The Government Accountability Office’s (GAO) latest report reveals a sobering reality: Organized fraud groups have evolved into sophisticated criminal enterprises that pose unprecedented risks to both public programs and financial institutions.1 With an estimated US$300 billion in pandemic relief fraud losses, these groups demonstrate the scale and speed at which modern fraud operates. Financial institutions must review this comprehensive analysis to understand how these evolving threats will impact their fraud detection strategies and compliance programs.
The Evolving Threat Landscape
Organized fraud groups vary in size, structure, and composition; they have defrauded programs on a large scale using technology, program knowledge, and other means. These groups harm people, programs, and society in financial and nonfinancial ways that deplete program funds and cause physical and psychological harm. The GAO’s report identifies three distinct types of organized fraud groups, each presenting unique challenges for financial institutions.
- Organized criminal enterprises represent the most sophisticated threat. These groups involve established criminal syndicates that may engage in other illicit activities in addition to fraud. They are generally large and operate with corporate-like structures where individuals or cells act in specialized roles. For example, one cell may focus on procuring stolen identities, another on electronically preparing and submitting fraudulent documents, and yet another on moving, laundering, and disbursing proceeds. These groups have included large transnational criminal enterprises, such as those based in China, Italy, Mexico, Nigeria, Romania, and Russia. Nation-states such as the North Korean government also pose a significant threat.
- Groups organized around a program exploit insider knowledge and connections. Groups organized around a program involve program participants and facilitators who conspire to defraud the program to which they are connected. Program participants are individuals or groups who receive public assistance benefits, as well as others who are internal to a program, such as those who deliver the benefits, including program administrators, contractors, and grantees. These groups are particularly dangerous because they leverage legitimate business relationships and program knowledge to circumvent controls.
- Opportunistically organized groups are the most agile and adaptable. These groups consist of clusters of individuals who come together when opportunities for fraud arise. Opportunistically organized groups are generally smaller in size and simpler in structure than other types of organized fraud groups. Fraudsters in these groups are external to the program and are recruited from established communities, including online communities. While smaller in scale, their ability to rapidly form and dissolve makes them particularly challenging to detect and prevent.
Critical Impact on Financial Institutions
For fraud executives at financial institutions, this represents a fundamental shift in risk management. According to our analysis of Department of Justice public statements and court documentation from March 2020 through December 2024, 46 percent of the 1,875 defendants convicted of pandemic fraud-related offenses with final charges recorded had conspiracy charges, suggesting involvement of an organized fraud group.
These groups leverage advanced technologies, including AI, bots, and sophisticated money laundering schemes, which directly impact banking systems. Organized groups recruit and use individuals known as money mules to move fraudulently obtained funds through money laundering and other techniques to obscure their illicit origins. The scale of their operations means that financial institutions face not just individual fraudulent transactions but coordinated attacks that can overwhelm traditional detection systems.
AML Program Implications
The report’s findings have profound implications for anti-money laundering (AML) programs. In addition to money laundering, organized groups employ layered financial transactions, use prepaid debit cards, and leverage digital assets to efficiently move funds to accounts where it is more difficult for law enforcement to trace and recover funds. Traditional AML detection methods must evolve to address these sophisticated techniques.
The report emphasizes three key indicators that AML programs must monitor: scale (large numbers of actions within short timeframes), connections (relationships between people and entities), and outliers (data points that fall outside normal patterns). According to federal and state officials, organized fraud groups can be distinguished by the following three indicators that are identifiable using data analytics: scale, connections, and outliers.
Call to Action: Critically Examine Your Current Fraud and AML Programs
Financial institutions must immediately enhance their fraud detection capabilities, strengthen cross-institutional data sharing, and invest in advanced analytics to combat these evolving threats. The time for reactive measures has passed; proactive, collaborative defense is essential. AML programs must incorporate network analytics and predictive modeling to identify the sophisticated patterns that these organized groups employ.
Becki LaPorte and other advisors in the fraud and AML practice have led enterprise-wide fraud programs at large financial institutions. They bring that level of expertise to provide actionable insights to Datos Insights clients. To learn more about how Datos Insights can help, contact Becki at [email protected].
- “Fraud Risk in Federal Programs: Continuing Threat from Organized Groups Since COVID-19,” U.S. Government Accountability Office, July 10, 2025, accessed July 11, 2025, https://www.gao.gov/products/gao-25-107508. ↩︎