A newly released report by Nasdaq Verafin, along with an op-ed from Nasdaq Chair and CEO Adena Friedman published in Fortune, highlights the significant economic threat posed by financial crime in the United States. The report reveals that financial crime, particularly money laundering and fraud, has grown into a trillion-dollar problem, threatening the stability and integrity of the U.S. financial system.
Building on data from the Nasdaq Verafin 2024 Global Financial Crime Report, the new economic impact study reveals staggering figures. In 2023, money laundering in the U.S. reached $845 billion, representing nearly 3.1% of the nation’s GDP. This illicit flow of funds through the financial system highlights the extent of the problem, with far-reaching consequences for both economic growth and financial stability.
According to the report, the economic toll of fraud and financial crime is not just a number on paper but has real consequences for the U.S. economy. It suggests that without the burden of these fraudulent activities, the U.S. economy would have grown more robustly in 2023. Specifically, GDP growth could have risen from 2.5% to 3.1%, and productivity could have increased by 0.4%. This missed opportunity for stronger economic growth underscores how financial crime stifles innovation, efficiency, and broader economic development.
Moreover, the report highlights the personal toll financial crime takes on American households. It estimates that around 15% of households—roughly 20 million—have been victimized by fraud schemes. On average, each affected household experiences a loss of $575, which can be financially devastating, particularly for lower-income families. This is compounded by the fact that 37% of U.S. households struggle to cover an emergency expense of $400, making the impact of financial crime even more burdensome for those living paycheck to paycheck.
Fraud losses in the U.S. were estimated to exceed $138 billion in 2023, with $127 billion attributed solely to bank fraud involving payment, check, and credit card transactions. These losses are not just limited to the individual victims but also severely affect financial institutions. Banks, which bear the brunt of fraud-related incidents, often face reputational damage and loss of customer trust, further eroding the financial system’s stability.
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Nasdaq, through its subsidiary Verafin, has been at the forefront of combating financial crime, partnering with over 2,500 financial institutions to fight fraud. However, the report emphasizes that banks and financial institutions alone cannot fully tackle the issue due to the complexity of the global financial system. Coordinated action between financial institutions, policymakers, and law enforcement is necessary to address the scale and sophistication of modern financial crime.
The report and Friedman’s op-ed stress the need for an updated regulatory framework that embraces advanced technology. Technologies such as artificial intelligence and machine learning can play a pivotal role in detecting complex, network-wide patterns of financial crime. By making connections across data silos and integrating real-time monitoring systems, these technologies can help to dismantle sophisticated fraud networks and prevent future incidents.
The potential economic benefits of resolving the financial crime crisis are enormous. Reducing fraudulent activity would not only strengthen economic fundamentals but also reduce inflationary pressures and contribute to healthier balance sheets across the financial services sector. A coordinated, technology-driven approach to combating financial crime could, in turn, promote a more resilient and prosperous U.S. economy.
As financial crime continues to grow in both scale and sophistication, the Nasdaq Verafin report serves as a wake-up call to prioritize this issue at every level of the financial system.
