Typology

Typologies are essential tools for law enforcement agencies, regulators, and financial institutions, helping them understand not just that financial crime happens, but how it happens. By analyzing typologies, organizations can anticipate emerging threats, design targeted controls, and improve detection systems.

Understanding different methods used by criminals—whether layering illicit funds through complex transactions, using shell companies to hide ownership, or exploiting emerging technologies like cryptocurrencies—enables more proactive and risk-based approaches to compliance.

A well-developed typology typically includes:

• Description of Criminal Behavior: A detailed narrative of how a financial crime is carried out, including specific steps taken by perpetrators.

• Red Flags and Indicators: Observable behaviors or transaction patterns that may suggest suspicious activity.

• Risk Factors: Specific customer profiles, geographic areas, industries, or products more susceptible to the typology.

• Case Studies: Real-world examples that illustrate the typology in action, providing practical learning points for investigators and compliance professionals.

• Money Laundering: Use of trade-based schemes, real estate transactions, or casinos to clean illicit funds.

• Terrorist Financing: Small-value transfers and use of non-profit organizations to move funds covertly.

• Fraud: Investment scams, synthetic identity fraud, and invoice manipulation.

• Cybercrime: Use of ransomware payments or crypto-jacking to monetize illicit digital activities.

• Bribery and Corruption: Complex structures involving offshore accounts and intermediaries to conceal illicit payments.

Each financial crime area continuously evolves, requiring updated typologies that reflect new tactics and vulnerabilities.

International bodies like the Financial Action Task Force (FATF), the Egmont Group, and regional regulators frequently publish typology reports. These documents provide the financial industry with vital intelligence about emerging threats and evolving criminal methodologies, helping organizations update their AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) frameworks.

Examples include:

• FATF’s typology reports on virtual assets and emerging payment methods.

• Egmont Group’s analysis of COVID-19-related financial crimes.

Financial institutions integrate typology findings into their risk management processes by:

• Updating Monitoring Systems: Tailoring transaction monitoring rules based on typology indicators.

• Enhancing KYC Procedures: Adjusting due diligence questions and ongoing monitoring based on known criminal methods.

• Training Staff: Delivering targeted training to front-line employees and investigators to recognize new and evolving threats.

By embedding typology intelligence into their compliance programs, institutions can not only detect known schemes but also identify early warning signs of novel approaches.

As criminal methodologies continue to adapt to new technologies, the future of typology analysis will likely involve:

• Real-Time Typology Updates: Using AI and machine learning to dynamically update risk models based on emerging patterns.

• Cross-Sector Collaboration: Sharing typology insights more broadly between public and private sectors to strengthen defenses collectively.

• Focus on Non-Traditional Risks: Developing typologies for crimes facilitated through the metaverse, decentralized finance (DeFi), and other digital innovations.

In simple terms, typologies are the common patterns and methods behind financial crimes. They are derived from analyzing real cases and trends to identify how criminals operate. A typology might describe, for instance, the use of shell companies and offshore accounts to launder drug trafficking proceeds, or the way a charity can be misused to collect and move terrorist funds. International organizations like the Financial Action Task Force (FATF) and the Egmont Group of Financial Intelligence Units (FIUs) have long recognized the importance of studying and documenting such methods. In fact, since its inception, the FATF has made the study of money laundering and terrorist financing methods and trends – referred to as “typologies” – a key part of its work. These agencies regularly produce typology reports describing how illicit schemes work and what red flags they exhibit. By describing the nature of emerging threats, typology reports increase global awareness and enable earlier detection of money laundering and terrorist financing.

It’s important to distinguish typologies from related concepts like red flags. Typologies are the techniques or stratagems themselves (the what and how of criminal behavior), whereas red flag indicators are the observable signs that a particular typology may be occurring (the symptoms that alert us to suspicious activity). For example, a sudden surge of small, structured cash deposits across different branches is a red flag that might indicate the structuring typology in action. The presence of a red flag or typology indicator doesn’t prove illicit activity, but it does signal that closer scrutiny is warranted. Financial institutions train staff and configure transaction monitoring systems to recognize such red flags so that potential illicit behavior can be flagged for investigation.

