Fraud grows more complex in Europe; controls lag

Fraud schemes across Europe are growing more complex and move faster than current controls can track. Banks, payment firms and corporate compliance teams report attacks that span multiple channels and jurisdictions.

Over the last 18 to 24 months, national authorities and industry groups documented incidents using automated tools, social engineering across platforms and networks of mule accounts that cross EU and non-EU borders. Faster retail payment rails, open-banking links and more remote digital onboarding have opened new gaps in customer verification and transaction monitoring.

Firms that use legacy systems or keep risk teams in separate silos report difficulty detecting schemes that begin in one channel and finish in another. Smaller banks, payment service providers and newer fintech firms reported the largest rises in attempted fraud, in part because identity checks are often outsourced and rely on third-party data.

Sectors handling many low-value transactions, including e-commerce and digital marketplaces, reported higher rates of card testing and automated account takeovers. Fraud in wholesale payments and trade finance frequently involved falsified documents and weaknesses in supplier onboarding.

Companies using multiple vendors for know-your-customer checks, transaction monitoring and sanctions screening described attackers testing weaker links and moving activity across providers to avoid detection. Several payment firms reported patterns where fraudsters layered many small, legitimate-looking transactions with occasional large transfers to bypass older rule-based thresholds.

“A lot of the attacks now are stitched together across different products and jurisdictions,” a senior compliance executive at a European bank, speaking on condition of anonymity, described. The executive added that by the time a single team sees an alert, the activity has often moved to another payment type or country. A head of fraud prevention at a mid-sized payment firm described pressure to invest in data science and orchestration tools to correlate events in real time.

Regulatory frameworks such as the revised Payment Services Directive, successive EU anti-money-laundering directives and cybersecurity rules aim to strengthen defenses, but enforcement and technical alignment vary by country. Corporates cite inconsistent interpretation of rules, slow cross-border information sharing and limited access to centralized fraud data as constraints. Compliance officers also report staff shortages and high costs to upgrade systems.

An EU regulator said agencies are preparing guidance to improve cross-border information sharing, harmonize suspicious activity reporting and encourage faster public-private cooperation. The European Banking Authority has published technical standards on transaction monitoring and KYC, and member states are discussing tighter rules on digital identity verification and vendor risk management.

Proposals from industry and regulators include stronger real-time transaction screening, standardized cross-border data-sharing agreements, centralized fraud-reporting hubs, tighter oversight of third-party identity and monitoring vendors and expanded training to build in-house expertise in machine learning and anomaly detection. Changes to payment rails, open APIs and the spread of cryptocurrency channels are cited as factors that have changed where and how funds can move quickly across borders.