Anti-Money Laundering (AML) , Fraud Management & Cybercrime , Fraud Risk Management

Both of the White House's recent executive orders deal with the financial services industry and discuss the importance of integrity and innovation in combatting fraud. But read them together and another picture emerges that could confuse seasoned fraud and compliance practitioners.

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The first order from President Donald Trump, "Restoring Integrity to America's Financial System," instructs the Treasury Department to advise banks within 60 days on red flags linked to "non-work authorized populations and their employers."

The order proposes Bank Secrecy Act amendments, new customer identification rules and it directs regulators to issue guidance on enhanced due diligence thresholds. Within 90 days, the Treasury Department also must propose changes to how banks verify customer identities and strengthen customer identification program rules. The likely impact will be more Know Your Customer scrutiny and potentially more onboarding friction for customers. It doesn't look bad at first glance, especially at a time when fraud and scams are sky high. But a dive deeper shows the focus is on undocumented or unauthorized workers rather than fraudsters.

The second order, "Integrating Financial Technology Innovation into Regulatory Frameworks," requires federal financial regulators to review existing regulations and remove "overly burdensome and fragmented regulations and supervisory practices that form barriers to entry." It also asks the Federal Reserve to evaluate whether fintechs and crypto firms should get direct access to its payment network, bypassing traditional banks entirely. The fintech industry has been lobbying for years to get direct access to these federal accounts, cutting out the bank middleman entirely. The order gives the Fed 120 days to complete that evaluation.

How should the financial services industry react? Expect more regulatory burden related to KYC and due diligence. Meanwhile, easing regulations on non-banking players will spur more agile competitors in banking.

KYC was built to detect fraud, not enforce immigration policy. Stretching it beyond that purpose makes compliance teams busier, in the process it will divert resources from fraud problems that need solving now.

Fintech deregulation adds another layer of risk. Lighter oversight doesn't make the financial system more innovative. It makes it more vulnerable. Fraud migrates to wherever supervision is weakest. When real-time payments launched in the United States, the rails moved faster than the liability frameworks. This latest EO is expanding access before harmonizing fraud-control expectations risks, repeating mistakes seen in faster-payment rollouts.

What both orders miss entirely is the fraud landscape that actually exists today. APP scams and synthetic identities are passing KYC at onboarding. Deepfake-enabled account takeovers and mule networks are sophisticated enough to stay under SAR thresholds. First-party fraud is rising and largely invisible to legacy AML systems.

A meaningful executive order would have tackled these directly. It could have set a clear mandate to upgrade AML standards and link AML and fraud functions that have operated in silos for too long. Other jurisdictions have already begun their journey in this direction. But the U.S. has lacked the political will to act on fraud for too long.

I spoke to one fraud practitioner, who put it more bluntly: "I did not really see anything about real fraud containment. Dealing with APP fraud and scams is more important than fintech competition."