Financial crime typologies do not emerge in a vacuum – they are developed through collective analysis and intelligence sharing. Typically, FIUs, law enforcement agencies, regulators, and international bodies analyze data from investigations and suspicious transaction reports to identify new patterns. This can involve reviewing large sets of transaction records, probing case studies of confirmed crimes, and even applying advanced data analytics to find anomalies. Modern analytical tools (including big-data mining and machine learning algorithms) are increasingly employed to detect hidden patterns that might form the basis of new typologies. Notably, the U.S. Anti-Money Laundering Act of 2020 now requires FinCEN (the U.S. FIU) to regularly publish information on emerging threat patterns, including typologies with data adaptable for algorithmic detection. In other words, when FinCEN shares typologies, it often provides technical details that financial institutions can plug into their monitoring software as detection rules or models. This reflects a broader trend: regulators expect that insights from typologies will be translated into tangible detection logic within banks’ compliance systems.

International cooperation is crucial in developing typologies, because financial crime is a transnational problem. Organizations like the FATF coordinate annual typologies exercises and expert working groups to pool knowledge from around the world. The FATF’s ongoing research into methods and trends helps countries understand their risks and adapt controls accordingly. Likewise, the Egmont Group – a global network of FIUs – serves as a platform for members to exchange case examples and identify new typologies across jurisdictions. For instance, the Egmont Group’s Training Working Group compiled a collection of sanitised international case studies illustrating money laundering techniques, grouping them into categories like misuse of business structures, use of false identities, exploitation of jurisdictional differences, and so on. Sharing these cases globally allows all stakeholders to recognize similar patterns in their own locale.

Regional bodies also play a role. In the Asia-Pacific, the Asia/Pacific Group on Money Laundering (APG) produces an in-depth Yearly Typologies Report with input from its member countries. Each year, APG members contribute information on money laundering and terrorist financing cases, trends, and enforcement actions, which is synthesized into reports containing illustrative case studies and analyses of emerging methods. The goal is to help governments and institutions “better understand the nature of existing and emerging threats and pursue effective strategies to address those threats,” thereby aiding investigations, prosecutions, and the design of preventive measures. Similar efforts exist in Europe and the Americas via organizations or collaborations (such as the Caribbean FATF, MONEYVAL in Europe, etc.), ensuring that typological knowledge spreads globally. National FIUs and regulators also publish typology or trend reports specific to their jurisdictions (for example, the UAE FIU has released compilations of local typologies, and countries like Jersey have issued typology booklets to assist their financial industries).

Crucially, public-private partnerships have emerged as a means to develop and share typologies in real time. In the United Kingdom, for example, the Joint Money Laundering Intelligence Taskforce (JMLIT) brings together banks, law enforcement, and regulators to share information on active threats and typologies. In Singapore, the regulator (MAS) actively engages banks about evolving criminal typologies and even spearheaded a platform called COSMIC(Collaborative Sharing of ML/TF Information & Cases) to enable secure sharing of customer red-flag information among major banks. These initiatives recognize that frontline financial institutions often see the first signs of new schemes, while law enforcement has broader insight across cases – by sharing typological information in a timely way, both sides can respond faster to new threats.

Financial crime typologies span a broad range of illicit activities. Below, we highlight how typologies manifest in several key areas – money laundering, fraud, terrorist financing, and sanctions evasion – noting some common patterns and examples of each.

Money Laundering Typologies

Money laundering (ML) involves making illegally obtained money appear legitimate, and over the years criminals have developed myriad methods to do so. Typologies in this area often describe how offenders obscure the origins of dirty money through a series of transactions or transformations. Many classic ML typologies follow the well-known stages of placement, layering, and integration. For example, structuring deposits into numerous small amounts (to evade reporting thresholds) is a foundational typology in the placement stage. Another prevalent typology is the use of shell companies and front businesses – criminals route funds through corporate entities that have no real operations (often in secrecy havens) to create layers of distance between the money and its criminal source. International trade is also commonly abused: trade-based money laundering (TBML) typologies show how criminals falsify invoices or misstate the value or quantity of goods in cross-border trade to move value covertly. One FATF/APG study on TBML highlighted methods like over- or under-invoicing, multiple invoicing of goods, and falsely described goods as techniques to launder funds under the cover of legitimate trade, and it identified red flags to detect such schemes. Other typologies involve cash-intensive businesses (where illicit cash is mingled with genuine revenue), real estate purchases (converting cash into property, sometimes using third parties), and wire transfer networks that rapidly disperse funds across many accounts.

