Key insights:

• • • Prediction markets sit in a regulatory gray zone 鈥� Prediction markets鈥� economic function often looks much closer to gambling than traditional finance.

    • That ambiguity creates an AML blind spot 鈥� This blind spot allows potentially weaker controls around KYC, source of funds, sanctions screening, and suspicious activity reporting.

    • Banks and payment processors should focus on actual risk, not labels 鈥� Reputational, legal, and financial crime risk exposure can arise long before regulators clarify the rules.

Prediction markets have grown into a multi-billion-dollar ecosystem, offering the ability to enter into a contract to predict the outcomes on everything from elections and sports games to economic data and weather events. Yet as these platforms expand, they operate in a regulatory gray zone that raises serious questions for banks, payment processors, and compliance professionals.

Yet, the classification question that regulators and financial institutions continue to debate is not merely academic. It determines whether prediction market platforms will face the same anti-money laundering (AML) and know-your-customer (KYC) obligations as casinos and sportsbook venues, or whether prediction markets can continue to operate with minimal compliance oversight. This distinction has real consequences for the financial system.

鈥淧rediction markets are not just a classification problem, they represent a structural gap in how financial crime risk is currently understood and managed,鈥� says James Lephew, Founder & CEO of , a Charlotte-based consulting firm that serves major gambling operators and financial institutions globally.

Clarification is required in classifying this sector

Prediction markets occupy an ambiguous middle ground. Market operators position their platforms as financial derivatives or forecasting tools rather than gambling venues, emphasizing price discovery and statistical analysis over chance-based wagering. A contract on the outcome of a presidential election or a sports event, they argue, reflects crowd-sourced probability estimates grounded in information aggregation, not gambling luck.

Yet the fundamental mechanics raise legitimate questions. A user who buys a contract predicting that a candidate will lose an election is, in economic terms, wagering money on an uncertain outcome. The distinction between betting on a football game and trading a contract on the outcome of that same game becomes difficult to defend from a regulatory standpoint 鈥� and this classification matters enormously.

The distinction between betting on a football game and trading a contract on the outcome of that same game becomes difficult to defend from a regulatory standpoint 鈥� and this classification matters enormously.

If prediction markets are treated as gaming operations, they trigger Title 31 obligations under the Bank Secrecy Act, including currency transaction reporting, suspicious activity reporting (SAR) requirements, and comprehensive KYC procedures. If on the other hand, prediction markets are classified more akin to financial markets, these requirements may not apply. Currently, many prediction market platforms claim financial market status, allowing them to operate outside gaming regulations and with potentially weaker AML controls.

There is a compliance gap

Without clear regulatory classification, prediction markets create a significant AML blind spot. Casinos must report cash transactions exceeding $10,000, conduct source-of-funds reviews, and maintain detailed customer profiles. Sportsbooks face licensing requirements, geolocation checks, and responsible-gaming safeguards. Prediction market platforms, by contrast, often operate with minimal reporting obligations.

This gap introduces concrete risks. Digital wallets and cryptocurrency channels can obscure the source of funds. Structuring and layering of sources become easier without robust verification, further clouding who exactly playing in these markets. Collusive trading through multiple accounts allows value transfer that may go undetected. And VPN use and foreign payment channels can enable sanctions evasion.

Further, without mandatory SAR reporting, suspicious patterns tied to money laundering, terrorist financing, or market manipulation may never reach law enforcement.

“What we’re seeing is an AML blind spot,鈥� says Lephew. 鈥淧latforms enabling financial flows with characteristics of gambling, but without the controls that regulators would normally expect.” Until classification catches up with the technology, he adds, this blind spot remains open 鈥� and exploitable.

Why this matters for banks and processors

Banks and payment processors that support prediction market platforms may carry significant reputational and legal risk if they haven’t conducted thorough due diligence 鈥� and they cannot rely on a platform’s self-classification as a financial market or forecasting tool. Nevada and other jurisdictions are actively examining whether these platforms constitute gambling, echoing concerns from the American Gaming Association that products carrying similar economic risks deserve similar regulatory treatment.

If a product allows participants to wager on uncertain outcomes and creates risk that is substantially similar to gambling, it should face AML and customer identification requirements proportionate to that risk.

“Risk must be assessed based on how the product actually behaves, not how it is marketed,” Lephew explains. And that means evaluating whether a platform applies robust KYC procedures, verifies the source of deposits and beneficial ownership, screens against sanctions lists, reports SARs to the government, prohibits contracts on high-risk events such as assassinations or terrorism, and uses geolocation controls to block users in restrictive jurisdictions. Those answers matter far more than whatever label the platform chooses, Lephew says.

The path forward

Regulators have several options. One approach applies gaming regulations uniformly, treating all prediction markets with economic characteristics similar to gambling as gaming operations subject to Title 31. A second approach creates explicit financial market classification with statutory AML obligations and enhanced scrutiny of high-risk contracts. A third option adopts a tiered or risk-based framework, classifying contracts on lower-risk events such as economic data or weather under financial market rules, while sports and election markets could face enhanced scrutiny. Violent outcome markets would be prohibited entirely.

Regardless of which path regulators choose, the principle should be the same: Classification should follow economic function. If a product allows participants to wager on uncertain outcomes and creates risk that is substantially similar to gambling, it should face AML and customer identification requirements proportionate to that risk.

Financial institutions should not wait for regulatory clarity. They should apply rigorous due diligence now, treating prediction markets with a heightened level of scrutiny appropriate to their actual risk profile rather than their claimed legal status.

The goal is not to eliminate prediction markets, but to ensure they operate within a framework that prevents money laundering, terrorist financing, and market abuse. “If it looks like gambling, behaves like gambling, and carries the same financial crime risk, it should be regulated accordingly,鈥� Lephew notes. 鈥淎nything less creates systemic exposure.”

You can find out more about the challenges financial institutions face in their anti-money laundering efforts here

Key insights:

• • • Getting at the core legal question 鈥� In a case brought by defendant Ongkaruck Sripetch, the Supreme Court is deciding whether the SEC must prove investors suffered measurable financial loss before courts can order disgorgement, which would require fraudsters to give up illegal profits.

    • Why it鈥檚 high-stakes 鈥� Disgorgement is a major SEC enforcement tool 鈥� representing billions of dollars annually 鈥� so a new requirement to prove investor losses could sharply limit when and how much the SEC can recover.

    • How the justices seemed to lean (so far) 鈥� Questions at the argument before the Court suggested skepticism toward Sripetch鈥檚 position, with several justices asking why it would be an unfair penalty to take back ill-gotten gains and noting the practical difficulty of proving each investor鈥檚 exact loss.

If you鈥檝e ever wondered how the U.S. Securities and Exchange Commission (SEC) actually gets money back after it catches a fraudster, one of its biggest tools, disgorgement, is now under the microscope. This week, the U.S. Supreme Court heard arguments in a case, Sripetch v. SEC, that sounds technical on paper but has at its core a simple question: When the SEC makes a fraudster give up illegal profits, does it have to prove that investors suffered measurable, out-of-pocket losses first?

The case centers on Ongkaruck Sripetch, who the SEC says pocketed illicit proceeds through a classic pump-and-dump scheme from 2013 to 2017. Pump-and-dumps often involve penny stocks in which a person will hype up the price of these thinly traded stocks, then sell into the price spike they caused and walk away richer. Other stock traders who bought into the hype are the ones left holding the bag.

Sripetch admitted violating securities law and, in his subsequent criminal case, was sentenced to 21 months in prison. Separately, in the SEC鈥檚 civil action, a federal court in California ordered Sripetch to repay more than $3 million in ill-gotten gains plus interest.

