The Deregulation Dividend: How Reduced Regulatory Oversight Creates Fraud Opportunity and How Companies Can Close the Gaps

Fraud risk rarely rises in a straight line. It spikes when incentives outrun controls, during boom cycles, rapid technological change and, most predictably, when enforcement softens and regulators shift from policing markets to facilitating them. That is the environment many companies should expect in 2026: faster deal velocity, fewer regulatory headwinds and growing uncertainty about what conduct will draw federal scrutiny, if any. The takeaway is not political; it is operational. When oversight thins, sophisticated fraudsters and opportunistic actors test boundaries, exploit governance gaps and use cross-border complexity to hide assets and evidence. Organisations that fail to anticipate this shift risk being caught flat footed; whereas those that prepare now can respond quickly, coherently and on their own terms.

This article addresses closely linked risks that should be front-of-mind for US businesses in 2026:

• the structural shifts in the US regulatory environment and the trend toward deregulation;
• the corresponding rise in internal and external fraud opportunities; and
• the need for proactive governance, investigative readiness and asset recovery strategies that do not depend on rapid government intervention.

The article additionally discusses steps companies should take to limit potential damages and maximise recovery, including a look at domestic and cross-border strategies for asset recovery.

Historical Deregulation Cycles and the Recurrence of Fraud

Periods of deregulation have repeatedly coincided with spikes in financial fraud – not because deregulation itself causes misconduct, but because reduced oversight, delayed supervision and stretched enforcement capacity create environments in which bad actors strike. This is not an anomaly; it is a predictable pattern.

In the 1920s, rapid credit expansion and market speculation unfolded within a limited federal supervisory framework, enabling manipulation and misleading disclosures that were fully exposed only after the 1929 crash. The US responded with the securities laws of the 1930s that reshaped market oversight and embedded mandatory disclosures.

That cycle reappeared in the 1980s, when policymakers loosened restrictions on savings and loan institutions in hopes that the sector could recover, even as regulators lacked the resources to monitor the expanded risk-taking. The result was widespread institutional failure and a taxpayer-backed resolution. A different imbalance emerged in the 1990s and early 2000s, as weak oversight of audit practices and internal controls, combined with growing financial complexity, coincided with major accounting frauds, culminating in Enron’s collapse and the fall of Arthur Andersen.

More recent frauds reflect the same structural vulnerabilities. Bernard Madoff’s decades long scheme persisted because of fragmented oversight, reputational deference, and limited regulatory capacity to challenge opaque strategies. The 2008 financial crisis similarly exposed gaps in a lightly supervised financial ecosystem, accelerated by widespread mortgage fraud and misrepresentation. The resulting systemic losses prompted renewed structural oversight, including Dodd-Frank and related reforms designed to strengthen supervision, enhance transparency and impose clearer accountability across the financial system.

The 2020s have fared no differently. The collapse of FTX revealed how rapid innovation, jurisdictional arbitrage and limited oversight of crypto asset markets allowed basic governance failures to persist until billions of dollars in liquidity evaporated. Similarly, the ongoing First Brands matter, already marked by numerous criminal indictments, illustrates how accounting manipulation and financial misrepresentation can take root during periods of market stress and supervisory strain, with multi-billion-dollar consequences.

In short, when regulation and enforcement retreat or fall out of sync with market activity, fraud risk mutates, becoming harder to detect, faster moving and more costly to unwind.

The Current Regulatory Environment: Structural Shifts Relevant to Organisational Fraud Risk

Across Washington, regulatory signals point toward a deliberate retreat from expansive regulation and an explicit prioritisation of capital formation, market efficiency and “right-sized” oversight. Agencies have been directed to reduce aggregate regulatory costs, reconsider or withdraw prior initiatives, and narrow enforcement activity to core fraud and market integrity concerns. The practical effects are that:

• rule-making bandwidth has tightened;
• contested mandates are being abandoned rather than defended; and
• enforcement agendas are being recalibrated around fewer, more traditional theories of harm.