Authorities continuously research and publish reports on new and evolving ML typologies. Recent FATF reports, for instance, have focused on modern challenges such as money laundering through digital assets and cryptocurrencies, laundering proceeds of cybercrimes like ransomware, and even laundering linked to specific illicit markets (e.g. the fentanyl and synthetic opioid trade). By understanding these methods, banks and regulators worldwide adjust their monitoring. For example, if a typology reveals that criminals are increasingly using virtual currency exchanges to obfuscate money flows, institutions dealing in crypto can be alerted to implement stricter checks and monitoring for patterns unique to that medium (such as rapid layering across many blockchain wallets or use of mixing services – behaviors which FATF has flagged as red flags in virtual asset transactions).

Fraud and Scam Typologies

Fraud is a broad category of financial crime that encompasses everything from investment scams and cyber-fraud to embezzlement and identity theft. Typologies of fraud describe how scammers and fraudsters execute their schemes and move the illicit proceeds. In recent years, many fraud typologies have become cyber-enabled, taking advantage of online platforms and digital communication. A prominent example is business email compromise (BEC), a typology wherein fraudsters impersonate a company executive or supplier via email to trick employees into sending funds to the fraudster’s account. Another growing typology is the so-called “romance scam” or confidence fraud, where criminals cultivate online relationships to defraud victims of money; these often involve patterns of frequent small transfers to new beneficiaries (the “mules” or accounts controlled by the scammer). Elder financial abuse and identity theft rings are additional typologies that banks are trained to recognize – for instance, sudden changes in an elderly customer’s transaction patterns or a caretaker making atypical withdrawals can be red flags for an exploitation typology.

Regulators and FIUs actively share fraud typologies and red flags because the landscape shifts quickly with technology and current events. FinCEN has noted that fraud-related schemes are among the most commonly reported suspicious activities in the U.S., often tied to identity misuse. In an analysis of identity-related suspicious activity reports, FinCEN identified over 14 prevalent typologies – the top categories included fraud, use of false identification records, identity theft, third-party money laundering (money mule networks), and attempts to circumvent verification processes. These findings underscore that criminals frequently exploit weaknesses in identification and authentication to perpetrate fraud. During the COVID-19 pandemic, for example, many new fraud typologies emerged (such as scams to steal pandemic relief funds or impersonation of health authorities), prompting special advisories. FinCEN and other agencies issued alerts to financial institutions about imposter scams and money mule schemes related to COVID-19, a surge in mail theft leading to check fraud, and cryptocurrency investment scams like the notorious “pig butchering” schemes. Each alert described how the fraud works and provided red flag indicators. By learning these patterns, banks worldwide have been able to spot and report such scams more readily. In turn, the suspicious activity reports (SARs) filed by banks feed back into the system, allowing FIUs to refine existing typologies and discover new ones as fraudsters adjust their tactics.

Terrorist Financing Typologies

Terrorist financing (TF) involves the raising and moving of funds to support terrorist activities. While sometimes conflated with money laundering, terrorist financing typologies have unique characteristics because the goal is not to hide criminal proceeds per se, but to conceal the purpose and destination of funds that may originate from legal sources. Many TF typologies revolve around relatively small transfers and legitimate-seeming transactions, reflecting the often modest budgets needed for terrorist operations. One well-documented typology is the misuse of charities and non-profit organizations: terrorist groups or cells may set up fake charities or infiltrate legitimate nonprofits to collect donations, which are then diverted to finance violence. Funds may be raised under humanitarian pretenses and sent abroad in a way that mirrors normal charity work, making detection challenging. Recognizing this, regulators have issued guidance to monitor nonprofit accounts for red flags like unusually large cash withdrawals or transfers to high-risk regions not aligned with the charity’s mission.

Another typology involves self-funding through criminal enterprises. Terror operatives might engage in fraud or smuggling to generate money (for example, cigarette smuggling or bank fraud) and then launder those funds in small increments to finance their activities – creating an intersection of fraud and TF typologies. A known case is the use of petty crime or benefit fraud in some European terror cells, where proceeds were funneled into attack planning. Yet another set of typologies relates to foreign terrorist fighters: individuals who travel to conflict zones (such as Syria or Iraq in the 2010s) and need financing. They often receive a series of personal remittances from family or facilitators, or withdraw cash on credit cards abroad. Monitoring for patterns like multiple small wire transfers to individuals in certain regions, or use of funds from online crowdfunding campaigns for travel expenses, can reveal such activity. Indeed, as fundraising has moved online, FATF has identified emerging typologies like the use of crowdfunding platforms and social media to raise terror funds. A 2023 FATF report on terrorist financing via crowdfunding highlighted how online campaigns with ideological messaging can attract many small donations that are then transferred to conflict zones under the radar. Financial institutions are advised to look for red flags such as donations funnelled through multiple intermediaries or accounts associated with extremist content.