The Supreme Court case isn鈥檛 a serious argument against the SEC鈥檚 ability to seek disgorgement 鈥� numerous courts have recognized the remedy for years, and Congress has since written the SEC鈥檚 ability to pursue it into federal law. The core question in the case is narrower, yet crucial for the SEC鈥檚 mission. It asks whether the SEC must show that victims suffered pecuniary or economic harm before a court can order disgorgement. Federal appeals courts have split on that point, which is why the Supreme Court agreed to take the case.

What is disgorgement, exactly?

Think of disgorgement as a legal give it back order. If a person or company makes money by breaking the securities laws 鈥� say by manipulating prices, lying to investors, or running a Ponzi-style scheme 鈥� disgorgement is designed to strip the profits away from that wrongdoing and the wrongdoers. In theory, it鈥檚 not about punishing someone for being bad, rather it鈥檚 about making sure crime doesn鈥檛 pay.

In real markets, harm can be scattered across thousands of trades, mixed up with normal price swings, and hard to trace to one bad actor. Disgorgement, on the other hand, gives securities regulators a way to focus on the part that鈥檚 often the clearest: How much ill-gotten profit the fraudster made.

Indeed, that not a punishment framing is important because the SEC has other ways to punish those convicted of securities law violations 鈥� such as civil penalties, disbarment from serving as an officer or director, industry suspensions, and more. Disgorgement is supposed to be different 鈥� an action that aims at profits, not pain. The government鈥檚 position in the Sripetch case puts it bluntly: Disgorgement is meant to strip ill-gotten gains from wrongdoers, not to compensate victims for their losses.

And disgorgement is not a niche tool. The SEC regularly collects big sums of seized money through disgorgement. According to recent figures, the SEC obtained about $1.4 billion through disgorgement in fiscal 2025 (excluding certain amounts), and $6.1 billion the year before, which represented nearly three-quarters of its total financial penalties for that year.

Those numbers may help explain why this Supreme Court fight is being watched so closely: The outcome could either keep the SEC鈥檚 playbook intact or force it to do a lot more legwork before it can ask courts to order payback.

The arguments before the Court

Earlier this week, both sides argued before the Supreme Court as to the potential future use of disgorgement and what requirements the SEC might have to meet when requesting court to order it.

Sripetch鈥檚 argument 鈥� Lawyers for Sripetch told the Court that the SEC shouldn鈥檛 be able to get disgorgement unless it can show that investors actually suffered financial harm, such as a price drop caused by the fraud or some other measurable loss. If the SEC can鈥檛 prove that kind of harm, the lawyer argues, then making Sripetch pay money looks less like giving it back and more like an impermissible penalty that the SEC is not allowed to levy.

The government鈥檚 argument 鈥� Lawyers for the U.S. Justice Department, defending the SEC, said the proof-of-loss requirement makes no sense. Disgorgement, in their view, is about the defendant鈥檚 gains, not the victim鈥檚 losses. One government lawyer summed it up as a straightforward principle: Disgorgement is intended to ensure a defendant does not profit from their own wrongdoing.

At this week鈥檚 argument, the justices sounded (at least generally) more sympathetic to the government than to Sripetch. Justice Amy Coney Barrett pressed the defense on its basic logic: If the court is only taking away ill-gotten gains 鈥� money the wrongdoer was never entitled to 鈥� why is that a penalty at all? Justice Ketanji Brown Jackson made a similar point, suggesting disgorgement would only feel like punishment when someone is forced to pay money that was rightfully theirs.

When Sripetch鈥檚 lawyer suggested the SEC should have to identify and prove each victim鈥檚 dollar loss, Justice Sonia Sotomayor鈥檚 response was basically, Why would anyone bother? If the SEC has to run a mini-trial on every investor鈥檚 exact harm just to reclaim the fraudster鈥檚 profits, disgorgement would be unworkable in many cases.

The practicality of that point is a big deal in securities fraud. In real markets, harm can be scattered across thousands of trades, mixed up with normal price swings, and hard to trace to one bad actor. Disgorgement, on the other hand, gives securities regulators a way to focus on the part that鈥檚 often the clearest: How much ill-gotten profit the fraudster made. The idea is deterrence-by-math 鈥� if you can鈥檛 keep the profits, the incentive to run the scheme shrinks.

The Supreme Court’s ruling, when it comes, could re-shape how the SEC negotiates settlements, litigates fraud cases, and talks about remedies and punishments going forward.

Still, some justices raised broader concerns about how disgorgement gets used in the real world, such as whether certain applications start to look punitive, or whether they raise questions about a defendant鈥檚 right to a trial by jury. However, the Court also seemed interested in deciding only the question of the requirement to prove victims鈥� losses and leaving those bigger constitutional debates for another day.

Why this matters (even if you aren鈥檛 the SEC)

If the Supreme Court agrees with Sripetch and requires proof of investor pecuniary harm, the SEC could face a higher hurdle in cases in which misconduct is real, but losses are tough to quantify on a trade-by-trade basis. That could mean fewer disgorgement awards, smaller ones, or more pressure to rely on classic penalties instead.

If the Court backs the government, however, disgorgement stays what it has largely been 鈥� a fast, flexible way to reclaim profits from securities fraud and a core part of how the SEC tries to keep the securities markets honest.

Either way, the ruling will shape how the SEC negotiates settlements, litigates fraud cases, and talks about remedies and punishments going forward. With the Court expected to issue its decision by the end of June, securities lawyers and stock market mavens will be keeping an eye on this case.

You can find more about the challenges facing the SEC here

Key insights:

• • • Non-compliance is significantly more expensive than compliance 鈥� Data consistently shows the cost of non-compliance can be greater than proactive compliance investments.

    • Reputational damage and hidden costs often outweigh direct fines 鈥� Beyond financial penalties, the damage from legal fees, loss of customer trust, and operational disruptions from non-compliance can inflict long-term harm.

    • Strategic investment in compliance yields a competitive advantage 鈥� A robust compliance program builds trust, attracts investors, and demonstrates greater operational resilience in a complex regulatory landscape.

There’s a persistent myth in the business world that compliance programs are a necessary burden, a line item to be minimized and managed rather than invested in strategically. The data tells a very different story, however, and it has for quite some time. For organizations still treating compliance as an overhead expense, it’s time to reconsider the math and view the broader strategic picture.

The numbers don’t lie: Non-compliance costs more

Non-compliance costs are 2.65-times the cost of compliance itself, a finding that dates back to the of multinational organizations. While the average cost of compliance for the organizations in that study was $3.5 million, the cost of non-compliance was much greater. That means simply by investing in compliance activities, organizations can help avoid problems such as business disruption, reduced productivity, fees, penalties, and other legal and non-legal settlement costs.

According to a later report from from 2017 (the most recent set of analytical data on the subject), the numbers have only grown more striking. The study showed that average cost of compliance increased 43% from 2011 to 2017, totaling $5.47 million annually. However, the average cost of non-compliance increased 45% during the same time frame, adding up to $14.82 million annually. The costs associated with business disruption, productivity losses, lost revenue, fines, penalties, and settlement costs add up to 2.71-times the cost of compliance.

And these non-compliance costs from business disruption, productivity losses, fines, penalties, and settlement costs, among others aren’t simply abstract risks. They’re real, recurring, and measurable, and they don’t stop with the fine itself.

Beyond the fines themselves, legal costs are a significant and often underestimated component of non-compliance.

This gap between compliance and non-compliance provides evidence that organizations do not spend enough of their resources on core compliance activities. If companies spent more on compliance in areas such as audits, enabling technologies, training, expert staffing, and more, they would recoup those expenditures and possibly more through a reduction in non-compliance cost.