In the securities and financial regulatory sphere, this shift is visible in the SEC’s re-centring on capital access and conventional investor protection, the CFTC’s stated move away from “regulation by enforcement” and the CFPB’s retrenchment toward demonstrable consumer fraud and remediation over novel theories. At the Department of Justice, the change is even more pronounced: Foreign Corrupt Practices Act enforcement has effectively stalled, with new initiations rare and prosecutorial resources redirected toward cases with a direct US nexus and clear individual culpability.

These policy changes are occurring alongside meaningful capacity constraints across the federal workforce, further lengthening oversight cycles and slowing non-priority matters. Taken together, reduced regulatory pressure and constrained enforcement resources generate a “deregulation dividend,” creating a permissive environment for risk-taking at the margins. For boards and audit committees, that environment heightens the importance of internal governance, early detection and self-help remediation mechanisms that do not depend on rapid government intervention.

Anticipated Fraud Patterns in 2026

Heading into 2026, three patterns of conduct are especially relevant.

First, confidence narratives are paired with accounting opacity. Many recent failures and noteworthy fraud cases relied on high-growth storytelling to obscure weak cash controls, related-party activity and balance-sheet stress. Red flags include rapid expansion with implausibly stable margins, poor cash conversion and unexplained auditor turnover.

Accounting opacity tends to increase when review queues lengthen and highly prescriptive disclosure initiatives recede. Issuers and private companies seeking capital may lean more heavily on bespoke performance indicators and non-GAAP metrics that are not easily reconciled to audited financial statements, particularly when those metrics bear directly on valuation narratives. This phenomenon raises the probability of misstatement and weakens the disciplining influence of external oversight if internal governance does not insist on reconcilability and cash-conversion realism. The SEC’s recalibrated agenda and its withdrawal from defence of the 2024 climate rule, for example, reinforce the need for disciplined, issuer-led materiality judgments and robust audit committee scepticism rather than reliance on thematic mandates to police borderline presentations.

Second, jurisdiction shopping and offshore obscurity. Fraud frequently involves routing assets, funds, or contracts through jurisdictions that offer secrecy, speed or slow mutual legal assistance. By shifting assets and operations offshore, bad actors complexify value tracing.

As perceived scrutiny declines, jurisdictional and structural arbitrage becomes more attractive. Bad actors exploit both time and geography by routing assets, intellectual property and governance touchpoints through offshore jurisdictions. They rely on nominee directors, layered entity structures and offshore shifts of receivables or licensing rights to place investigators and counterparties at a procedural disadvantage. The availability of nationwide service of process under 18 U.S.C. § 1965 of the Racketeer Influenced and Corrupt Organizations (RICO) Act, and the enduring circuit split over its mechanics, underscores how often multidistrict and cross-border structures are used to frustrate consolidation. At the same time, well-known resource constraints within enforcement agencies make it more likely that cases will be selectively prioritised rather than pursued through broad, coordinated actions across jurisdictions.

Third, competitor-driven exfiltration disguised as ordinary employee mobility. Trade secret theft often begins innocuously: a senior employee departs, joins a competitor and months later that competitor launches a strikingly similar product or underbids with suspicious precision. When growth and deal-making dominate, companies often underinvest in access controls, monitoring and data hygiene.

This type of misappropriation through mobility and third-party channels flourishes when vigilant supervision yields to growth imperatives. The most damaging theft of trade secrets or pricing logic often presents as routine:

• elevated file export activity on collaboration platforms;
• cloud sync events in the weeks before resignation; and
• subsequent bids or product decisions by a competitor that are implausibly well-informed.

Nothing about the current enforcement landscape diminishes civil remedies for such conduct, but it does intensify the need for robust organisation-controlled detection to position the company to act within days rather than months of any misappropriation.

Organisational Preparedness: Controls, Data Governance, and Investigative Foundations

Because regulatory agendas shift and enforcement cycles lengthen, organisations should plan for weaker external oversight and slower intervention. The prudent response is not to debate rule-making trajectories but to assume less frequent oversight and strengthen internal controls and evidence readiness. In a softer enforcement environment, deterrence moves to inside the organisation.

