European firms tighten fraud controls as scams grow complex

Companies across Europe are strengthening fraud controls after criminals adopted more sophisticated, multi-step schemes that combine synthetic identities, account takeovers and cross-border money mule networks.

Banks, payment processors and large online retailers reported a shift from simple card theft to layered attacks that use automated account creation, social engineering and rapid transfers across jurisdictions. Executives say the change accelerated during the pandemic, when more customers moved to online-only channels and gave fraudsters a larger surface for automated and targeted attacks.

Since early 2020, firms increased investment in machine-learning models that analyze device signals, transaction timing and customer behaviour to flag anomalies. Many have added stronger identity checks at account opening, including biometric verification and third-party identity services, and tightened account-takeover defences such as step-up authentication for unusual activity. Payment providers report wider use of device fingerprinting, one-time passcodes linked to new devices and limits on same-day high-value transfers.

Regulatory requirements are influencing the changes. Strong customer authentication under EU payment rules has driven banks and online merchants to adopt multi-factor controls for card payments. Anti-money-laundering directives and guidance from regulators across Europe have prompted expanded customer due diligence, more screening for politically exposed persons and sanctions, and clearer procedures for documenting and reporting suspicious activity. Several large banks have announced increased compliance staffing and enhanced internal controls.

Operational practices have changed as well. Firms have set up specialised teams to investigate complex fraud cases, expanded 24/7 monitoring of transaction streams and partnered with fintechs that provide real-time analytics. Participation in industry information-sharing groups has increased; these networks swap intelligence on mule accounts, fraudster phone numbers and emerging attack patterns. In some countries police and prosecutors with units focused on cyber-enabled financial crime have pursued more cross-border investigations.

Retailers and marketplaces that handle many third-party sellers have tightened onboarding and verification. Some platforms now delay initial payouts for new sellers, add automated checks for changes to banking details and require stricter invoice verification to reduce business email compromise and invoice fraud. Card networks and acquirers report closer scrutiny of merchants whose transaction profiles change suddenly.

Operational costs have risen as firms add headcount, technology and external consultants. Payment firms reported higher false-positive rates when new rules and models were first implemented, which increased manual review workloads. Firms are adjusting detection systems to reduce friction for legitimate customers while aiming to catch more complex scams.

A compliance head at a major European bank described the industry shift as a move from isolated card theft toward detecting chains of activity across accounts and channels. A payments executive characterised current efforts as a balance between ‘stronger checks and avoiding undue friction for customers’ and said companies are investing to improve both accuracy and speed of detection.

Background: Fraud in financial services has evolved with technology and changes in customer behaviour. In recent years criminals combined identity spoofing, automated account creation and social engineering to exploit gaps in controls that were designed around single-event fraud. Regulators in the EU and the UK have issued rules and guidance aimed at reducing payment fraud and money laundering, and firms continue to adapt processes, technology and cooperation arrangements in response.