What Broker-Dealers Must Know About Cyber Fraud and AML
As capital markets grow more digital, distributed, and global, financial crimes prevention has become one of the most critical compliance obligations for broker-dealers in 2026. Cyber-enabled fraud, money laundering, sanctions violations, and manipulative trading schemes continue to evolve alongside technology, private markets, and alternative investments.
Regulators are responding accordingly. Expectations around cybersecurity governance, anti-money laundering (AML) controls, fraud detection, and market integrity are rising, and firms are expected to demonstrate proactive, risk-based compliance programs rather than reactive or checklist-driven approaches.
For broker-dealers, financial crime prevention is no longer a siloed function. It is a core component of enterprise-wide supervision.
Cybersecurity and Cyber-Enabled Fraud Are Front-Line Risks
Cybersecurity remains one of the most significant operational and regulatory risks facing broker-dealers. As firms rely more heavily on digital onboarding, remote access, cloud infrastructure, electronic communications, and third-party vendors, threat vectors continue to expand.
Regulators expect broker-dealers to maintain cybersecurity programs that are tailored to their specific business models, rather than generic or static policies. Common examination issues continue to include:
- Weak access controls and identity management
- Inadequate vendor and third-party risk oversight
- Insufficient testing of cybersecurity controls
- Poorly documented incident response and escalation procedures
Cyber-enabled fraud has grown in parallel. Social engineering, impersonation schemes, account takeovers, and fraudulent wire requests increasingly exploit gaps between technology, operations, and supervision. Firms are expected to monitor for suspicious digital activity and adapt controls as threats evolve.
Anti-Money Laundering, Fraud, and Sanctions Compliance Remain Core Obligations
AML compliance remains foundational to broker-dealer supervision, particularly as firms engage in private placements, alternative investments, and cross-border activity. Regulators continue to identify deficiencies where AML programs fail to keep pace with business growth or product complexity.
Key risk areas include:
- Customer identification and beneficial ownership verification
- Risk-based transaction monitoring
- Escalation and documentation of suspicious activity
- Oversight of high-risk jurisdictions, products, and counterparties
Sanctions compliance is also receiving heightened attention, especially for firms with international exposure. Broker-dealers are expected to maintain effective screening, escalation, and recordkeeping procedures that reflect evolving geopolitical and regulatory developments.
In 2026, regulators are emphasizing that AML and sanctions programs must be dynamic and risk-based, not static frameworks that fail to adjust as business activity expands.
Fraud Prevention Requires Cross-Functional Supervision
Financial fraud rarely exists in isolation. It often intersects with weaknesses in supervision, communications oversight, technology controls, and outside business activity monitoring.
Regulatory examinations continue to highlight failures where firms did not adequately supervise:
- Electronic communications and marketing activity
- Outside business activities and private securities transactions
- Third-party service providers and vendors
- Registered representatives operating across multiple platforms
As private markets and alternative investments expand, fraud risk increases when firms lack clear visibility into how offerings are marketed, how investors are onboarded, and how funds move through the system.
Effective fraud prevention requires coordination across compliance, technology, operations, and supervision functions.
Manipulative Trading and Market Integrity Remain Enforcement Priorities
Market manipulation remains a core enforcement focus, even as trading activity extends beyond traditional public markets. Regulators expect broker-dealers to maintain surveillance programs capable of detecting and preventing abusive conduct, including:
- Spoofing and layering
- Wash trading
- Insider trading and misuse of material nonpublic information
- Abusive or automated trading strategies
As firms adopt new technologies and data tools, regulators are focused on whether surveillance and supervisory systems are evolving at the same pace. Firms are expected to review alerts, escalate issues appropriately, and document follow-up actions.
Market integrity remains a foundational regulatory obligation regardless of asset class or trading venue.
How FNEX Supports Financial Crimes Prevention in 2026
As regulatory scrutiny increases, broker-dealers need a trusted partner to navigate evolving SEC and FINRA requirements. FNEX Compliance Services provides a streamlined, institutional-grade solution designed to help firms stay compliant as their business scales.
FNEX supports broker-dealers across key compliance areas, including:
Regulatory Filings and Oversight
FNEX manages required filings, renewals, and ongoing regulatory obligations to support consistent SEC and FINRA compliance.
Cybersecurity and Financial Crime Controls
FNEX implements robust cybersecurity and supervisory frameworks to help protect client data and reduce exposure to cyber-enabled fraud and other financial crime risks.
LEARN MORE ABOUT FNEX COMPLIANCE SERVICES
Alternative Investment Compliance Expertise
FNEX brings deep experience supporting alternative investments, including due diligence review, investor approvals, and Reg BI-aligned supervision of private placements.
By partnering with FNEX, financial professionals can focus on growth while relying on a compliance platform built to manage regulatory complexity and reduce risk.
Reference
FINRA – https://www.finra.org/sites/default/files/2025-12/2026-annual-regulatory-oversight-report.pdf
