Table of Contents
- Why disconnected teams lead to missed threats and higher costs
- The myth #5: AML and fraud are distinct functions
- The reality: fraud and money laundering are deeply intertwined
- When teams operate in silos, critical risk signals are missed
- How leading organizations break down silos
- What compliance and fraud leaders can do now
Why disconnected teams lead to missed threats and higher costs
It’s a familiar setup in many insurers: the AML team sits in compliance, and the fraud team sits in claims, underwriting, or operations. Each runs its own systems, follows different workflows, and reports to separate chains of command.
They may collaborate on the occasional case, but for the most part, they operate independently.
After all, AML is about money laundering and fraud is about internal or customer deception. Well, not anymore.
In this round of the “Compliance myth-buster series: Insurance edition”, we tackle the false comfort of siloed operations and explain why separating AML and fraud is costing insurers in more ways than one.
The myth #5: AML and fraud are distinct functions
Traditionally, AML and fraud have been treated as separate domains. AML focuses on regulatory compliance, transaction monitoring, and suspicious activity reporting. Fraud teams zero in on claims abuse, impersonation, or internal misconduct.
Each has different objectives, tools, and mandates. And in large, federated organizations, that separation is further reinforced by geography, business line, or tech stack.
But this division is more based on organizational legacy than operational logic.
The reality: fraud and money laundering are deeply intertwined
Financial crime doesn’t care how you structure your org chart. In fact, criminals actively exploit the gaps between teams.
Many money laundering schemes start as fraud:
- A staged motor accident or fake property claim
- A forged identity used to buy and quickly cancel a policy
- Premium overpayments that appear as customer error
- Exaggerated commercial claims routed through shell entities
These don’t just defraud the insurer; they also serve as placement and layering mechanisms to clean illicit funds.
Without shared intelligence and coordinated investigation, each team sees only part of the picture and the full crime goes undetected.
When teams operate in silos, critical risk signals are missed
Here’s how disconnected operations create risk:
- Duplicate investigations that waste time and resources
- Missed network links across customer, entity, or claim data
- Inconsistent thresholds and policies for red flags
- Gaps in regulatory reporting when fraud isn’t escalated as potential laundering
- Delayed detection of cross-product, multi-channel typologies
When AML and fraud don’t talk to each other, the criminal wins.
How leading organizations break down silos
Leading insurers are now shifting toward unified financial crime intelligence connecting data, insights, and expertise across AML, fraud, and sanctions teams.
Here’s what that looks like in practice:
- Shared data models and entity resolution across risk domains
- Intelligence sharing that helps high-risk claims inform AML escalation
- Aligned typology libraries that evolve with input from both teams
- Governance frameworks that unify risk appetite and regulatory standards
This isn’t about adopting a single tool. It’s about aligning teams, data, and objectives to see the full picture of financial crime risk.
What compliance and fraud leaders can do now
- Map overlapping fraud and AML typologies to understand shared exposure
- Create shared escalation protocols for alerts that show dual indicators
- Strengthen collaboration through unified reporting and review cycles
- Use AI and analytics to identify hidden links across datasets
- Host regular cross-team reviews to align priorities and outcomes
Insurers can no longer afford to treat AML and fraud as disconnected functions. Bringing them together through shared intelligence and coordinated oversight unlocks a more comprehensive view of risk, reduces duplication, and strengthens defenses against financial crime.
Coming up next in the “Compliance myth-buster series: Insurance edition”
➡️ “Compliance slows business growth” – why smarter compliance actually accelerates onboarding and improves customer experience.
Related resources:
Compliance myth-busters: Insurance edition: The myth #1: AML insurance—still low risk?
Compliance myth-busters: Insurance edition: The myth #3: Rules are enough for AML
Compliance myth-busters: Insurance edition. The myth #4: If it’s not regulated, it’s not a risk.
Redefining Risk: The Insurance Industry’s New Reality
Webinar: The domino effect: How breaking down silos amplifies financial crime prevention
Webinar: Regulators, risk & reinsurers: AML’s New Frontier
Want to see how smart insurers are managing unregulated risk?
Download our white paper “Elevating compliance in insurance: A risk-driven, AI-powered approach to AML and sanctions screening” and discover how organizations are strengthening compliance across all product lines.
FAQs
Historically, AML focused on regulatory compliance and suspicious activity reporting, while fraud teams concentrated on claims abuse and policy manipulation. Different mandates, reporting lines, and technology stacks reinforced the separation, even though the underlying risks increasingly overlap.
Many laundering schemes begin as fraud. Staged accidents, exaggerated claims, fake identities, and policy cancellations can all serve as mechanisms to move or disguise illicit funds. Without shared intelligence, each team sees only part of the pattern, allowing threats to slip through.
Siloed operations lead to duplicated investigations, missed network links across policies or entities, inconsistent thresholds, and gaps in regulatory reporting when fraud-related activity is not escalated as potential money laundering. This delays detection and increases overall financial crime exposure.
Rather than merging tools, leading insurers focus on aligning data, intelligence, and governance across teams. This includes shared typology insights, coordinated escalation pathways, unified risk understanding, and more frequent cross-team analysis to identify patterns that single domains can’t see alone.
Insurers can map overlapping typologies, create joint escalation protocols, establish shared reviews, leverage AI analytics to surface cross-domain patterns, and educate leadership on the value of integrated financial crime intelligence. These steps build a more complete and defensible view of risk.