While the math here is straightforward, the strategic case is even clearer. Compliance isn’t overhead; rather, it’s an investment with a measurable, proven return.

The hidden costs: Legal fees, fines & reputational fallout

Regulatory fines get the headlines, but they represent only part of what non-compliance actually costs an organization 鈥� a cost that has only risen over time. As of February, a total of 2,394 fines of around 鈧�5.65 billion have been recorded in the database, which lists the fines and penalties levied by European Union authorities in connection with its General Data Protection Regulation (GDPR).

Beyond the fines themselves, legal costs are a significant and often underestimated component of non-compliance. Regulatory norms are shifting constantly and navigating them requires specialized expertise. As quickly as the rules change, outside counsel and compliance specialists must keep pace, and that knowledge comes at a price. Every alleged compliance violation triggers an immediate need to engage qualified counsel, adding to a cost burden that compounds quickly and unpredictably.

Then there is reputational damage, perhaps the most enduring consequence of all. The cost of business disruption, including lost productivity, lost revenue, lost customer trust, and operational expenses related to cleanup efforts, can far exceed regulatory fines and penalties. Consider , whose compliance failures around its anti-money laundering (AML) efforts became a cautionary tale for the industry. TD Bank’s massive $3 billion in fines from US authorities wasn’t just the result of a few missteps; rather, it was caused by years of deep-rooted failures in its AML program, pointing to a culture that prioritized profit over compliance.

The findings from both the 2011 and 2017 studies provide strong evidence that it pays to invest in compliance.

TD Bank’s failure to make compliance a priority not only led to a huge fine but also seriously damaged its reputation, with revising TD’s outlook to negative in May 2024, where it remains. This is the kind of a reputational stigma that can take years to repair.

Leveraging compliance as a competitive advantage

There is also a positive side of the ledger that often goes unacknowledged. A robust compliance program signals to investors, partners, and clients that an organization is well-governed and trustworthy. That reputation doesn’t just retain market value; it actively attracts it.

Organizations that cut corners in compliance risk engaging in a short-sighted, high-risk strategy that will ultimately result in a negative outcome for the organization. Businesses that take compliance seriously tend to operate with greater predictability, fewer surprises, and stronger stakeholder confidence.

The 2017 Ponemon and Globalscape and study found that, on average, only 14.3% of total IT budgets were spent on compliance then, not much of an increase from the 11.8% reported in 2011. This clearly indicates that organizations are underspending on core compliance activities in the short term and aren’t prepared to allot further resources as the years go on. That gap represents not just risk, but a clear missed opportunity.

“The findings from both the 2011 and 2017 studies provide strong evidence that it pays to invest in compliance,鈥� explains Dr. Larry Ponemon, Chairman and Founder of the Ponemon Institute. 鈥淲ith the passage of more data protection regulations that can result in costly penalties and fines, it makes good business sense to allocate resources to such activities as audits and assessments, enabling technologies, training, and in-house expertise.”

The organizations that recognize compliance as a strategic function, not a reactive one, are the ones that will earn the trust of clients, the confidence of investors, and the operational resilience to weather an increasingly complex regulatory environment. The data is clear, and the choice is a critical one.

You can find out more about the challenges faced by corporate compliance professionals here

Key takeaways:

• • • Companies should act fast on refunds 鈥� Companies that paid IEEPA-based duties have potential refund claims, but statutory deadlines are ticking. Business leaders should map exposure, quantify opportunities, and file protective claims now.

    • Remember, other tariffs still apply 鈥� This decision only invalidated IEEPA-based tariffs. Tariffs based on Sections 232, 301, and 122 of the 1974 Trade Act听remain in force, and the administration is already signaling plans for new global tariffs.

    • Businesses should update their financial models 鈥� Tariff refunds flow through cost of goods sold, which affects taxable income and effective tax rates. Business leaders should review their transfer pricing models and contracts to determine which parties receive refund proceeds.

The U.S. Supreme Court’s recent ruling striking down the tariffs that the Trump Administration based on the International Emergency Economic Powers Act (IEEPA) creates immediate refund opportunities for businesses that paid billions of dollars in now-invalidated duties. However, the administration’s pivot to alternative tariff authorities means the trade policy landscape is shifting rather than settling.

Now, corporate tax and trade leaders must move quickly to preserve refund claims while building resilient strategies for the next wave of tariff changes that are already fully in motion.

What actually happened

In , the Supreme Court said last month that President Donald J. Trump went too far by using the IEEPA 鈥� a statute designed for genuine national emergencies 鈥� to impose broad, peacetime tariffs. The Court’s message was blunt: If you want sweeping tariff authority, get the U.S. Congress to give it to you explicitly 鈥� IEEPA doesn’t cut it.

This ruling invalidated the tariffs that relied solely on IEEPA, including certain reciprocal global duties and some measures targeting Canada, Mexico, and China. However, here’s the catch: Other tariff regimes 鈥� such as those outlined in Sections 232, 301, and 122 of the Trade听Act听of听1974听鈥� are still standing. Those weren’t touched by this decision, and they’re not going away.

Check out听听for more on the Supreme Court鈥檚 tariff decision here

Further, the administration isn’t sitting still either. There’s already talk of pivoting to Section 122 to impose a new 10% global tariff. So, while one door closed, another may be opening, which means the legal landscape is shifting, not settling.

Why this matters right now

There are several important factors to consider in the wake of this decision, including:

Start with the money 鈥� If your company paid IEEPA-based duties, your effective tariff rate on many imports just dropped. That , changes your margin picture, and could shift pricing dynamics across the retail, consumer goods, manufacturing, and automotive sectors.

Then there’s the refund potential 鈥� Billions of dollars were collected under tariffs that are now unlawful. The government won’t write checks automatically 鈥� indeed, the administration has already signaled it will fight broad refund claims 鈥� but for individual companies, the cash at stake could be significant.

Don’t overlook your contracts 鈥� Many commercial agreements include tariff pass-through clauses, price adjustments, and indemnities. Those provisions will determine which parties actually gets the money: the importer of record, the customer, or someone else in the chain. If you restructured your supply chain around the old tariff regime, you may need to rethink those decisions, too.

What businesses should do first

There are several steps business leaders should undertake to move forward in this new environment, including:

Map your exposure 鈥� Tax and trade teams need to pull multi-year import data by Harmonized Tariff Schedule (HTS) code, country of origin, and legal authority. Figure out which entries were hit specifically by IEEPA-based tariffs, as opposed to Section 232 or 301 duties, which again, are still in effect.

Quantify the opportunity 鈥� Calculate total IEEPA duties paid by entity, jurisdiction, and period. Include a rough estimate of interest, prioritize the highest-value lanes, and flag any statutory deadlines for protests or post-summary corrections. Missing a deadline isn’t something you can easily fix later.

Preserve your rights 鈥� If you’ve already filed test cases or joined class actions, revisit your strategy with counsel. If you haven’t, evaluate quickly whether to file protests, post-summary corrections, or other protective claims with the U.S. Customs & Border Protection. These procedures will evolve, of course, but the clock already is ticking.

Get the right people in the room 鈥� This isn’t just a tax problem or a trade compliance problem. Stand up a cross-functional working group that includes tax, customs, legal, finance, supply chain, and investor relations. Agree on who owns what, how you’ll share data, and how you’ll communicate, especially if the refund could move the needle on earnings or liquidity.