Global agencies continuously update TF typologies to account for new methods. For example, virtual assets have been misused for TF, leading to typologies on crypto-based terrorist financing (with indicators like sudden purchases of cryptocurrency by persons with no prior history, followed by transfers to mixers or exchanges in high-risk jurisdictions). The dual nature of combating terrorist financing requires both vigilance in the financial system and cooperation with intelligence and security services, since purely financial red flags may not always tell the full story. Still, understanding typologies gives financial gatekeepers a fighting chance to detect and disrupt terror money flows before they cause harm.

Sanctions Evasion Typologies

When countries impose financial sanctions (against rogue states, entities, or individuals), those targets often seek ways to evade restrictions and maintain access to funds or markets. Sanctions evasion typologies describe the schemes used to circumvent sanctions, and they have become especially salient in recent years (for example, with high-profile sanctions on countries like North Korea, Iran, or Russia). A common sanctions evasion typology is the use of front companies and third-party proxies to hide the involvement of a sanctioned person. For instance, a sanctioned oligarch might transfer assets to relatives or create a network of shell companies across multiple jurisdictions so that business continues under new names. In 2022, British authorities issued a “Red Alert” detailing how certain Russian elites and their enablers were employing such tactics to evade UK sanctions: they were rapidly transferring ownership of assets (like real estate, luxury yachts, and investments) to business associates or family members just before sanctions hit, thereby concealing the true beneficial owners while maintaining control through proxies. The Red Alert listed specific red flag indicators gleaned from case intelligence – for example, sudden changes in ownership of high-value assets to people with no clear relationship, or the involvement of known “professional enablers” (lawyers, accountants) helping to obscure asset trails. Financial institutions were urged to take these indicators into account when conducting sanctions risk assessments and due diligence, to better spot attempts to move or hide frozen assets.

Other sanctions evasion typologies involve more technical methods. Trade-based evasion is one: sanctioned countries or entities may use falsified trade documents and circuitous shipping routes to obtain prohibited goods or earn hard currency. A notable example is ship-to-ship transfers of oil at sea (to mask the oil’s origin) combined with forged bills of lading – a method seen in North Korean and Iranian sanction evasion cases. Banks have been advised to watch for shipping and trade finance red flags like inconsistencies in vessel information, last-minute changes of the shipment destination, or payments involving shell trading companies in third countries unrelated to the goods’ origin. Use of alternative payment systems is another typology: sanctioned actors might turn to cash couriers, crypto-assets, or informal value transfer systems (like hawala networks) to move funds outside the regulated banking system. For instance, during periods of intense sanctions, there have been surges in cryptocurrency activity traced to sanctioned entities – leading FATF and others to highlight crypto wallet addresses and patterns associated with sanction evasion attempts.

Government agencies globally (such as the U.S. Office of Foreign Assets Control, OFAC, and counterparts in the EU and Asia) issue advisories to alert the private sector about evolving sanctions evasion typologies. These often follow major geopolitical events. As a case in point, after Russia’s 2022 invasion of Ukraine triggered unprecedented sanctions, regulators from multiple countries (U.S., UK, EU, etc.) quickly shared information on how Russian businesses and wealthy individuals were trying to skirt the restrictions – from using complex ownership webs to exploiting countries with less rigorous enforcement – and they provided financial firms with fresh red flags to enhance screening. The clear message is that typologies are as critical in the sanctions domain as in AML/CFT: only by understanding the tricks and channels used by evaders can institutions hope to intercept illicit transactions and freeze assets in accordance with the law.

Typologies serve a dual function in fighting financial crime: they help institutions detect suspicious activity, and they guide efforts to prevent such activity from occurring in the first place. Additionally, typologies enhance the quality of regulatory reporting and inform risk management strategies. Below, we examine how typologies are applied in practice across these areas.