That effort should begin with a fraud-specific risk assessment. Generic enterprise risk maps rarely capture how fraud actually occurs. A more effective exercise asks a simple question: If someone wanted to steal from this organisation, how would they do it? The analysis should trace where value enters, exits, or can be diverted, for example:

• procurement and vendor onboarding;
• payments, treasury and refunds;
• revenue recognition, rebates and chargebacks;
• inventory and credits; and
• sensitive information assets (such as pricing, product roadmaps, customer lists and source code).

The critical step is mapping people, not just processes. For each transaction class, organisations should identify who can initiate, approve, record and reconcile activity and who controls system access. Any instance in which a single individual can move a transaction from inception to reconciliation reflects a design flaw – and these gaps are where opportunistic conduct concentrates.

Effective fraud programs align incentives, limit opportunity and surface issues early. The strongest programs share a few practical features.

Risk assessments

In addition to enterprise-level risk reviews, organisations should conduct periodic fraud-focused assessments that concentrate on four areas:

• money out (ie, payments, vendor onboarding, treasury, refunds);
• money in (ie, revenue recognition, rebates, channel partners, chargebacks);
• value leakage (ie, inventory, warranties, promotions, credits); and
• information theft (ie, pricing, product plans, customer data, source code).

Each risk should map directly to the individual who approves, records, reconciles and has system access to these touchpoints. Any concentration of authority, particularly in the hands of a single employee, signals elevated risk.

Controls

Fraud prevention works best when controls are difficult to bypass casually and easy to audit. High yield measures, which sharply reduce the ability to self-deal, route funds through related parties or redirect payments undetected, include:

• segregation of duties in procurement, payments, and revenue adjustments;
• dual authorisation for high-risk actions and master data changes; and
• centralised vendor and counterparty governance that validates beneficial ownership and bank details.

Data governance

Data governance should be treated as a fraud control measure, not a compliance afterthought. Evidence is digital and perishable. Companies should position themselves to readily and effectively access critical data in times of crisis, including misappropriation. Comprehensive data governance policies can become particularly important in cross-border matters where cross-jurisdictional access to data can be critical. Practical safeguards include:

• maintaining a current data map for sensitive systems;
• enforcing role-based access tied to job function with quarterly recertification;
• enabling immutable logging of exports, downloads, permission changes, and mass deletions; and
• requiring approved channels for sensitive file transfers while restricting personal email forwarding.

These measures enable defensible disclosures when legal obligations arise, even as enforcement narrows, but statutory requirements persist.

Analytics and monitoring

Continuous monitoring allows organisations to detect issues long before whistleblowers or counterparties raise concerns. Even modest analytics programs can flag:

• duplicate or round-dollar payments;
• vendor clusters sharing addresses or bank accounts;
• spikes in credits or manual journal entries; or
• unusual data access near resignation dates.

The objective is simple: compress the detection to an action window while facts are fresh and assets remain recoverable.

Taken together, these features reflect the basic reality that when external oversight thins, internal discipline matters more. Organisations that invest now in targeted controls, data integrity and early-warning signals will be better positioned to prevent loss and respond decisively when misconduct surfaces, without relying on swift government intervention.

Discovering Fraud & Misconduct: Steps to Limiting Potential Damages and Maximising Recovery

When misconduct is suspected, speed and restraint are critical; having defined roles, escalation protocols and prepared response frameworks will permit teams to act quickly and effectively. When potential fraud or misconduct is discovered, the priority is to stabilise the situation and preserve evidence before facts degrade or systems change. In the initial hours, companies should secure relevant information by issuing legal holds for key custodians and systems, quietly restricting access for suspected users where appropriate and forensically imaging devices and accounts in a defensible manner. Financial controls matter just as much as digital ones at this stage: pausing suspicious vendor payments or account changes can prevent further loss while the facts are assessed.

When cross-border data is involved, companies should assume that privacy, employment and privilege rules may conflict across jurisdictions and engage legal counsel immediately. Cross-border coordination is often the most fragile part of investigations and early planning, along with clear protocols, can help avoid delays.