Financial reporting and tax implications

Most importantly, you need to reassess your tariff-related balances and disclosures. If refunds are probable and you can estimate them, that may affect liabilities, expense recognition, and reserves. Even if the accounting is murky, material claims may need to be discussed in your report鈥檚 Management鈥檚 Discussion & Analysis (MD&A) section or in footnotes.

On the tax side, tariff refunds and lower ongoing duties flow through cost of goods sold (COGS), which changes taxable income and your business鈥檚 effective tax rate. Timing matters: When you recognize a refund for book purposes may not match when it hits for tax, creating temporary differences that need Accounting Standards Codification 740 analysis.

And don’t forget transfer pricing. Many intercompany pricing models were built during the high-tariff period and may embed those costs in tested party margins. If tariffs fall or refunds materialize, those models and the supporting documentation may need updates. Review intercompany agreements that allocate customs and tariff costs to make sure they align with both the economics and the legal entitlement to possible refunds.

Think beyond the refund

Yes, the immediate focus is on getting your company鈥檚 money back and staying compliant 鈥� but this is also a moment in which more strategic thinking is required, including:

Run scenarios 鈥� Business show run their models to see what happens if IEEPA tariffs disappear and aren’t fully replaced. Model what happens if a broad 10% global tariff lands under Section 122. Model what happens if country- or sector-specific measures expand. For each scenario, stress-test your gross margin, cash flow, and key supply chain nodes.

Revisit your sourcing strategy 鈥� Some nearshoring or supplier diversification moves you made under the old tariff structure may no longer make sense. Others may still be smart as a hedge against renewed trade tensions. The tax team needs to be part of these conversations 鈥� not just because tariffs affect cost, but because new structures reshape your effective global tax rate, foreign tax credit position, and your base erosion and profit shifting (BEPS) exposure.

Fix your data and governance 鈥� Trade policies can move fast and unpredictably. If you can’t quickly pull clean import data, run classification reviews, or model your exposure across scenarios, then you’re simply flying blind. Now is a good time to fix that.

The bottom line

The Supreme Court’s decision closed one chapter of the president鈥檚 tariff story, but it didn鈥檛 end it. For corporate tax and trade leaders, the message is straightforward: Grab the refund opportunity, protect your position, and use this moment to build a more resilient strategy for whatever comes next.

Because if there’s one thing we’ve learned, it’s that the next round of tariff changes is already on its way.

For more on the impact of tariffs on global trade, you can download a full copy of the 成人VR视频 Institute鈥檚 recent 2026 Global Trade Report听here

Key insights:

• • • Crypto crime is likely much bigger than it appears 鈥� Blockchain forensics firms only report what they can prove with 99%-plus accuracy, meaning the true scale of crypto crime is likely far larger than official reports suggest.

    • False negatives are still a problem 鈥� While achieving incredibly low false positive rates, these strict standards result in significant false negatives, with firms missing up to 75% of known criminal addresses in tested datasets.

    • This reporting gap reveals hidden losses 鈥� FBI data shows higher losses than do forensic reports and when accounting for the 85% of fraud victims who never report crimes, actual losses could exceed $110 billion annually.

Law enforcement has known about crypto-related crime for more than 14 years now. Five years ago, I felt these industry reports left a lot to be desired. A lot has happened in since then, however, and I have learned that clarity is becoming more important than caveats, because even my own are being taken out of context by the cryptocurrency ATM industry.

The myth of “crypto crime”

Nick Furneaux points out 鈥� spoiler: it鈥檚 all just financial crime. Yet, the blockchain forensics industry still has the annual tradition of issuing crypto crime reports that end up getting reviewed . However, my previous post showed how the prevailing reports appeared to prove Nick鈥檚 point, stating that crypto crime represented just 鈥� effectively, a rounding error.

I wrote that these reports needed to be heavily caveated, as the figures identified were clearly smaller than the figures that may have been reasonably expected. In fairness to the industry, reports have since incorporated caveats on nearly all stated figures. However, this has still not stopped the industry from cherry picking figures that support the argument that there is no such thing as crypto crime.

The ironically good news in this year鈥檚 reports has been that the official figures for illicit activity across the industry has increased to of all crypto activity for the . This increase is an indicator that the industry has gotten better at identifying criminal activity; and while there is still room for improvement, we are moving in the right direction.

Art vs. science

The companies producing these reports continue to hold some of the largest datasets on crypto-crime and blockchain metadata in the world. They are ideally placed to speak to these trends in illicit activity in the crypto ecosystem. However, one of the early arguments in blockchain forensics was that it is not as effective as some people were claiming.

In the landmark case, (colloquially known as the Bitcoin Fog case), blockchain intelligence platform CipherTrace claimed that blockchain forensics was more of an art than a science. Based on evidence from Chainalysis, the case鈥檚 acknowledged blockchain forensic evidence was admissible in criminal court to based on the methods used.

Understanding the limits of these reports requires an understanding of the core audience for these forensic firms: Law enforcement, which has a high burden of proof to achieve before going to court with any evidence.

Chainalysis has been doing this for 12 years at this stage and has been one of the only services to undergo a of its data, albeit a tiny sample size of its overall dataset. In the last five years, competitor TRM Labs has become an industry leader based on its focus on blockchain intelligence and law enforcement support.

The accuracy trap

Understanding the limits of these reports requires an understanding of the core audience for Chainalysis and TRM Labs: Law enforcement, which has a high burden of proof to achieve before going to court with any evidence. As such, the standard held by industry leading companies is that a data model should achieve an accuracy level of 99%-plus. However, as with any machine learning algorithm, it is incredibly difficult to guarantee 100% accuracy. Still, 99% accuracy is higher than human-based systems are expected to have.

Despite this commitment to high standards, the blockchain forensics industry has come under fire for false negatives. In the academic research of Chainalysis鈥� data, researchers found its false positive rate to be 0.01%, 0.15%, and 0.11%, respectively across the three datasets, or at least 99.85% accuracy for what was in their tool. Obviously, this is much more scalable and accurate in the modern world in which criminals are using AI than having humans unravelling these datasets manually. However, this level of certainty does paradoxically result in a surprising level of false negatives.

Indeed, Alison Jimenez, of Dynamic Securities Analytics, pointed out that Chainalysis missed a significant percentage of all addresses in the three sample datasets. The study looked at coverage of three known illicit services: BestMixer, Hansa Market, and Wall Street Market.

Chainalysis was found to have been able to identify 25%, 79%, and 95% of the sampled addresses, respectively. While this may seem like the company is negligent to suggest they can identify crime when it missed 75% of Best Mixer addresses, a service designed to obfuscate the flow of funds, the reality is that identifying any of these services is pretty difficult in the first place 鈥� especially in a world in which criminals are actively trying to escape surveillance. And remember, this is just the data that made it to production; Forensics firms are still able to assist law enforcement to make informed decisions on their investigations based on a range of additional data that never gets surfaced in the tool or in reports.

The reporting gap

These forensic companies are unable to publish informed estimates of the level of crime, but they are saying that they have identified at least $154 billion dollars in illicit activity in 2025. These tools also assist law enforcement with investigations which they may not always have permission to include in their datasets. Yet, investigators can still use the technology to carry out their investigations safe in the knowledge that their evidence will be admissible in court. That means, the $154 billion figure is effectively a floor, not a ceiling for the potential effectiveness of blockchain forensics.

The FBI counts what victims report, whereas forensic firms count what they can prove on-chain. When you consider that academic research suggests 85% of fraud victims never report their crimes to anyone, the scale of the problem becomes staggering.

The discrepancy between forensic reports and law enforcement data is where the caveats become most visible. The for 2024 (released in late 2025) pegged crypto-related scam losses at $16.6 billion. This figure is 67% higher than Chainalysis鈥檚 estimate, and 55% higher than TRM Lab鈥檚 for the same category.

