AML in Healthcare: Protecting the Sector from Financial Crime
As the healthcare sector is undergoing a massive digital transformation, new doors are opening for financial crimes and scams of all types: from AI-generated fake medical records to complex networks of shell clinics. Sadly, the “clean” facade of medical billing is increasingly being used to wash “dirty” money nowadays.
If your organization handles patient onboarding, insurance claims, or supplier payments, you are no longer just a healthcare provider but also a gatekeeper against financial crime. This article explores why the sector is under fire and how modern Healthcare Anti-Money Laundering (AML) software has become an essential shield for compliance and integrity.
Why Healthcare Faces Increasing Money Laundering Risks
Gone are the days when money laundering in healthcare was associated with bribes and bags of cash. Today, it’s about the “legitimatization” of illicit funds through the high-volume, complex payment systems of medical institutions.
Back in early 2025, the US Department of Justice executed the largest healthcare fraud takedown in its history, resulting in criminal charges against 324 defendants and revealing intended losses exceeding $14.6 billion – more than doubling the previous record of $6 billion. This case demonstrates how large-scale fraudulent schemes can turn into a systematic exploitation of patients and taxpayers.
Let’s go deeper into the main money laundering schemes that exist in modern healthcare:
- Shell clinic structures. Criminals set up fake or semi-legitimate clinics that exist only on paper. They use these entities to bill insurance companies for services never rendered, effectively turning stolen data into “legal” reimbursement checks.
- Identity fraud in patient onboarding.With the rise of telehealth, verifying who is on the other side of the screen is difficult. Fraudsters use synthetic identities to enroll in plans and rack up fraudulent charges. For example, a fraudster uses a stolen identity to receive expensive treatments billed to insurance, then collaborates with insiders to redirect reimbursements.
- Fraudulent billing networks. Sophisticated syndicates often create a web of labs, pharmacies, and doctors that refer patients to one another for unnecessary tests. The complexity of healthcare ecosystems, coupled with a massive paper trail, makes it difficult for traditional manual audits to spot the underlying crime without advanced ongoing monitoring.
- Pharmacy fraud. Criminals may use pharmacies to launder money by creating fake prescriptions, purchasing drugs with illicit funds, and then selling those drugs on the black market.
- Cybercrime and ransomware. The healthcare sector’s increasing reliance on digital systems makes it susceptible to ransomware attacks, in which criminals demand ransom payments.
- Illicit insurance claims. Fraudsters often submit false or inflated insurance claims to generate “clean” funds. These payments, once processed, can appear legitimate. According to the FBI, healthcare fraud costs the US an estimated $68 billion or more annually – roughly 3% to 10% of total health expenditures.
EXAMPLE: A criminal group steals the medical IDs of 500 seniors. Then, they set up a fake physical therapy clinic and submit “low-dollar” claims for every ID. Because the amounts are small and the IDs are real, they fly under the radar of basic billing software, funneling millions of dollars of “clean” insurance money into the criminals’ accounts.
How AML Procedures Protect Healthcare from Financial Fraud
In the healthcare industry, anti-money laundering procedures are becoming a fraud prevention norm, helping identify, prevent, and report suspicious financial activity.
AML risk assessment
Healthcare organizations need to conduct risk assessments to identify vulnerabilities and potential money laundering crimes. AML software for healthcare allows you to categorize patients, partners, and vendors based on their risk level. For instance, a vendor located in a high-risk jurisdiction identified by the Financial Action Task Force (FATF) would trigger a deeper investigation.
Customer Due Diligence (CDD)
Whenever healthcare providers enter new business relationships, they must conduct Customer Due Diligence (CDD), which includes verifying the identity of patients, partners, suppliers, and other stakeholders. This is done to ensure that they are not involved in money laundering or other illicit activities. Automated AML software uses biometric authentication and document analysis to ensure that an ID isn’t a deepfake or a stolen document.