Detecting Suspicious Activity (Red Flags and Monitoring)

One of the most direct applications of typologies is in the detection of suspicious transactions and behaviors. Financial institutions integrate known typologies into their AML monitoring systems by using them to formulate rules and scenarios. For example, if a typology indicates that illicit funds are often moved through a series of rapid-fire transfers among newly opened accounts, a bank can set its transaction monitoring system to flag that pattern. These rules are essentially red flag indicators encoded in software. Regulators actively encourage this practice. In the United States, FinCEN’s advisories to financial institutions typically include detailed typologies and red flags, precisely so banks can incorporate them into their monitoring efforts. FinCEN notes that banks should use this information to enhance their AML monitoring systems, thereby improving their ability to detect suspicious activity and file valuable reports. Similarly, international guidance suggests that banks should establish red flag indicators based on typology reports and apply closer scrutiny in higher-risk situations. In practice, this might mean more frequent or real-time monitoring for accounts in sectors known to be targeted by current laundering typologies (e.g. cryptocurrency exchanges, real estate dealings, etc.), as well as manual review by compliance analysts when complex patterns emerge.

Advanced analytics and technology play a growing role here. As typologies become more complex (especially those involving chains of transactions across multiple institutions or new technologies like crypto), banks are leveraging big data analytics and artificial intelligence to detect subtle typological patterns. For instance, network analysis tools can uncover a ring of accounts transacting in a circular manner (a possible sign of layering in money laundering), even if each individual transaction is innocuous. Machine learning models can also be trained on past examples of known typologies to recognize them in new data, and even flag anomalies that might represent new typologies in formation. The use of typological data in algorithms is explicitly supported by regulators – authorities now provide typology information in formats that data scientists can feed into monitoring models. This melding of human intelligence (case typologies) with artificial intelligence is becoming a cornerstone of effective suspicious activity detection.

Equally important is the role of typologies in investigations once a red flag is raised. When an alert is generated, compliance investigators will compare the account’s behavior against known typologies to assess whether it truly looks suspicious. Knowledge of typologies thus helps analysts “connect the dots” – for example, recognizing that a customer’s pattern of structuring cash deposits and then wiring funds abroad fits the typology of a remittance-based money laundering scheme. This guides investigators to escalate and report the case promptly. In short, typologies are embedded at multiple layers of the detection process: in the automated filters that sift through millions of transactions, and in the human analysis that determines which cases warrant reporting or action.

Preventative Measures and Internal Controls

Beyond detection, typologies inform the preventative side of financial crime control. By understanding how crimes are carried out, institutions and regulators can devise controls to block those methods up front, thus reducing the incidence of illicit transactions. For example, once regulators learned of typologies involving shell companies with hidden owners, many jurisdictions implemented stricter beneficial ownership transparency rules (so that it’s harder to use anonymous companies for laundering). Banks likewise enhanced their customer due diligence: they now more rigorously verify the owners of corporate accounts and scrutinize corporate structures that match known risk patterns (like companies registered in offshore havens with nominee directors). In this way, typologies directly drive policy and control enhancements.

Another preventative application is in employee training and awareness. Financial institutions incorporate real typologies into their training programs, so that front-line staff (tellers, relationship managers, etc.) can spot suspicious behavior early. For instance, knowing the typology of a “smurfing” operation, a bank teller can be alert when they see a customer accompanied by several unrelated individuals each depositing just under the reporting threshold – an indicator that may prompt the teller to escalate the activity to compliance. Similarly, understanding fraud typologies like romance scams can help customer-facing employees notice if an elderly client is making unusual wire transfers under someone’s influence. Many regulators publish typology case studies which banks use as educational tools for staff. The Guernsey Financial Services Commission, for example, provides links to international typologies and case compilations so that businesses can use these cases for training and awareness.

Typologies also shape preventive technology. When a new typology is identified, banks may adjust their product features or transaction screening. Consider sanctions evasion typologies: once aware that sanctioned parties might try to use third-country intermediaries, a bank can implement controls to flag payments involving certain transit jurisdictions or to require additional checks for clients who are closely linked to high-risk regions. In trade finance, banks introduced more stringent documentation checks and vessel tracking after learning of trade-based evasions and shipping typologies, to prevent inadvertently financing sanctioned trade. Another example is in cyber fraud prevention: understanding the typology of a phishing-based account takeover (where fraudsters steal online banking credentials to loot accounts) has led banks to adopt stronger customer authentication and fraud monitoring tools to stop unauthorized logins and transfers before completion.

