Technology can make fraud and fraudsters seem a lot more sophisticated and complex than they really are.
"Fraud is often the starting point for criminal organisations to fund other serious crimes. It is the tip of a very large criminal iceberg.”
We should pay heed to the words of US District Attorney Damian Williams who spoke following the conviction of bankrupt crypto exchange boss Sam Bankman-Fried.
“Crypto may be a new thing…the players might be new, but this kind of fraud and this kind of corruption is as old as time,” Williams told media following the conviction of Bankman-Fried.
Fraud has prevailed for centuries and is legally defined as “intentional deception to secure an unfair or unlawful gain, or to deprive a victim of a legal right”.
Within the ANZ Financial Crime Portfolio, we understand fraud is a criminal activity that continues to be underestimated, underreported and much more common than people think.
To most effectively battle it we must understand how it is changing, and to chart the best way to disrupt the fraudsters. The tools, products and services that fraudsters manipulate or leverage may change – but so have the toolkits used to prevent, detect, and disrupt it.
Just the beginning
Fraud is often the starting point for criminal organisations to fund other serious crimes. It is the tip of a very large criminal iceberg.
If your identity is stolen, if your credit card is hacked – this could provide seed money for further criminal activities. Once the proceeds of fraud are obtained, the individuals and organisations involved often attempt to clean or “launder” the money to make it appear legitimate.
This can be carried out through everything from so-called “mule” accounts to misuse of gift certificates. A money mule is a person (or company) recruited by criminals to transfer illegally obtained money or goods.
In legal terms, an offence which is a component of a larger crime is termed a “predicate” offence. Fraud as a “predicate” crime is now growing at an unprecedented rate due to sophisticated technology.
This increased use of technology has changed the threat landscape in ways that could not have been anticipated five years ago. Fraud can now cross borders as transnational organised crime gangs spread their digital arms around the globe.
So how is digital fraud evolving?
Historically the primary battleground for fraud was focused on banking and credit card schemes - siphoning money from victims’ accounts without their consent or awareness.
However, as banks stepped up their technological defences, criminals adapted and evolved their tactics. This shifting focus has seen an increase in customer-authorised fraud cases.
In these instances, victims are manipulated by fraudsters employing advanced and persuasive methods including social engineering and psychological influence.
Scammers Vs Fraudsters
While the terms “fraud” and “scam” are often used interchangeably, they are different. Legally, fraud is a comprehensive umbrella term encompassing various criminal offenses.
Within this broader category, scams represent a specific segment characterised by deceptive schemes aimed at tricking individuals or entities to authorise a transaction for the benefit of the fraudster
In a fraud, the victim is deceived by a criminal who wants to make an unlawful gain without the victim’s knowledge. For example a bank account takeover in which someone accesses a customer’s account without their knowledge. Or identity theft, where a fraudster uses a customer’s personal details to open accounts in their name.
A scam on the other hand involves you making or authorising the payment to the fraudster. If you are persuaded to buy a fake item, hand over your security code or transfer a sum of money – this is a scam. In its simplest form, scams are thefts that occur with your permission or knowledge.
What can I do?
Organised crime networks working across borders which means efforts to battle fraudsters must be co-ordinated across multiple regions and different stakeholders.
This includes collaboration within businesses, but also ensuring those companies are cooperating with others and working with governments and agencies.
This type of public-private partnership model recognises no one party can tackle fraud alone. This model underpins a plethora of initiatives taking place within ANZ and across the broader industry.
In many countries, funds and additional resources are being allocated to better enable the pursuit of fraudsters globally.
Australia and the UK have appointed dedicated government officers to focus on scams and fraud mitigation. Police forces have expanded taskforces charged with tackling the most sophisticated criminals.
This collaborative approach helps build a more resilient and adaptive framework, responsive to the evolving and increasingly complex fraud landscape.
Cassandra Hewett is Head of Financial Crime & Kishanie Wijewickrama is Head of Group Integrity, ANZ