This summary highlights the key findings, implications, and recommendations from the SFNet Fraud Task Force white paper, Systemic Resilience in Secured Finance, which covers asset-based lending, factoring and supply chain finance. Drawing on survey data from SFNet member organizations and real‑world case studies, the report provides a clear-eyed assessment of fraud risk in the secured finance ecosystem and a practical roadmap for strengthening controls without restricting access to capital.

“Secured finance is a $6.5 trillion ecosystem that has historically demonstrated resilience,” stated SFNet president/Fraud Task Force chair, Betty Hernandez, Executive Vice President-Chief Credit Officer, SLR Business Credit.

Fraud Task Force member Steven Sanicola, Senior Managing Director of Siena Lending Group, said: “What became clear through this work is that fraud risk doesn’t usually come from one dramatic failure—it builds quietly when controls don’t evolve as fast as borrowers do. The goal of this white paper is to help lenders close those gaps early, with discipline and consistency, before small blind spots turn into real losses.”

“This report reinforces that independent diligence and ongoing monitoring are still the most important defenses, especially as cyber-enabled schemes and more complex structures test traditional controls,” said Katy Jordan, Senior Vice President and Head of Channel Finance at PNC Business Credit.

To read the full white paper, click here.

Fraud Risk Is Persistent—but Largely Contained

In late 2025, the Secured Finance Network (SFNet) convened a task force to provide guidance and resources to the industry following a series of actual or alleged fraud-market events in 2025. The Task Force’s objective was to assess the scope of actual or perceived fraud risk and develop actionable strategies to enhance portfolio resilience considering that assessment.

Survey results show a divergence between perception and reality. While approximately 45% of SFNet member leaders believe fraud is increasing across the industry, nearly two‑thirds report that fraud activity within their own portfolios has remained stable. This suggests that the secured finance model—when paired with disciplined underwriting, collateral controls, and monitoring—continues to perform as intended, even amid heightened market scrutiny.

The Primary Threat Is a Growing Control Gap

The Task Force found that the most significant risk facing lenders today is not a sudden spike in fraudulent behavior, but a widening gap between modern borrower complexity and legacy monitoring practices. As borrowers adopt new ERP systems, operate across borders, and utilize increasingly complex capital structures, traditional controls may no longer provide sufficient visibility unless they are updated and reinforced.

How Modern Fraud Manifests

Analysis of 26 real‑world cases revealed recurring fraud mechanisms, including inflated or fabricated receivables, inventory re‑aging, undisclosed affiliate transactions, and cash diversion during periods of liquidity stress. The report also highlights emerging cyber and AI‑enabled threats, such as executive impersonation and deepfake‑driven wire fraud, which exploit speed and trust rather than balance‑sheet manipulation alone.

Lessons from High‑Profile Cases

Recent cases, including First Brands Group, underscore how opaque corporate structures, special purpose vehicles, and overreliance on third‑party diligence can obscure true leverage and collateral availability. These cases reinforce the importance of independent verification and a healthy skepticism—even when deals involve well‑known sponsors, agents, or advisors.

Independent Verification Remains the Cornerstone

Across all case studies and survey findings, one principle consistently emerged: lenders must verify, then fund. Independent confirmation of receivables, inventory, cash flows, and counterparty relationships is the most effective defense against both traditional and emerging fraud schemes. Trust, reputation, or syndicate participation should never replace direct diligence.

A Practical Framework—Not Alarmism

Rather than promoting fear or retrenchment, the white paper provides actionable tools designed to help lenders adapt. These include a comprehensive red‑flag framework, detailed pre‑ and post‑funding checklists, and tiered recommendations that firms can scale based on portfolio size, complexity, and risk appetite.

Operational Discipline and Training Matter

Survey respondents identified less stringent monitoring, insufficient training, and complex deal structures as the top vulnerabilities within their organizations. The Task Force emphasizes that investment in people, processes, and training is as critical as investment in technology when it comes to fraud prevention and early detection.

Secured Finance Continues to Deliver

Historical loss data confirms that, even amid isolated fraud events, secured lending has delivered strong portfolio performance over multiple economic cycles. By modernizing controls while preserving the core principles of secured lending, the industry can continue to provide critical liquidity to businesses while protecting capital providers.