At the regulatory level, typologies feed into preventive regulations and guidance. The FATF’s work on typologies often results in best practice papers that recommend preventive measures for both industry and governments. For instance, FATF’s studies on NPO abuse for terrorist financing led to guidelines on how charities can protect themselves and how authorities can oversee the sector without stifling legitimate activity. The APG notes that its typologies studies help members design and implement effective preventative measures against the highlighted threats. This shows a continuum from typology insight to concrete action: once a risk method is understood, defenses can be erected to make that method harder to exploit.

Supporting Regulatory Reporting (STRs/SARs)

Typologies play a pivotal role in regulatory reporting of suspicious activities, such as Suspicious Transaction Reports (STRs) or Suspicious Activity Reports (SARs). These reports are the mechanism by which financial institutions alert authorities to potential wrongdoing, and their quality can significantly influence whether a crime is detected by law enforcement. When compliance officers prepare a SAR, knowledge of typologies helps them describe the suspicious activity effectively and provide context. For example, rather than a vague statement, a SAR narrative might say: “Transaction patterns are consistent with the trade-based money laundering typology involving over-invoicing of goods,” and then list the specific red flags observed. Such clarity ensures that investigators who receive the report understand its significance.

Regulators encourage institutions to reference typologies in their filings when appropriate. Many SAR reporting forms include checkboxes or categories for common typologies (e.g., mortgage fraud, identity theft, human trafficking, etc.), allowing banks to indicate the nature of suspicion. The data collected from these reports is then analyzed by FIUs to spot trends. In fact, there is a cyclical relationship: banks use typologies to write better reports, and FIUs analyze those reports to refine typologies. As mentioned earlier, FinCEN’s analysis of SAR data showed prevalent typologies in identity-related fraud – that insight was only possible because banks, aware of those typologies, filed many SARs citing them. FinCEN and other FIUs periodically publish SAR trend reviews and feedback that highlight emerging typologies gleaned from filings, effectively closing the loop by informing banks what to watch for next.

Financial agencies also use typologies to guide reporting advisories. For instance, if law enforcement is seeing a surge in a certain crime (say, opioid trafficking proceeds being laundered via casinos), the FIU may issue an advisory to banks describing that typology and asking them to report any similar activity. This was formalized in the U.S. by law: FinCEN is mandated to publish semiannual threat pattern and trend information that provides feedback to institutions about the value of their reports and shares emerging typologies for ML/TF, including data for algorithms as mentioned earlier. The intention is to improve the collective reporting regime – when banks know the latest methods, they can file more targeted STRs, which gives authorities better intelligence to act on.

In practice, a well-documented typology can significantly boost reporting effectiveness. A notable example is how typologies related to human trafficking have enabled banks to identify financial footprints of trafficking rings (such as regular payments for online ads, frequent hotel charges in different cities, and rapid cash withdrawals – a pattern indicative of sex trafficking operations). Once these patterns were shared as a typology, SARs reporting such indicators increased and led to numerous investigations globally. Thus, typologies act as a common language in STR/SAR reporting – they provide a standardized way to describe suspicious conduct, ensuring that both reporters (banks) and recipients (FIUs/regulators) have a mutual understanding of the risk being flagged.

Informing Risk Assessment and Strategy

A more strategic use of typologies is in conducting risk assessments at both institutional and national levels. Banks are expected to assess the money laundering and terrorist financing risks they face in their business (per the “risk-based approach” principle of global AML standards), and being aware of current typologies is an integral part of that. When a bank evaluates risk, it looks at the products and services it offers, the customer profiles it serves, and the regions it operates in, to judge where it might be vulnerable to financial crime. Information on known typologies greatly enhances this process. For example, if a new typology indicates that criminal networks are exploiting trade finance mechanisms to launder money, a bank with a large trade finance portfolio should recognize that as a higher risk area and strengthen controls accordingly. Likewise, if fraud typologies point to certain digital banking services being a target (say, peer-to-peer payment apps used in scams), a financial institution offering those services will factor that into its risk assessment and allocate more resources to monitoring and customer education in that area.