Suspicious activity monitoring
Instead of waiting for a yearly audit, AML software monitors transactions in real-time. It flags suspicious behavior, such as a pharmacy suddenly processing five times its usual volume of high-cost prescriptions in a single weekend. By using ongoing monitoring systems, healthcare organizations can identify unusual patterns of financial activity and high-risk clients.
Employee training and reporting
AML software streamlines the process of filing Suspicious Activity Reports (SARs) with regulators. It also ensures that staff are following a standardized, repeatable process, which reduces “compliance fatigue” and human error. Especially, since employees are often the first line of defense against money laundering practices.
Automated solutions
Advanced technologies such as machine learning and data analytics can be used to analyze large datasets, flag anomalies, and detect potential money laundering activities that might go unnoticed through manual means. All in all, modern AML compliance platforms automate identity verification, risk scoring, sanctions screening, as well as perform real-time transaction monitoring.
EXAMPLE: Instead of manually reviewing thousands of insurance claims, AML software can automatically and within seconds flag suspicious patterns, like, for example, repeated billing for the same procedure across multiple patients.
Key AML Requirements for Healthcare Providers
Healthcare organizations must meet a growing set of AML regulatory obligations. Fraudulent billing, opaque vendor relationships, and cross-border payment flows make the healthcare sector an instrument for financial crime. Regulators across the US (Bank Secrecy Act/FinCEN), the EU (AMLD), and the UK (Proceeds of Crime Act 2002) are paying closer attention, and non-compliance carries serious consequences.
To help you ascertain the key AML requirements you, as a healthcare provider, should meet, here is a practical checklist:
Identity verification of patients, partners, and suppliers
- Verify government-issued ID for patients paying out-of-pocket or through unfamiliar third-party payers.
- Screen patient names against sanctions lists (OFAC, UN, EU) at onboarding and periodically thereafter.
- Apply Enhanced Due Diligence (EDD) for unusual payment profiles – large cash payments, multiple billing address changes, or payments routed through intermediaries.
- Verify the legal identity and beneficial ownership (UBOs ≥25%) of all referring physicians, clinical partners, and corporate entities.
- Re-screen all counterparties at least annually or when a material change occurs.
Know Your Business (KYB) on contractors, labs, and suppliers
- Before onboarding any vendor, collect their legal name, registration number, jurisdiction, Ultimate Beneficial Owner(UBO) details, and director information.
- Confirm the vendor has a genuine operating history and verifiable physical presence.
- Screen vendors and their key personnel against sanctions lists and adverse media.
- Assign a risk rating (low/medium/high) based on contract value, geography, and ownership transparency.
- Include AML compliance programs and anti-bribery representations in all significant vendor contracts.
- Make no purchase orders or payments until KYB sign-off is complete and documented.
- Apply EDD for vendors in the FATF’s grey/black-listed jurisdictions.
Monitoring of claims and payments
- Use automated analytics to flag duplicate claims, upcoding, unbundling, and “ghost patient” billing.
- Set value thresholds that trigger manual review for high-value or unusual claims.
- Screen all incoming and outgoing payments against sanctions lists in real time.
- Flag suspicious payment patterns, such as round-number transactions, payments with no matching invoice, and structuring behavior (multiple payments just below a reporting threshold).
- Reconcile services rendered, claims submitted, and payments received periodically, meaning that all unexplained gaps are red flags.
Suspicious Activity Report (SAR) / Suspicious Transaction Report (STR)
- The US: Entities in scope under the BSA must file SARs with FinCEN. The False Claims Act creates additional exposure for those receiving federal reimbursements.
- The EU: Obliged entities under AMLD must report to the relevant national FIU.
- The UK: Any business in the regulated sector must file SARs with the NCA under POCA 2002.
- Designate a Money Laundering Reporting Officer (MLRO) as the single point of accountability.
- Establish a clear internal escalation path, so staff can report suspicions without fear of retaliation.