As the situation stabilises, in the days and weeks that follow, the company should establish a privileged investigation structure that allows facts to be gathered efficiently while protecting legal analysis. Engaging outside counsel to direct the investigation helps maintain privilege and provides a clear point of coordination for interviews, document review and legal assessments. Internally, a small steering group (typically drawn from legal, compliance, finance and IT or security) should collaborate closely with counsel to support the investigation without fragmenting decision-making. Early development of a work plan, including a preliminary timeline and theory of loss, helps discipline the inquiry and ensures that fact gathering remains focused on issues that matter legally and financially.

Reporting decisions should follow quickly, even as the investigation continues. Despite fluctuations in enforcement priorities, reporting obligations remain real and, in many cases, mandatory. Depending on the nature of the misconduct, obligations may arise under:

• securities laws;
• contractual notice provisions;
• cyber incident regimes;
• lender covenants; or
• sector-specific regulations.

These determinations are rarely intuitive, and companies should rely on outside counsel to identify which regimes apply, what thresholds are triggered, and when disclosures must be made. Importantly, reporting decisions should be revisited as facts develop rather than treated as a one-time judgment.

Throughout the process, careful stakeholder management is essential. Fraud is not only a legal issue, but also a reputational one and poorly coordinated messaging can do lasting damage. Internal and external communications should be aligned with the investigative and litigation posture, avoid speculation and be tightly controlled. Companies should assume that anything written (eg, emails, presentations or talking points) may eventually be reviewed by regulators, counterparties or a jury and should draft accordingly.

Finally, how the company manages and defends the matter often determines whether the issue is contained or compounded. Regulators, auditors and courts assess credibility through process – not just outcomes and disciplined governance – data preservation and investigative protocols are critical. A common misstep is attempting to demonstrate cooperation by producing documents rapidly and in an unfocused manner. Uncontrolled “document dumps” can waive privilege, violate data protection laws and create inconsistent narratives across jurisdictions. A phased, counsel-led production strategy, with early attention to cross-border transfer constraints, is typically far more effective.

At the same time, companies should consider the full range of response options, including civil litigation, criminal referrals, insurance recovery and asset tracing or clawback. Speed is particularly important in civil matters, where early court intervention, such as injunctive relief or expedited discovery, can prevent further misuse and preserve value. Criminal referrals can provide powerful investigative tools, but they also require careful judgment, as law enforcement involvement may affect civil timelines, disclosure strategies and communications.

Even while facts are still emerging, remediation should proceed in parallel. Strengthening controls, revising approval thresholds and addressing governance gaps reduce ongoing risk and create a contemporaneous record of good-faith action. That record often becomes critical later, when regulators or courts evaluate not just what happened, but how the organisation responded.

Asset Recovery: Domestic and Cross-Border Strategies

In a lighter enforcement environment, private remedies and civil equitable relief become more important. Asset recovery should begin alongside first day preservation and internal fact development. Courts can quickly issue temporary restraining orders and preliminary injunctions to:

• halt transfers;
• restrict the use of stolen information;
• compel the return of property; and
• preserve the status quo.

They may also issue attachment and garnishment orders to immobilise accounts and receivables, appoint receivers where dissipation is ongoing and authorise targeted third-party discovery (particularly from banks, payment processors and technology providers) to trace value flows and convert suspicion into enforceable relief.

Early factual development also shapes the available causes of action and, by extension, the potential scope of recovery. Civil RICO claims can materially expand leverage in complex fraud matters through treble damages, fee shifting and nationwide service of process under 18 U.S.C. § 1965, allowing consolidation of multi-defendant networks in a single forum where statutory requirements are met. In Yegiazaryan v Smagin, the Supreme Court adopted a context-specific test for domestic injury that focuses on the location of the injured property interest and the racketeering conduct, rather than the plaintiff’s residence. That framework significantly broadens RICO’s reach, where US judgments or US-situated property are impaired by racketeering acts occurring in the United States.

In cross-border matters, foreign estates, trustees and liquidators can pair civil RICO claims with Chapter 15 of the Bankruptcy Code to accelerate asset protection and recovery. Once a foreign proceeding is recognised, US courts can stay transfers, compel discovery and place US-based assets under the representative’s control without requiring a full domestic bankruptcy case. While Chapter 15 limits certain bankruptcy-specific claims absent a plenary filing, it does not restrict independent civil actions, allowing RICO claims to proceed in parallel.

