Financial crime is a constantly evolving threat affecting individuals, businesses, and governments worldwide. Each year, new trends emerge as criminals seek new ways to exploit vulnerabilities in the financial system. This article will take a closer look at the most significant financial crime trends of the year, including emerging forms of cybercrime, money laundering, and fraud.
With the increasing use of technology in the financial sector, cybercrime has become a significant trend in financial crime. Cybercrime includes crimes such as:
- Hacking: Hacking is the act of illicit programmers that attempt to compromise digital devices, such as computers, smartphones, tablets, and even entire networks.
By gaining direct access to these systems, they could take administrative actions. As a result of hacking, for example, many “bridges” that interconnect blockchains and provide a “safe” and easy way for users to transfer assets between two blockchains were hacked in 2022 alone, and millions of $ that were initially locked in those bridges were stolen.
- Phishing: Phishing can be described as the illegitimate collection of private data, such as internet banking usernames and passwords or blockchain wallet seed phrases, with the usage of fraudulent websites, chat support forums, social engineering, etc.
Phishing sites usually copy the appearance of legitimate and established websites (a bank, for example) and invite users to “log in” to their fraudulent websites. If a user does that, he is essentially delivering his bank access to the scammers.
As an example, let’s say your bank’s website is:
A phishing site would attempt to use a similar name by altering or removing a single letter to trick the eye. For example:
Can you spot the differences?
- Identity Theft: As the term implies, a criminal could use the credentials of an unsuspicious citizen to commit crimes on his behalf. The information is obtained through phishing scams or bought from the dark web.
- Ransomware: Ransomware is a type of malware (malicious software) that threatens to publish data, or block access to data or a computer system, usually by encrypting it, until the victim pays a ransom fee to the attacker.
The ransomware attacker could demand the following:
“Deposit “X” amount of cryptocurrency in this address within a limited time or else you will have to pay double / or forever lose access to your data / or your data will go public.”
A regular backup system could deflect the impact of such an attack and minimize the damage.
Money laundering is the process of making illegally gained proceeds (i.e., “dirty money”) appear legal (i.e., “clean”). Criminals use various methods to launder money, such as smurfing, trade-based money laundering, informal money transfer businesses, cryptocurrencies, gambling, shell companies, complex ownership structures, complex transactions, and many other ways.
Criminals usually use a combination of methods to disguise the source of the funds and always look to exploit the latest technological developments to commit their crimes.
It is important to note that money laundering is a complex and constantly evolving field. As a result, financial institutions and governments have implemented various regulations and laws to combat money laundering and to detect these methods and prevent them.
Fraud is another major trend in financial crime. Fraud includes crimes such as:
- Ponzi schemes: A Ponzi is a form of fraud that presents itself as an investment opportunity. However, the funds of the “investors” are not invested anywhere. A Ponzi scheme pays profits to earlier investors with funds from more recent investors. They usually promise high and steady returns and more and more investors are recruited into the scheme.
- Insider Trading: Insider Trading is when an individual who, due to their position, possess not-publicly available, valuable information and uses it for his/her benefit to purchase or sell financial assets or “tip-it-off” to 3rd parties so that they can take advantage of the information.
- Pig butchering: Fraudsters, posing as highly successful traders in cryptocurrency, convince victims to make purported investments in cryptocurrency, providing fictitious returns through fake profiles to encourage additional investments. These schemes are often performed through romance scams where the fraudster allows some time to win the victim’s trust and then convinces it to invest in a fake cryptocurrency platform that shows “profits.” The fraudster, after some time, disappears with the money.
- Cryptocurrency-related crime: As the use of cryptocurrency has increased, so too has the occurrence of financial crimes related to it, such as crypto-jacking, scams, and illegal activities like drugs, weapons, and human traffic.
- Financial Terrorism Financing: Financing terrorist activities has become a significant concern for governments and financial institutions worldwide, as terrorist organizations fundraise fiat money or cryptocurrencies to fund their operations and carry out attacks.
- Synthetic Identity Fraud: A synthetic identity is a combination of real and fabricated information. Usually the real information are bought from the dark web or obtained through phishing attacks. Fraudsters may create synthetic identities using potentially valid social security numbers (SSNs) with accompanying false personally identifiable information (PII).
- Other fraud schemes: These include Business email compromise, fraudulent online marketplaces, social media fraud, etc.
In conclusion, financial crime is a constantly evolving threat affecting individuals, businesses, and governments worldwide. Each year, new trends emerge as criminals seek new ways to exploit vulnerabilities in the financial system.
By staying informed and taking proactive steps, entities can help reduce financial crime’s impact and create a safer and more secure financial system for all.