Phantom Risks

The Haunting Begins

Every compliance program has its ghosts.

They don’t rattle chains or drift through corridors, but they linger in forgotten risk registers, outdated policies, and blind spots no one’s thought to revisit. They’re the phantom risks—the unseen threats that quietly grow stronger as financial institutions race ahead with evolving technologies. They don’t show up on dashboards or in your annual training refresh. They’re the quiet gaps that form between what your program teaches and how the real world keeps changing.

This Halloween, it’s not the usual villains that should send a chill down a Chief Compliance Officer’s spine. It’s the invisible ones:

• The AI tools producing results no one can fully explain
• The third-party solutions with unclear controls
• The fraud typologies that shift faster than traditional monitoring can adapt

While most compliance teams stay vigilant against familiar foes—money laundering, sanctions breaches, and corruption—new variants are emerging in the shadows. They don’t fit neatly into existing frameworks, and they rarely announce themselves until the damage is done.

By then, the haunting is real: regulatory penalties, reputational fallout, and boardroom questions about why no one saw it coming.

The Nature of Phantom Risks

They’re not new in concept; every CCO knows there are blind spots. What’s different today is how fast those blind spots multiply. The pace of innovation, automation, and interconnected systems means new exposures can appear overnight, often in areas where no one’s explicitly responsible for monitoring.

A few examples:

• An AI model that helps flag suspicious activity—but no one can explain why it flags what it does.
• A third-party compliance tool that integrates seamlessly, until you realize its data sources aren’t as reliable as yours.
• Fraud typologies that now use synthetic identities, deepfakes, or AI-generated communication to bypass human intuition.
• A digital asset transaction that touches multiple jurisdictions, each with its own evolving set of sanctions and reporting rules.

These risks rarely appear in traditional training or risk assessments, not because anyone ignored them, but because they didn’t exist in the same way a year ago. They live in the spaces between functions, the gray zones between “technology” and “compliance.”

That’s what makes them phantom risks. They’re not invisible forever, but they stay unseen long enough to cause real damage if no one goes looking for them.

Why They’re Hard to See

Phantom risks don’t usually appear with warning signs. They slip through the cracks quietly camouflaged by confidence in systems, checklists, and routines that once worked perfectly fine.

The first reason they’re hard to see is simple: our focus tends to stay where the light already shines. Teams continue to refine what’s measurable: training completion rates, audit scores and policy reviews, while new threats grow in the corners no one’s tracking.

Then there’s the comfort of automation. Many compliance programs now rely on technology to monitor, flag, and report. But what happens when the tool itself introduces new exposure—like an algorithm trained on incomplete data, or a vendor’s API pulling from sources you can’t verify? It’s easy to mistake efficiency for assurance.

Fragmented ownership adds another layer of fog. A risk that touches technology, compliance, and operations might not sit squarely in anyone’s lane. Everyone assumes someone else is handling it until it’s too late.

And finally, familiarity dulls curiosity. Once a process has been in place for a while, it stops feeling urgent to question it. Teams settle into a rhythm, and vigilance fades. That’s when phantom risks thrive quietly, feeding on the spaces where no one’s looking.

Turning on the Lights: Detecting and Disarming Phantom Risks

The good news? Phantom risks lose their power once they’re brought into the light. The challenge is developing the kind of vigilance and curiosity to illuminate them before they strike.

The first step is to expand what “risk awareness” really means. Traditional compliance training does a solid job explaining policies, red flags, and procedures. But to keep up with today’s pace of change, teams also need to understand how risks evolve. Training should include scenario-based exercises, simulations, and examples that reflect the latest fraud and typology trends: AI-driven impersonation, misuse of digital assets, or third-party data vulnerabilities.

Next, test your assumptions regularly. It’s easy to trust that your frameworks are sound, but running “what if” stress tests can reveal where they might bend or break under real-world conditions. Ask questions like:

• What if our monitoring tools miss a pattern because it’s new or untrained?
• What if one of our vendors suffers a breach?
• What if a sanctioned entity uses AI-generated false identities to evade detection?

Cross-functional collaboration is another critical defense. Phantom risks don’t respect departmental boundaries, so detection can’t either. Encourage your risk, technology, and compliance teams to share insights, compare data, and align priorities. Sometimes the biggest clue isn’t in the compliance data, it’s buried in IT logs or vendor management reports.

And finally, don’t treat vigilance as a one-season activity. Organizations that stay resilient are those that continually refresh their training and controls—not just during audits or after enforcement actions, but as an ongoing discipline.

Clearing out the Cobwebs

Every compliance program, no matter how advanced, needs a little housekeeping from time to time. Risks evolve, systems age, and assumptions gather dust in the corners.

The strongest compliance leaders aren’t the ones who never face surprises; they’re the ones who stay curious enough to keep looking. They question why something works, not just whether it does. They challenge the comfort of “that’s how we’ve always done it.” And they treat every refresh—of training, frameworks, or technology—as an opportunity to bring more light into the room.