Why the gap? Because the FBI counts what victims report, whereas forensic firms count what they can prove on-chain. When you consider that academic research suggests 85% of fraud victims never report their crimes to anyone, the scale of the problem becomes staggering. If we extrapolate the FBI鈥檚 reported figures to account for this silent 85%, the potential loss to crypto scams could be as high as $110 billion. While not an academically rigorous calculation, this figure would not surprise many industry analysts.

What will these reports look like in another 5 years?

The critique I have of these reports is that they underestimate the size of the problem in order to be able to accurately stand by their data. This isn鈥檛 a bad thing, it just results in unfortunate outcomes. There may be a day when these reports are combined with academic research to make a more informed estimation of how big the crypto crime problem really is.

Thankfully, those in the blockchain forensics industry can鈥檛 speak in theories or artistic interpretation. They have to be able to prove their statements and back them up with verifiable data. Right now, these reports are effectively looking at the tip of the iceberg and showing what they know about what they can see 鈥� the caveat now is that this is just the known knowns. The challenge continues to be identifying the known unknowns. Fortunately, we are getting better at identifying criminal activity every year.

You can find more of our coverage of the cryptocurrency industry here

Key insights:

• • • Pushing innovation in the financial sector 鈥� The OCC is actively enabling innovation among financial service institutions, not resisting it.

• • • Regulation is being refocused, not removed 鈥� Priorities may change with each administration, but oversight remains, and crypto is increasingly central.

    • Compliance is a growth requirement 鈥� Regulations around the BSA, sanctions, and KYC still apply, so durable controls and experienced teams do matter, even with AI.

Shortly after being named Acting Director of the Comptroller of the Currency in early 2025, Rodney E.听Hood in the financial sector. Hood spoke about improving bank-fintech partnerships and providing regulatory frameworks for digital asset activities.

As expected, the Hon. Jonathan V. Gould was sworn in as the 32nd on July 15, 2025. Under his leadership of the Office of the Comptroller of the Currency (OCC), the spigot of technology-enabled financial innovation is set to remain wide-open, with blockchain-based products at the forefront.

In his speech to the , Comptroller Gould laid out a road map to a future that includes more de novo charters, with many of them coming from the ranks of blockchain and digital or virtual asset service providers (VASP). He refuted notions that these things cannot be done under current rules and reaffirmed the agency’s ability to regulate such institutions.

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Institutions that fail to embrace these emerging technologies as they arise risk falling behind, Gould said, describing how any legal framework that treats digital assets differently than existing electronic means is risking 鈥渁 recipe for irrelevance.鈥� Such an antiquated approach keeps companies, institutions, and indeed the nation鈥檚 entire financial system, mired in the past, he added.

Digi-mon go!

In word and deed, the current OCC continues to offer a green light to VASPs as well as to traditional financial institutions that are looking to dabble with blockchain, stablecoins, and the like. Regulatory action in the past year mostly served to end prior enforcement against traditional institutions while putting ancillary companies in check. For example, of US/Mexican border casinos, crypto ATM-style terminals, and armored car companies demonstrates the regulatory shift that takes place after each change in administration.

Government rarely gives up its authority, but it does shift the focus. Border cash is out, crypto is in. Clear regulation for this sector is important, necessary, and will continue to create an entirely new set of financial products & services.

Institutions that fail to embrace these emerging technologies as they arise risk falling behind… [and] any legal framework that treats digital assets differently than existing electronic means is risking ‘a recipe for irrelevance.’

Normally I advocate more caution but, in this case, having any regulation is better than having no regulation. Blockchain is here to stay and having any kind of clarity around it is the right way to begin. Those who legislate have an opportunity to improve the regulatory framework over this technology as it evolves 鈥� as long as a framework exists. It’s sort of like the slippery slope argument in reverse: When we build a foundation on regulations that encourage innovation while protecting consumers, including the companies themselves, we create a healthier economy. These rules can always be improved and adjusted as we understand better what we have unleashed upon the world.

Compliance is on the 鈥渃an鈥檛 cut鈥� list

Rumors are swirling of cuts to many corporate compliance budgets. Many compliance pros think this administration will let companies do as they please! Let a professional risk manager urge caution here instead. The power of the Bank Secrecy Act (BSA), the extraterritorial reach of sanctions, and the requirements to know your customers (KYC) are not going anywhere. Regulations are refocused, not removed. A proliferation of nouveau financial institutions will provide a target-rich environment for the regulators of today and tomorrow to find things they dislike and prosecute those offenses. A business that hopes to make it big should be built to withstand the winds of change and weather different regulatory conditions over time.

Therefore, smart compliance professionals will keep an eye on the horizon and keep their risk controls tight. Yes, it may be a good time to start a crypto company; but no, that does not mean you can process drug cash, ignore sanctions, or fail to collect basic personally identifying information.

With increasingly ubiquitous AI tools, your humans in the loop are more important than ever. As entry level jobs become automated, depth of experience becomes more valuable. Retain talent and institutional knowledge on your compliance teams because those individuals will train the AI as well as the investigators of tomorrow.

Indeed, no matter who is in charge of the government鈥檚 regulations, enforcement will come when you let your guard down and ignore basic risk management principles.

You can find more about how government agencies are managing various risk, fraud, and compliance issues here

Key insights:

• • • The Supreme Court decisively limited presidential tariff power under IEEPA鈥擳he decision held that the statute鈥檚 authority to 鈥渞egulate importation鈥� does not include the power to impose tariffs, especially absent clear congressional authorization for actions of major economic significance.

    • The ruling creates major uncertainty around refunds of already鈥憄aid IEEPA tariffs鈥� There is more than $175 billion potentially at stake and no clear, orderly mechanism yet for determining who is entitled to refunds or how they will be administered.

    • Tariffs are not ending but shifting to slower, more constrained legal authorities 鈥� As the administration pivots to statutes like Sections 232 and 301 that impose procedural hurdles and limits, it is likely to result in continued trade volatility rather than relief for businesses.

In a 6鈥�3 ruling handed down February 20 in Learning Resources, Inc. v. Trump, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize President Donald Trump to impose tariffs. For businesses that have spent the past year navigating a dizzying storm of rate changes, exemptions, and modifications 鈥� sometimes shifting within days of each other 鈥� the ruling offers a measure of vindication.

However, don’t exhale just yet. The decision is likely to produce more confusion and instability in the near term, not less. The IEEPA tariffs may be legally dead, but the trade policy fight is very much alive, the refund process is an open question, and the administration is already pivoting to Plan B. For businesses trying to plan around a coherent trade regime, the ground has shifted again 鈥� it just shifted in a different direction.

Shortly after the announcement of the Supreme Court鈥檚 ruling, President Trump announced that his is planning to invoke new trade authorities and potentially levy new, across-the-board tariff on US trading partners. As of press time, the White House declined further comment but had tentatively scheduled a news conference for later Friday afternoon.

Here’s what happened, what it means, and what comes next.

The Court鈥檚 ruling

Chief Justice John Roberts, writing for the majority, framed the case around a simple but consequential question: Can two words 鈥� regulate and importation, separated by 16 other words in IEEPA’s text 鈥� support President Trump’s claim to his ability to impose tariffs of unlimited amount, duration, and scope on imports from any country?

The answer, from the Court鈥檚 majority is No.