Regulators explicitly advise using typologies as an input to risk assessments. The FATF recommends that both countries and institutions draw on domestic and international typologies, as well as FIU intelligence, when identifying and evaluating risks. Supervisors, too, use this approach: for instance, the Dutch central bank (DNB) has noted that in its risk-based supervision of banks, the first step is to identify risks using sources like typologies, intelligence from national and international bodies (FATF, Basel Committee, etc.), and information from other regulators. This ensures that emerging global trends are taken into account in local oversight. On the private sector side, guidance from authorities often suggests that firms incorporate published typologies and indicator lists into their own enterprise risk assessments. A clear illustration comes from the UK’s 2022 Red Alert on Russian sanctions evasion: it not only listed typologies and red flags but also urged firms to “take these indicators into account when conducting sanctions risk assessments and due diligence.” In other words, if a bank is doing a self-assessment of its sanctions compliance risk, it should weigh how exposed it might be to those typological scenarios (e.g. do they have clients who could be fronts for sanctioned persons, or payment flows through high-risk transit points).

By feeding into risk assessment, typologies help institutions adopt a proactive stance. Rather than only reacting to incidents, banks can anticipate where to tighten controls or devote more scrutiny. This might involve strategy decisions like exiting certain high-risk business lines if typologies suggest they are frequently abused. On a national scale, countries conduct National Risk Assessments (NRAs) for money laundering/terrorist financing, and these exercises heavily rely on known typologies and case statistics. The EU, for example, publishes a Supranational Risk Assessment that identifies risks and methods affecting the Union, guiding member states’ policies. The insights from typologies thereby influence everything from policy-making and regulator focus, to how a bank designs its compliance program. An informed risk assessment leads to smarter resource allocation – focusing compliance efforts where typologies indicate the greatest vulnerabilities.

The concept of typologies is deeply embedded in the regulatory frameworks that govern financial crime prevention worldwide. At the global level, the Financial Action Task Force provides the baseline standards (the 40 Recommendations) which emphasize a risk-based approach and information sharing. While the FATF Recommendations do not list specific typologies, the FATF periodically issues reports on methods and trends to complement its standards, thereby guiding countries on current threats. FATF’s ongoing research (through its Risk, Trends, and Methods Working Group) flags new forms of money laundering and terrorist financing and pushes for countermeasures. Countries, in turn, incorporate this knowledge. For instance, when FATF identified proliferation financing (evasion of sanctions related to weapons of mass destruction) typologies as an emerging risk, it led to a new Recommendation (Rec. 7) and national laws to address those typologies.

United States: In the U.S., the regulatory regime under the Bank Secrecy Act (BSA) explicitly values typologies. FinCEN – as both FIU and lead AML regulator – runs the Financial Institutions Advisory Program which issues advisories containing typologies and red flags on various threats. U.S. authorities often publish joint alerts (e.g., FinCEN with banking regulators or with the Department of Commerce for export control evasion typologies) to warn about current patterns like fentanyl trafficking finances or high-tech export evasion schemes. The U.S. Treasury’s National Money Laundering Risk Assessment and National Terrorist Financing Risk Assessment documents also enumerate typologies and trends seen domestically. These assessments guide banks and examiners on where to focus. Moreover, U.S. regulators have mechanisms like the FinCEN Exchange, a public-private partnership where typologies and case information are shared in briefings with financial institutions to enhance detection of specific threats. On the enforcement side, U.S. indictments and forfeiture cases often describe the typologies used (for example, cases against banks for AML failures will detail how launderers exploited the bank – effectively pointing out typologies that went undetected). This becomes part of regulatory expectations: banks are expected to learn from these cases and avoid similar blind spots.

Europe: In Europe, the European Union’s AML Directives set a broad framework that is implemented by member states. While these directives mandate things like risk-based supervision and information sharing, a lot of typology work is done by EU-wide bodies and national authorities. Europol, the EU’s police agency, produces an annual report (“The Other Side of the Coin,” for instance) analyzing financial crime threats and methods across Europe. These reports cover everything from money laundering and corruption to fraud and IP crime, highlighting key typologies and criminal techniques. Such intelligence feeds into the EU’s Supranational Risk Assessment, which identifies the most prevalent illicit finance typologies affecting the union (e.g., trade-based schemes, cyber-enabled fraud, etc.) and recommends mitigating actions to member countries. Individual European regulators and FIUs also share typologies. The UK (while no longer in the EU, it set many precedents) regularly issues National Risk Assessments and NCA/FIU alerts on topics like cash-based laundering or sanctions evasion (as seen with the joint NCA-OFSI red alert in 2022). Countries like France, Germany, and the Netherlands publish annual FIU reports summarizing trends in SARs and notable typologies. The European Banking Authority (EBA) has published guidelines on risk factors, essentially distilling typological risk indicators that banks should consider for different customer and product types. Additionally, Europe is establishing a new EU-wide AML Authority (AMLA) in the coming years, which is expected to enhance coordination – likely including more unified typology and threat intelligence sharing across the EU.

