At SFNet’s recent Independent Finance Roundtable conference, a panel of industry experts explored the current fraud environment in secured finance and shared practical strategies for mitigating risk in an increasingly complex and fast-moving landscape. Moderated by Bryan Ballowe, the panel featured Angela Fiorentino (AmeriFactors), Vince Mancuso (Bay View Funding), Gen Merritt-Parikh (Haversine Funding), and Paul Schuldiner (Rosenthal Capital Group).

Fraud Is Not New—But It Is More Prevalent and Scalable

Panelists agreed that while the fundamental nature of fraud has not dramatically changed, its frequency and sophistication have increased. Common schemes—such as payment rerouting and falsified banking instructions—are becoming more widespread, often enabled by advances in artificial intelligence. Fraudsters are leveraging tools to spoof emails, generate realistic documents, and impersonate executives, making detection more challenging.

Human Error Remains the Primary Vulnerability

Despite technological advancements, the panel emphasized that most fraud incidents still stem from breakdowns in basic controls. Email spoofing and unauthorized wire changes frequently succeed due to lapses in verification procedures. A recurring theme was the importance of “back to basics” discipline—such as independently confirming payment changes via known contacts and telephone rather than relying on email instructions alone.

Training and Awareness Are Critical

Ongoing employee education was identified as one of the most effective defenses against fraud. Panelists stressed that teams must be continuously trained to recognize red flags, especially as fraud tactics evolve. Peer review processes and internal audits can help ensure that due diligence standards are consistently applied and not bypassed under time pressure.

Technology Is Helpful—but Not a Silver Bullet

A range of tools are being deployed across the industry, including anti-money laundering platforms like Nasdaq Verafin, document verification systems such as Factor Genie, and training solutions like Ninjio. However, challenges remain: lack of system integration, high costs, and the rapid pace of innovation make it difficult for firms to identify and implement the most effective solutions. Panelists noted that overreliance on tools—without proper validation—can create a false sense of security.

Operational Pressures Can Undermine Controls

Competitive pressures and tight deal timelines were cited as significant contributors to risk. In some cases, the urgency to close transactions leads to shortcuts in due diligence or bypassing established controls. Additionally, referral networks have become more fragmented, increasing the need for independent verification rather than relying on historical trust.

Emerging Risks: AI and Synthetic Identity Tactics

The panel also discussed emerging threats, including AI-generated impersonation attempts—such as fraudulent video calls posing as company executives. These developments underscore the need for layered verification methods and skepticism toward digital interactions that cannot be independently validated.

Striking the Right Balance with Clients

An important dynamic highlighted was the tension between maintaining strong controls and supporting client relationships. Panelists observed that fraud risk can increase when procedures are relaxed to accommodate client needs, particularly in distressed situations. Firms must carefully balance flexibility with discipline to avoid exposing themselves to unnecessary risk.

Key Takeaways

• Reinforce foundational controls—most fraud exploits simple oversights.
• Prioritize continuous training and awareness across teams.
• Use technology strategically, but do not substitute it for diligence.
• Maintain verification rigor, especially under time pressure.
• Stay vigilant as AI-driven fraud tactics continue to evolve.

The session concluded with a clear consensus: while tools and tactics will continue to change, strong fundamentals—training, verification, and disciplined processes—remain the most effective defense against fraud in secured finance.