The Court’s reasoning proceeded along two tracks. First, three justices 鈥� Chief Justice Roberts, and Justices Neil Gorsuch and Amy Coney Barrett 鈥� invoked the major questions doctrine, the principle being that executive actions of vast economic and political significance require clear congressional authorization. They found none in the IEEPA. As Roberts wrote, the President must “point to clear congressional authorization” to justify his assertion of tariff power. “He cannot.”

If the past year has taught businesses anything about trade policy, it’s that certainty is now a luxury item.

Second, and commanding a full six-justice majority, the Court worked through IEEPA’s text and concluded that the word regulate simply does not encompass the power to tax. The U.S. Code is full of statutes authorizing agencies to regulate various things, but the government, in its arguments before the Court, could not identify a single one in which that power has been understood to include taxation. In one of the opinion’s sharpest lines, the majority expressed skepticism “that in IEEPA 鈥� and IEEPA alone 鈥� Congress hid a delegation of its birth-right power to tax within the quotidian power to ‘regulate.'”

What the ruling does not say

Here is where businesses may need to pay close attention: The Court said nothing about refunds of tariffs already paid.

Justice Brett Kavanaugh, writing in dissent, flagged the looming chaos directly. “The Court’s decision is likely to generate other serious practical consequences in the near term,鈥� Justice Kavanaugh wrote. 鈥淩efunds of billions of dollars would have significant consequences for the U.S. Treasury鈥� . [T]hat process is likely to be a ‘mess’鈥� . Because IEEPA tariffs have helped facilitate trade deals worth trillions of dollars鈥� the Court’s decision could generate uncertainty regarding various trade agreements.”

Check out for more on the Supreme Court鈥檚 tariff decision here

That mess is now a real, operational problem. There is more than $175 billion in IEEPA tariff collections at risk, according to a estimate released today. Nearly 1,000 companies had already filed preemptive refund claims with the Court of International Trade (CIT) before today’s ruling. Indeed, the CIT has indicated it has jurisdiction to order reliquidation and refunds, and the government has stipulated it won’t challenge that authority.

However, the mechanics 鈥� who gets paid back, how much, and when 鈥� remain deeply uncertain. Some importers passed tariff costs downstream to their customers or absorbed them into pricing adjustments that can’t easily be unwound. For many businesses, the refund question will be less a windfall than a logistical headache.

What the Administration might do next

Make no mistake, the White House took a significant blow today. The IEEPA was the administration’s most flexible and powerful tariff instrument and the tool that let the President impose duties instantaneously, on any trading partner, at any rate, with no procedural prerequisites. That tool is now gone.

However, as mentioned, the administration signaled immediately that it intends an end-around in order to keep as many tariffs in place as possible. the United States would invoke alternative legal authorities, including Section 232 of the Trade Expansion Act (national security tariffs), Section 301 of the Trade Act of 1974 (unfair trade practices), and other statutory provisions. None of these alternatives offer the speed and blunt-force flexibility that the IEEPA provided, however, and they may not replicate the full scope of the current tariff regime in a timely fashion.

Shortly after the announcement of the Supreme Court鈥檚 ruling, President Trump announced that his is planning to invoke new trade authorities and potentially levy new, across-the-board tariff on US trading partners.

Justice Kavanaugh’s dissent, notably, conceded the point while framing it sympathetically: “In essence, the Court today concludes that the President checked the wrong statutory box by relying on IEEPA rather than another statute to impose these tariffs.”

That framing understates the practical significance. The alternative statutes each come with procedural requirements 鈥� agency investigations, public hearings, durational limits, rate caps 鈥� that IEEPA’s emergency framework did not impose. Section 122, for instance, caps tariffs at 15% for 150 days. Section 232 requires an investigation and report from the U.S. a Commerce Department. Section 301 demands a formal determination by the U.S. Trade Representative. These are not insurmountable hurdles of course, but they are hurdles and they will take time.

What businesses should do now

If the past year has taught businesses anything about trade policy, it’s that certainty is now a luxury item. Today’s ruling doesn’t change that; rather, it just changes the axis of uncertainty. Here’s what any organization impacted by trade should be thinking about:

• • Review your tariff exposure immediately 鈥� Understand which of your import duties were collected under IEEPA authority compared to the other statutes (Sections 232, 301, 201). Only IEEPA tariffs are affected by today’s Court ruling. Section 232 tariffs on steel, aluminum, autos, and other goods remain fully in place, as do Section 301 tariffs on Chinese imports. For many importers, a significant portion of their tariff burden will not change. For others, it may change everything.
  • Engage trade counsel on refund claims 鈥� If you’ve paid IEEPA duties, the clock is ticking. The CIT has a two-year statute of limitations on refund claims, running from the date the tariffs were published. For the earliest IEEPA tariffs (the fentanyl-related duties on Canada, Mexico, and China from February 2025, for example), that window is already narrowing. If you haven’t filed a protective claim yet, consult with counsel now.
  • Prepare for replacement tariffs 鈥� The administration has made clear it intends to reimpose tariffs under alternative authorities. Thus, the effective tariff rate is not going to 0%. Even without IEEPA tariffs, estimates suggest the average rate would settle around 9%, still far above the roughly 2% that prevailed before the beginning of President Trump’s second term. Businesses should map out scenarios to plan for a period in which IEEPA tariffs are lifted but gradually replaced by duties under other statutes, potentially with different rates, different product coverage, and different country-specific treatment.
  • Monitor trade deal stability 鈥� Many of the bilateral and multilateral trade agreements negotiated over the past year 鈥� with the United Kingdome, the European Union, Japan, South Korea, and others 鈥� were structured around tariff levels built greatly upon the IEEPA. The legal basis for those arrangements is now uncertain. Watch for renegotiations, modifications, or lapses in these existing frameworks.
  • Build flexibility into supply chain planning 鈥� This is the hardest and most important advice. The trade policy environment is not returning to a stable equilibrium anytime soon. Today’s ruling is the end of one chapter, but the broader story 鈥� of a political system wrestling with how much tariff authority the President should have 鈥� is far from over. The administration will test the boundaries of its remaining statutory tools. And the courts will almost certainly be called upon again.

Taking in the bigger picture

For businesses, the practical takeaway from today鈥檚 Court order is more pedestrian but no less important: Strap in. The tariff landscape is shifting again, the refund process will be complicated, and the administration will find another way to pursue its trade objectives. Today brought clarity on the law, but clarity on the market is still a long way off.

For more on the impact of tariffs, you can download a full copy of the 成人VR视频 Institute鈥檚 recent听听here

Key insights:

• • • Sextortion has evolved into a global industry 鈥� This crime is being fueled by organized crime networks and human trafficking.

    • Victims exist on both sides鈥� Often, vulnerable workers, who operate as forced labor in scam compounds abroad, are as much the victims as those people being scammed online and extorted for financial gain.

    • Digital literacy and cross-border cooperation are strong tools 鈥� Governments and law enforcement need to better educate the public about these scams and seek better collaboration to prevent exploitation and to dismantle organized crime networks.

A 17-year-old Michigan high school student after inadvertently sharing explicit photos with a Nigerian sextortion scammer after the scammer posed as a teenage girl on a fraudulent Instagram account. Also, a 16-year-old Kentucky high school student after he was blackmailed with an AI-generated nude image.

Sadly, these two families are victims of the more than 100,000 sextortion reports filed with the National Center for Missing and Exploited Children (NCMEC) since 2020, many now involving AI-generated imagery. These reports are part of the larger increase in , which typically targets males ages 14 to 17 and which has been on the rise since 2020. These tragic cases are part of a vast network of scams that stretches from the to criminal compounds in Asia and Africa.