Asia-Pacific: The APAC region is diverse, but many countries there follow FATF standards closely (many are members of FATF or the APG). As noted, the APG’s yearly typologies report is a major regional resource. It not only collects cases from member countries (ranging from Australia and Singapore to Pakistan and Vanuatu) but also examines how regional developments (like the rise of fintech or the pandemic) are influencing typologies. For example, APG reports in recent years discussed the uptick in online scam typologies during COVID-19 and the increasing use of money mules in Southeast Asia. Nationally, several APAC countries have been proactive in typology work: Australia’s AUSTRAC (FIU) has a public-private partnership program (Fintel Alliance) which produces reports on typologies such as child exploitation financing and tax evasion, giving very concrete indicators to industry. Singapore’s MAS not only issues detailed AML/CFT guidelines but also circulates Best Practice papers with industry, focusing on emerging typologies and how to counter them. As mentioned, MAS is rolling out COSMIC to facilitate real-time sharing of typology-related intelligence among banks. Hong Kong’s HKMA has published thematic typology reports (for instance on trade-based laundering risks facing Hong Kong as a trade hub) and conducts industry risk roundtables. Even developing economies in Asia have begun publishing typology collections, often with donor or international support – for instance, typology digests on corruption and wildlife trafficking financing have been published in South Asia to raise awareness of those specific issues.

Across all these regions, a common thread is the influence of international guidance. When FATF or the Egmont Group highlights a typology, countries around the world echo that in their local guidance. A case in point: when virtual asset typologies and red flags were published by FATF in 2020 (identifying things like rapid transfers between many exchanges or use of anonymity-enhanced cryptocurrencies as warning signs), regulators from the U.S. to Singapore and EU issued their own advisories or regulations to ensure virtual asset service providers and banks apply those red flags. In sum, regulatory frameworks globally have internalized typologies as an essential tool – whether through formal policy, risk assessment practices, or industry communication. This global convergence helps raise the bar, making it harder for criminals to exploit gaps in any single jurisdiction.

Typologies are an indispensable element in the fight against financial crime, bridging the gap between raw data and actionable intelligence. They translate countless individual cases and transactions into clear patterns that can be recognized, shared, and preempted. For the general public, typologies offer insight into how financial crimes actually occur – demystifying complex schemes by illustrating, for example, how a fraudster might use a fake company or how terrorist cells might move money in seemingly innocuous ways. For financial professionals and compliance officers, typologies are part of the everyday toolkit that informs monitoring systems, client due diligence, and the drafting of suspicious activity reports. And for regulators and law enforcement, typologies guide strategic focus, from shaping regulations to setting investigative priorities.

A key theme is the global nature of typologies: criminals innovate and adapt across borders, so the defensive response must be collaborative and worldwide. Through organizations like FATF, Egmont, and various national bodies, there is now a robust network for circulating typologies and red flags to those who need them. We have seen that when a new threat emerges – be it a cyber-fraud scam, a sanctions dodge, or a money laundering trick – the faster those insights are packaged into a typology and distributed, the faster institutions can gear up to detect and prevent harm. This rapid information sharing is crucial in an era where financial flows are fast and far-reaching.

Finally, typologies embody the preventive and adaptive approach at the heart of modern AML/CFT regimes. Rather than waiting for crimes to occur, stakeholders use typologies to anticipate and choke off illicit activity. As FinCEN’s Director noted, robust identification of typologies and red flags “is critical to the effectiveness of financial institutions’ programs to combat money laundering and terrorism financing”, enabling them to detect, report, and ultimately preventcriminals from abusing the financial system. In essence, every typology is a lesson learned – and when those lessons are applied, they make the financial world just a bit safer and more transparent. By staying educated about typologies and fostering a culture of information exchange, the global community of regulators, banks, and citizens can stay one step ahead of those who seek to exploit the financial lifeblood of our economies.