- Document all internal reports, including cases where the MLRO decides not to file externally (and the reasoning).
- Never tip off the subject of a SAR, as this is a criminal offense in most jurisdictions.
Recordkeeping AML obligations
- Retain KYC/KYB identity records for a minimum of 5 years after the relationship ends.
- Retain all transaction records (invoices, claims, payments) for a minimum of 5 years.
- Retain SAR/STR records and supporting analysis for a minimum of 5 years.
- Store all compliance records in a secure, access-controlled system with prompt retrieval capability.
- Keep AML training records documenting who was trained, when, and on what.
Travel Rule (where applicable)
The FATF Travel Rule requires that originator and beneficiary information accompanies international wire transfers. It applies to healthcare providers where:
- Payments to foreign suppliers or distributors exceed the applicable threshold (typically USD/EUR 1,000).
- Reimbursements flow to/from international insurers or reinsurers.
- Payments are made under international clinical research agreements.
Note: It’s advisable to continuously monitor FATF guidance on Travel Rule extensions to virtual asset service providers (VASPs) as healthcare payment systems evolve.
Challenges in Healthcare AML Compliance
The road to perfect regulatory compliance is rarely smooth. Healthcare organizations face unique hurdles that make financial crime detection difficult.
First of all, many healthcare providers still use legacy systems. Oftenfragmented, these older software types don’t communicate well with newer security tools, making it difficult to get a unified view of fraud risks and creating data silos where criminals hide.
The next issue is the high volume of claims. With millions of claims processed daily, finding a fraudulent $200 charge is like finding a needle in a haystack, allowing suspicious activities to slip through the cracks.
The third danger is posed by the rising sophistication of fraud. Criminals are using advanced technologies, like AI, to generate synthetic identities, realistic doctors’ notes, and fake patient records to bypass traditional controls.
In Q1 of 2025, there were 179 detected cases of deepfake-related healthcare fraud, surpassing the total for all of 2024. Source
Fourth, the high number of intermediaries, such as insurers, labs, suppliers, and third-party administrators, creates complex networks that weaken the integrity of the AML chain and create spaces where fraud can hide.
Finally, healthcare professionals are already stretched thin. So, adding compliance responsibilities can lead to burnout, errors, and general compliance fatigue.
How Ondato’s AML Software Strengthens Healthcare Compliance
Healthcare organizations need solutions that are both powerful and practical, that help meet AML requirements while reducing manual input. Ondato, as one of the top AML software vendors, provides an all-in-one suite designed to handle the heavy lifting of healthcare compliance.
- AI-powered identity verification. Ondato uses advanced liveness detection to ensure patients are physically present during onboarding, virtually eliminating the risk of deepfakes or stolen photos.
- Automated KYB (Know Your Business). Quickly vet medical suppliers and contractors. Ondato’s tools can map out complex corporate structures to find the real people behind a vendor.
- Sanctions and PEP screening. Ondato automatically checks global databases for Politically Exposed Persons (PEPs), adverse media, and sanctioned entities, ensuring you never miss a red flag.
- Fraud detection signals. By analyzing behavioral data and document integrity, Ondato provides early warning signs of synthetic identities before a single claim is filed.
- Administrative efficiency. By automating the onboarding process, Ondato significantly reduces the compliance burden on your administrative staff, leading to faster approvals and fewer manual errors.
Final Thoughts
The era of passive compliance is over. The pressure on healthcare providers to modernize their AML defenses has never been higher.
Regulators are looking at whether you, as a healthcare provider, have the tools to stop fraudsters. Implementing a specialized healthcare AML solution is both a defensive move and a commitment to protecting your patients, your reputation, and the integrity of the entire healthcare system.
By using automation and AI-driven identity verification, your organization can move from reactive damage control to proactive protection, ensuring that healthcare resources go where they belong: to the people who need them most.
FAQ