Sextortion in the modern age

The FBI defines sextortion as a criminal act in which an offender blackmails a victim for payment under the threat of releasing sexually explicit material, such as a photo or video. The material may have been solicited through a romance scam or may be the product of generative AI (GenAI). Sextortion is the latest trend in a series of scams that generate billions of dollars for international criminal syndicates on the backs of forced labor in parts of the world with unstable governance and oversight. An average 800 CyberTipline reports submitted to NCMEC from 2022 to 2023 related to the sextortion of minors.

NCMEC notes that victims of sextortion scams to the CyberTipline and make use of the . Take It Down allows for anonymous requests to remove explicit images from participating platforms and social media companies. encourages changing passwords after scam activity and not responding to any requests for payment, even if threats are made.

Organized crime syndicates and cyber-scams

are the 鈥渄efinitive market leaders鈥� in cyber-enabled fraud and online scams, which have been rapidly expanding since the COVID-19 pandemic, according to the United Nations鈥� Office on Drugs and Crime. In areas of Asia with weak governance, scam centers and fraud gangs run sophisticated operations that often front as industrial parks or casinos and hotels. and coerced into defrauding other victims online. The trafficked individuals often are lured with false promises of high-paying jobs and the ability to maximize their language skills.

Broad enforcement efforts have been relatively ineffective as scamming operations simply move within the country or offshore.

Once there, victims are forced into labor to commit financial fraud usually by enticing smartphone users to invest in cryptocurrency scams or engaging in sextortion (which sometimes includes forced sex trafficking to produce sexual content). It is unclear if teenagers are being targeted explicitly or if they are inadvertently targeted through broader, population-wide cyber-scams.

The Myanmar town of Laukkaing (also spelled Laukkai), the capital city of the Kokang Self-Administered Zone is considered the engine-room of forced labor scamming. In Myanmar鈥檚 Kokang region, have turned from narcotics to online scamming, operating casinos, and scam compounds possibly because these crimes are more lucrative and easier to operate at scale.

In October 2023, a deadly crackdown at Myanmar鈥檚 Crouching Tiger Villa (referred to as the 1020 Incident) was the beginning of the crumbling of mafia-led control in Laukkaing. The Chinese government launched coordinated attacks, which resulted in . The leader of the Ming family (which operated Crouching Tiger Villa) took his own life after being captured, but of his extended family with ties to organized crime and illegal activities in Myanmar were sentenced in Chinese courts in September 2025, including 11 who were sentenced to death.

An estimated US $1.4 billion was generated by the Ming family over 10 years through telecommunications fraud, illegal casinos, drug trafficking, and prostitution.

Inside offshore scam compounds

Beyond Southeast Asia, forced-scam operations have grown rapidly across the Mekong region. The听, funded in part by 成人VR视频, notes their study of CyberTipline reports and IP addresses point to a strong presence of scam compounds in Myanmar and Cambodia.

The financial impact of scam compounds is no small factor 鈥� ruling elites in these countries have a financial motivation to look the other way because of its high profitability. The in Cambodia are more than US $12.5 billion annually, or about half of the country鈥檚 formal GDP. Across Mekong countries (China, Myanmar, Laos, Thailand, Cambodia, and Vietnam), cyber-scam returns generate an estimated US $43.8 billion annually.

The financial impact of scam compounds is no small factor 鈥� ruling elites in these countries have a financial motivation to look the other way because of its high profitability.

Broad enforcement efforts have been relatively ineffective as scamming operations simply move within the country or offshore, and there are reports that these complex money laundering operations help move funds into the formal economy of countries with weak governance.

Despite the challenges in enforcement, some high-profile enforcement cases have helped to generate international coordination against cyber-scams and sextortion. A California teen鈥檚 death by suicide resulting from sextortion led to three years later. Interpol鈥檚 (July and August 2025) resulted in 260 arrests and more than 1,200 electronic device seizures in 14 African countries. The Association of Southeast Asian Nations (ASEAN) announced that as the main regional security concern last month. Domestically, the U.S. Department of the Treasury鈥檚 Office of Foreign Assets Control (OFAC) has issued sanctions on nine targets involved in scam operations in , and against (who is also associated with online scam centers).

Digital literacy as a solution

To truly begin to crack scam networks that operate in parts of the world with weak governance, of their citizens and support stronger cross-border investigation strategies. Stronger anti-money laundering frameworks can disrupt scam compounds more effectively than sting operations that just force the scam operation to move elsewhere.

It is critical that digital literacy is emphasized for online users who fall prey to sextortion and among job seekers lured into forced labor in scam compounds by fraudulent job advertisements. Cross-border collaboration among authorities, along with stronger enforcement and shared digital literacy, are the best defenses against this evolving threat.

You can find out more about our coverage of human trafficking, child exploitation, and forced labor at our Human Rights Crimes Resource Center here

Key highlights:

• • • Human rights risks are elevated for data enrichment workers 鈥� Data enrichment workers can face low and unstable pay, overtime pressure driven by buyer timelines, harmful content exposure with weak safeguards, limited grievance access, and uneven legal protections that hinder workers鈥� collective voice.

    • Human rights due diligence is essential for companies 鈥� Companies as buyers of these services must map subcontracting tiers, assess risk by employment model, document worker protections down to Tier-2 and Tier-3 suppliers, and audit and monitor their own rates, timelines, and payment terms to avoid reinforcing harm to workers.

    • Responsible contracting and remedy are a necessity 鈥� Contracts should embed shared responsibility, and include fair rates, predictable volumes, realistic deadlines, funded health & safety and mental鈥慼ealth supports, effective grievance channels, and remediation.

Demand for data enrichment work has surged dramatically with the rapid development and expansion of AI technology. This work encompasses collecting, curating, annotating, and labeling data, as well as providing model training and evaluation 鈥� all of which are critical activities that improve how data functions in technological systems.

However, the workers performing these tasks currently operate under different employment models, according to from Article One Advisors, a corporate human rights advisory firm. Some workers are in-house employees at major AI developers, others work for business process outsourcing (BPO) companies, and many are independent contractors on gig platforms on which they bid for tasks and get paid per piece.

Human rights issues in data enrichment work

Data enrichment workers sit at the sharp end of the AI economy, yet many struggle to earn a stable, decent income. In particular, pay for gig workers often falls short of a living wage because tasks are sporadic, payments can be delayed, and compensation is frequently piece鈥憆ate. Because work flows through , fees and margins get skimmed at each layer and shrink take鈥慼ome pay 鈥� another area of exploitation for today鈥檚 digital labor workforce.

In addition, another human rights issue at work is their right to rest, leisure, and family life and, in some places, even breaching guidance from the International Labour Organization (ILO) or local labor laws. Buyer purchasing practices with aggressive deadlines are a significant upstream driver of this overtime pressure.

National labor protections vary widely, and platform workers in particular often fall through regulatory gaps.

For many, the work itself carries health risks. Labeling and moderation can require repeated exposure to violent or graphic content, with well鈥慸ocumented mental鈥慼ealth impacts. Yet safeguards are uneven. Indeed, workers may lack protected breaks, task rotation, mental鈥慼ealth support, adequate insurance, or the option to switch assignments. Even when content is not graphic, strain shows up as ergonomic problems, stress, and disrupted sleep.

When harm occurs, remedy can be hard to access. Platform-based work setups often provide no clear, trusted point of contact, and reports of retaliation deter complaints. Effective operational grievance mechanisms can be missing, and this leaves workers without credible paths to redress.

Finally, national labor protections vary widely, and platform workers in particular often fall through regulatory gaps. Because work is individualized and online, forming unions or works councils is harder. This weakens workers鈥� collective voice just where and when it is most needed to identify risks, negotiate improvements, and secure remedies.