The Smagin domestic injury framework is particularly consequential for foreign representatives. When US-based racketeering interferes with the enforcement of US judgments or harms US-situated property of a foreign estate, a domestic injury can often be pleaded regardless of the claimant’s domicile. This alignment enables foreign fiduciaries to pursue actors who have attempted to shield assets by exploiting US institutions or infrastructure.

In practice, the most effective sequence is to obtain Chapter 15 recognition to unlock discovery and preservation relief, then plead a civil RICO claim anchored to US-based harm and predicate acts in a forum that permits nationwide service. Together, these steps enable early asset freezes, consolidated jurisdiction and a sufficient evidentiary record to support preliminary relief.

Throughout the recovery process, discipline matters as much as speed. Courts and counterparties assess credibility by the rigour of the process, not just outcomes. Overbroad productions can waive privilege, trigger data protection conflicts, and undermine consistency across jurisdictions. A staged, deliberate disclosure strategy (grounded in a coherent factual record) strengthens the merits while preserving institutional credibility. Proper pleading under civil RICO is equally critical. Given the statute’s technical requirements, many claims fail at the motion-to-dismiss stage. Effective use of RICO, therefore, requires counsel with deep subject matter expertise in this specialised area.

Sector-Specific Observations and Forward-Looking Considerations

Public companies should not read various federal agencies’ recalibrated agendas as invitations to relax disclosure standards. By emphasising capital formation and stepping back from contested thematic rules, such as the climate-related rule, the SEC has refocused on fundamentals (material misstatements, omissions and internal control failures), placing greater responsibility on issuers to exercise disciplined materiality judgments and maintain strong controls. Audit committees should ensure alignment among KPIs, GAAP measures and cash conversion and scrutinise related party arrangements with heightened scepticism.

Financial services firms, fintech organisations, and digital asset platforms should view the CFTC’s reforms as enabling innovation within clearer legal boundaries, not as tolerance for aggressive conduct. Streamlined processes may accelerate enforcement against clear fraud, making rigorous vendor diligence, beneficial ownership verification and transaction level anomaly detection essential defences.

Consumer facing companies should note that while the CFPB has narrowed its priorities, it has sharpened its focus on demonstrable consumer harm. Early identification, quantification and documented remediation of harm – supported by robust complaints analytics and escalation protocols – will position firms more favourably with regulators and courts.

Cross-border groups should expect fewer government initiated, broad international inquiries absent a strong trigger, but faster moving private actions leveraging Chapter 15, targeted discovery and civil RICO theories. Companies with international data flows should therefore pre establish transfer strategies and privilege protocols that are sensitive to local law to avoid delays when timing is critical.

Perhaps most importantly, all organisations, regardless of industry, should be looking inward. Robust policies and protocols are critical, particularly in areas where fraud and misappropriation could run rampant, such as

• procurement and vendor information;
• payments and revenue recognition; and
• sensitive information such as pricing, product roadmaps and customer lists.

The time for companies to evaluate their systems and data governance is now, so that bad actors cannot capitalise on weaknesses when regulatory focus lies elsewhere and resources are scarce.

Conclusion

In a lighter enforcement cycle like this one, fraud does not wait for quarterly reviews; it exploits seams between:

• finance and IT;
• HR and security;
• domestic operations and offshore affiliates; and
• legal strategy and communications.

The right posture depends not on predicting the next regulatory skirmish but on building internal capacity to detect misconduct early, preserve evidence and options and recover value while it remains recoverable.

The organisations that will fare best in 2026 are those that:

• remove easy opportunities through control and data governance upgrades;
• train employees on investigations and reporting protocols so that speed does not compromise privilege, accuracy or cross-border compliance; and
• pre-stage recovery, including civil RICO and, for foreign estates, Chapter 15-enabled RICO, so they can freeze value first and litigate second.

Companies that act now will limit exposure, respond faster and recover more when misconduct inevitably tests the margins of deregulation.