are often linked to confidence fraud, cost victims $3.8bn globally. Victims are manipulated into transferring funds and, in some cases, are unknowingly recruited as money mules. The report observed that many victims find it difficult to accept they have been deceived, complicating intervention efforts by financial institutions and family members.
Financial institutions are described as the “frontline defence” against such fraud. Early detection, customer engagement, and transaction monitoring are key.
“Utilising innovative anti-financial crime solutions that profile both the sending and receiving accounts of funds transfers can also allow financial institutions to ensure transaction activity is typical for both parties,” the report noted.
Elder fraud accounted for $77.7bn in losses in 2023. The report cited data indicating that only one in 24 cases is actually reported. It urged financial institutions to closely monitor for suspicious or irregular account activity. “Effective anti-financial crime solutions can also determine when a customer’s activity is uncharacteristic and indicative of potential elder abuse,” it said.
Human trafficking – including forced labour and sex trafficking – generated $346.7bn globally. Nineteen percent of survey respondents identified it as a top concern. Experts interviewed for the report emphasised the essential role of banks in detecting and disrupting these networks.
“Banks that leverage modern technology, including AI, to parse through millions of financial transactions to track specific behavioural patterns and practices that are common among human traffickers, known as typologies, are advancing their ability to expose the criminals,” the report concluded.
IAFCI boosts South Africa’s fight against financial fraud
South Africa lost more than R3bn to financial crime in 2023, echoing global patterns highlighted in the Nasdaq Verafin report. According to the South African Banking Risk Information Centre, the majority of local losses stemmed from digital fraud, card fraud, and financially motivated contact crimes – what some experts are calling a financial crime epidemic.
Respondents in the Nasdaq report emphasised the need for greater collaboration between the public and private sectors. In this effort, the International Association of Financial Crimes Investigators (IAFCI) is stepping up its role in local and cross-border initiatives.
Christo Snyman, the president of the IAFCI’s Western Cape chapter and a forensic auditor, said the organisation was founded to address the growing complexity of financial crime. Its mission, he said, is “to create an environment where information about financial crime, investigative techniques, and fraud prevention can be accessible for the common good of the global financial industry”.
Snyman noted that the IAFCI has become a vital resource for training and international cooperation. “Financial crime is no longer found in isolated incidents,” he said. “It’s systemic, cross-border, and most of the time, enhanced by technology.”
He added that the cost of financial crime extends beyond monetary loss, undermining public trust in institutions. “The IAFCI plays a crucial role in restoring that trust, particularly as many companies face increasing digital threats with limited resources.”
With fraud increasingly tied to digital payment systems and online gambling platforms, the IAFCI Western Cape is calling for stronger enforcement of the Financial Intelligence Centre Act, stricter due diligence practices, and enhanced collaboration between banks and law enforcement agencies.