Due diligence for companies buying data enrichment services is essential

When companies procure data enrichment services, they must recognize that respecting human rights extends throughout the entire value chain and not just with themselves and their direct suppliers. Companies creating trusted partnerships with their suppliers helps to identify issues before they become harmful and create mutual accountability for the humans behind the algorithms.

Article One Advisors鈥� Lloyd explains that the mandatory baseline starts with human rights due diligence, and can be found in areas such as:

• • • Risk identification and assessment 鈥� The first step for companies is to identify and assess risks听by understanding their suppliers鈥� model. This means knowing which groups of workers are full-time employees, contracted workers, or platform-based gig workers. Each model carries different risk profiles.
    • Subcontractor ecosystem mapping 鈥� Tracing the subcontracting chain听to see how many layers exist between the supplier and the workers is essential. Fees and pressures compound at each tier of the value chain, says Lloyd.
    • Documentation of worker protections in Tier 2 and Tier 3 suppliers 鈥� Assessing and promoting worker protections for every layer of the value chain 鈥� which includes making sure the wage structures are clearly defined and equitable, health and safety measures are adequate, and protections for exposure to harmful content and effective grievance mechanisms exist 鈥� are baseline elements of human rights due diligence.
    • Examination of company鈥檚 own practices 鈥� Finally, it is necessary for companies to ensure that their own procurement standards and contracts are not reinforcing human rights harms. This includes companies confirming that their contract terms, timelines, and payment schedules are not inadvertently forcing suppliers to cut corners.

Responsible contracting and remedy mechanisms

Companies as buyers of data enrichment services also must instill shared responsibility in owning worker outcomes among themselves, BPOs, platforms, and model developers. Comprehensive, clear human-rights standards, living-income benchmarks, and shared responsibility are essential elements of good purchasing practices. More specifically, these require fair rates for work, predictable volume expectations, and realistic timelines to make sure suppliers do not push excessive hours. In addition, budgets should include cost-sharing for audits, key risk management measures (such as mental health support), and occupational health and safety controls.

Smart remediation turns harmful situations into improved conditions by providing back-pay for underpayment, medical and psychosocial care after exposure to harmful content, contract adjustments to remove perverse incentives, and time-bound corrective action plans co-designed with worker input. As a last resort when buyer and supplier need to part ways, a responsible exit is planned with notice, transition support, and no sudden contract termination that strands workers.

Similarly, grievance mechanisms for platform workers 鈥� who are often dispersed across geographics, classified as independent contractors, and lack line managers or union channels 鈥� need to be contractually documented. Effective grievance redressal needs to include confidential mechanisms and remediation processes, in-platform dispute tools, independent individuals to investigate complaints, multilingual facilitation, and joint buyer-supplier escalation paths to bridge gaps in labor-law protection and deliver credible remedies at scale, Lloyd notes.

Promoting quality through worker well-being

Protecting data enrichment workers is not only an ethical imperative but also essential for AI quality itself. When workers face excessive hours, inadequate pay, or harmful content exposure without proper support, the resulting stress and burnout directly impact data quality outcomes. Companies must recognize that responsibility for worker well-being and quality data outcomes extend throughout the entire value chain and does not solely rest with BPOs providers alone.

You can find more about the challenges companies and their workers face from forced labor in their supply chain here

Key insights:

• • • Compliance is becoming a technology arms race鈥� Criminals are rapidly deploying AI, automation, and cryptocurrency to execute sophisticated fraud on a large scale, while many compliance departments remain stuck with legacy systems, creating a technological gap.

    • AI represents a dual-edged sword for compliance 鈥� Organizations must strategically determine appropriate AI applications while maintaining rigorous human oversight and validation protocols.

    • Regulatory fragmentation is creating operational complexity 鈥� The compliance environment is splintering, and this fragmentation demands creating near-real-time automated systems and abandoning manual compliance processes.

The world of compliance and risk management is evolving quickly. Criminals, regulators, and markets are all moving faster, often powered by AI and digital innovation. As a result, compliance can no longer function as a static control department; rather, it must become an intelligent, tech-enabled risk partner to the business.

To examine this evolving terrain more deeply, the 成人VR视频 Institute has published a new digital report, 10 Global Compliance Concerns for 2026, that draws on interviews with compliance and other area experts to map out the critical challenges ahead and help determine what organizations need to do now to prepare.

10 critical risk areas

Based on extensive interviews with these experts, the report identifies 10 areas in which today鈥檚 compliance leaders should expect heightened scrutiny in 2026. These areas span tech-enabled fraud and scams, ethical AI use, crypto-assets entering mainstream finance, expanding data privacy obligations, and the professionalization of cybercrime.

Jump to 鈫�

10 Global Compliance Concerns for 2026

The experts we interviewed also highlight shifting financial crime enforcement priorities, escalating sanctions and tariff risks, complex reporting requirements around ESG issues, third-party oversight challenges, and accelerating regulatory changes across AI, cybersecurity, climate, and digital assets.

Across all 10 areas, the specialists interviewed stress that organizations will need stronger governance, smarter technology, and better-trained people in order to keep pace.

Interestingly, several developments stand out as game-changers in the report. For example, fraud seems to be entering a new era, one in which criminals aggressively adopt AI, automation, and crypto to scale up attacks while many compliance teams still rely on outdated tools. Smaller financial institutions, fintechs, and digital platforms are particularly vulnerable without advanced monitoring and analytics capabilities, area experts explain.

鈥淎I is a force multiplier for criminals, and they are exploiting that technology however they can,鈥� says Urriolagoitia 鈥淩io鈥� Miner, the founder and CEO of , adding that 鈥渂anks and financial institutions tend to move slowly, but hopefully they will start incorporating more AI tools as well to fight back.鈥�

The risks and opportunities of AI

AI itself presents both opportunity and risk on the compliance landscape. The experts interviewed urge organizations to think strategically about in which areas AI can enhance investigations, monitoring, and due diligence, and where it introduces unacceptable ethical or privacy concerns. Human oversight and robust validation remain essential.

Another potential development is that crypto is now mainstream, creating urgent demands on compliance officers to understand digital assets, stablecoins, and emerging regulatory frameworks. Experts emphasize that applying traditional risk-based approaches becomes far more complex when teams lack familiarity with blockchain activity and crypto-enabled crime patterns. Further, data privacy and cybersecurity stakes are rising as regulators grow increasingly intolerant of weak controls. Yet, technology is only half the solution, the area experts consulted note, and cultural factors and ongoing training are equally critical.

鈥淎I technology presents tremendous opportunities for improving efficiency and reducing costs within compliance programs,鈥� says Teresa Anaya, founder and director of AML Audit Advisory.听 However, she adds, 鈥淎I adoption must be approached thoughtfully and responsibly, and be conducted with expert human oversight.鈥�

Finally, regulatory change itself is a structural risk. The volume, speed, and complexity of new requirements are outpacing many compliance teams鈥� manual processes. Organizations need to invest in scalable technology and automation so that their compliance teams can simply keep up, experts warn.

Priorities for action

The report concludes with practical priorities drawn from these expert insights. for example, organizations should refresh enterprise-wide compliance risk assessments and strengthen governance and accountability, especially around AI and vendors. And as mentioned, investing in modern compliance and automation technologies is critical, as is updating policies for emerging risk domains.

For boards, executives, and compliance leaders, the expert consensus is clear: 2026 will reward those organizations that treat compliance as a forward-looking strategic capability that is fully integrated with technology, risk, and business decision-making.

You can access

a full copy of the 成人VR视频 Institute鈥檚 new digital report, 10 Global Compliance Concerns for 2026, here