The latest review from the UK Financial Conduct Authority (FCA) has revealed that romance scams are no longer just emotional frauds, but increasingly function as laundering conduits. The regulator’s findings show that banks, while often compassionate toward victims, continue to miss critical opportunities to prevent transactions linked to romance fraud, which collectively cost victims over £106 million last year. Some individuals transferred life savings, with one losing more than £428,000 to a scammer posing as a romantic partner.

The hidden financial crime networks behind romance scams

Behind these heartbreaking statistics lies a deeper financial crime problem. Romance scams have matured into organized laundering operations. Fraudsters use false relationships to solicit money, then channel those funds through networks of mule accounts, cryptocurrency platforms, and remittance corridors designed to conceal the origins of the proceeds. Victims unknowingly participate in the laundering chain, transferring criminally obtained funds under emotional manipulation.

The FCA highlighted that in nearly half of the reviewed cases, victims concealed the true purpose of their payments when questioned by their banks. That concealment complicates transaction monitoring and typology detection. While some financial institutions demonstrated proactive interventions, others failed to identify clear signs of coercion or suspicious transfer patterns. The regulator’s message is clear: firms must recalibrate monitoring thresholds, enhance behavioural analytics, and integrate typologies specific to romance fraud. Doing so transforms fraud prevention into an AML function capable of intercepting illicit value flows before they disappear into the layering stage.

Money laundering mechanisms used in romance scams

Romance scams are uniquely structured because they depend on emotional control rather than coercion. Once trust is established, fraudsters progressively request funds, often disguised as urgent needs, medical expenses, or business opportunities. From the victim’s perspective, each payment feels voluntary. From an AML perspective, each transaction is a potential predicate offence.

The launderers behind these scams rely on multiple mechanisms:

• Money mule networks that fragment and redirect transfers through personal accounts across several jurisdictions.
• Crypto-asset conversions that obscure the traceability of stolen funds, particularly through privacy coins or unregistered exchanges.
• Remittance corridors exploiting regions with weak beneficial ownership verification and limited correspondent oversight.
• Gift cards and prepaid instruments that bypass formal banking rails but serve as cash equivalents in online marketplaces.

Fraudsters often coach victims to use neutral payment descriptions or to withdraw funds in cash before sending them via alternative channels. These tactics prevent automated systems from flagging the transactions as suspicious. To counter this, financial institutions must integrate psychological pattern indicators into transaction monitoring, such as repetitive small transfers, high-frequency interactions with overseas recipients, and deviations from previous account behaviour.

The connection between romance scams and laundering is clearest during the layering phase. After receiving the funds, criminals immediately disperse them, converting fiat into crypto or funnelling it through intermediaries posing as legitimate import-export firms. This rapid value transformation ensures the money appears clean by the time it reaches its final destination, often in tax-neutral jurisdictions.

The regulatory and compliance response

The FCA’s call for stronger detection aligns with global AML obligations. Under the UK Money Laundering Regulations and the Proceeds of Crime Act, banks are required to detect, report, and prevent the transfer of criminal property. When romance scams occur, the proceeds qualify as such property, even if the victim acted without intent to commit a crime. That distinction matters, because financial institutions that fail to intervene can face supervisory criticism or enforcement for weak controls over predicate offences.

International frameworks echo this approach. The Financial Action Task Force (FATF) classifies fraud as a predicate offence to money laundering, and requires reporting entities to identify suspicious activities that may disguise illicit gains. Romance scams fit directly into that definition. The challenge is operationalizing it: traditional AML models look for structuring, trade-based laundering, or cash smuggling, not hundreds of small payments justified as romantic gestures.

To meet this challenge, some UK banks have begun deploying behavioural analytics that detect sudden emotional transaction patterns. These systems cross-reference communication frequency, device identifiers, and payment narratives. They also alert compliance teams when customers exhibit dependency behaviours, such as repeatedly ignoring bank warnings or denying the existence of a scam.

The FCA found that while several firms demonstrated strong, empathetic interventions, many still rely on manual reviews or incomplete staff training. Effective prevention requires more than empathy. It demands technical precision. Staff must be trained to ask probing questions, record inconsistencies in customer explanations, and escalate potential manipulations through AML channels rather than customer service workflows.

Globally, regulators are also paying attention. The US Financial Crimes Enforcement Network has issued alerts on “pig butchering” schemes, a category that includes romance scams involving crypto transfers. Similar typologies have appeared in Asia-Pacific markets, where dating app–linked scams are used to launder proceeds from cyber fraud. The convergence of social engineering and financial crime means that AML teams must now coordinate with cybersecurity and fraud functions to capture the full chain of risk.

Breaking the psychological laundering cycle

The financial dimension of romance scams is only one part of the problem. The other is psychological, and it directly affects the AML detection process. Victims often enter a cognitive state described by the FCA as being “under the spell” of the fraudster. They rationalize transfers, defend the scammer, and reject intervention attempts. This psychological manipulation shields the launderers from scrutiny, as banks struggle to obtain honest transaction rationales.

To “break the spell,” institutions need multidisciplinary engagement strategies. Beyond monitoring, banks must design early-warning scripts, involve social support teams, and create escalation mechanisms for vulnerable customers. Compassionate engagement, as noted by the FCA, can disrupt the fraudster’s influence and prevent further laundering activity.

From a compliance standpoint, this requires integrating financial crime prevention with customer protection frameworks. The AML officer and the fraud investigator should not operate separately when dealing with romance scams. Each fraudulent transfer is both a victimization and a laundering transaction. Internal processes must treat them as such, ensuring the filing of suspicious activity reports even when refunds are processed.

Technology can reinforce this approach. Machine learning models trained on scam typologies can identify sentiment markers, repetitive justifications, and timing patterns consistent with manipulation. However, no algorithm can replace the necessity of human judgment. The frontline employee, equipped with the right training, remains the best barrier against both emotional exploitation and laundering.

Some firms reviewed by the FCA went as far as maintaining multi-week communication schedules with victims, gently questioning inconsistencies until the scammer’s narrative collapsed. These interventions not only protect individuals but also prevent illicit funds from passing through legitimate accounts, fulfilling the institution’s AML obligations.

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Related Links

• FCA – Protecting consumers from scams
• UK National Crime Agency – Economic crime
• Action Fraud – Romance scams guidance
• Financial Ombudsman Service – Fraud and scams complaints
• FATF – Guidance on the risk-based approach to money laundering

Other FinCrime Central Articles About Romance Scams and Money Laundering

• ASIC Shuts Down 95 Scam Companies Related to Pig Butchering and Romance Scams
• Record-Breaking $12.4B Lost to AI-Powered Pig Butchering and Romance Scams in 2024
• Romance Scam Takes Florida Woman to Jail after Laundering Millions

Source: FCA

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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