The Bird-Eye View of Emerging Fraud Trends in 2022

Considering the world’s persistent march toward digitisation, the masses of data being uploaded to the web is under the danger of being breached. Where the internet is presumed to be a safe place, it certainly is not, as every single person’s personal information is present on thousands of servers across the globe. Data theft has been a thriving business for criminals and it has experienced major growth in 2021, where identity theft cost American’s, a loss worth 56 billion dollars. The world experienced a slight drop in identity theft cases back in 2019 but unfortunately, the rate increased by 45% in 2020 and has been reaching heights since then.

Fraud Analysis of the Past Few Years

The year 2021 has encountered the most identity theft cases and has been all about the implementation of strict identity verification and AML solutions. Keeping in view the surge in biometric identity frauds, Shufti pro’s analysts predicted a significant rise in the identity frauds in the Global Identity Fraud Report 2020. The predictions, however, proved accurate as Shufti Pro encountered multiple fraud attempts in 2021.

Modern day technological advancements have not only benefited the businesses but the impostors as well. As per the CNBC report, businesses, especially banks are subjected to a loss of 6 billion each year due to synthetic identity fraud. Moreover, synthetic identity fraud is the fastest growing fraud in the world. As per Shufti Pro’s Global Identity Fraud Report of 2020 that predicted a 16% increase in synthetic fraud, in the year 2021, unfortunately, all the predictions became true and the world experienced a further increase in the fraud reports. However, despite authentic ID verification solutions, it was quite a challenging task to fight the criminal who deployed advanced tactics to disrupt the systems.

Transformation of the ID Verification Systems — An Industrial Outlook

The major shift towards digitization, recently and the continuously evolving technological advancements have completely transformed the business’s operational activities. They have become well acquainted with the significance of identity verification to combat phishing attacks, identity thefts and other financial crimes. The local and global regulatory authorities have also complied with the changing trends to fight the constantly evolving thefts by developing strict KYC and AML regulations.

Although the financial institutions have long been complying strictly with the customer due diligence and enhanced due diligence regulations, their constant exposure to the criminal’s advanced attacking schemes has led to the formulation of more strict regulatory laws. Along with the finance industry, criminals have successfully targeted the crypto industry as well and the rate of cybercrimes are reaching heights. Hence, the local and global regulatory authorities are focused on the provision of strict laws to deal with the increased online scam rates.

Banking and Finance Industry

The banking and finance industry, like always, was the easiest target for criminals in 2021 as well. The sole reason for the whopping increase in the disruption of the financial sector was the pandemic that paved way for the criminals to exploit the digital systems. Considering the sudden shift towards digitization, financial institutions have worked to significantly improve their digital customer experience for the purpose of attracting online audiences. As per the 2021 Javelin identity fraud report, the financial sector experienced a loss of nearly $56 billion from identity scams. Moreover, the UK finance report generated shocking results of EUR 753.9 million being lost to the criminals only in the first half of 2021. Hence, the FATF and FinCen exerted sheer efforts to amend and secure the digital platform through AML and KYC compliance.

Gaming and Gambling Industry:

The pandemic, alone, led to a significant increase in the disruption of several digital platforms with Gaming and Gambling being one of them. Considering the surge in audience engagement in 2021, the market is predicted to experience a growth of $74 billion by 2023. Hence, huge funds transfers on the online gambling platforms attract criminals and as per Shufti Pro’s Identity Fraud report of 2021, the Australian authorities received around 6000 gambling scam reports. The gaming and gambling company’s negligence in implementing adequate KYC and AML solutions led to the mass disruption of their systems. In this regard, the UK Gambling Commission imposed a penalty of $10 million on the companies that lacked adequate player verification procedures.

Fintech Industry

Modern day technological advancements testify to the gaining prominence of the Fintechs in the days to come. The current regulatory protocols, however, do not suffice the security requirements and invite the cybercriminals to intervene with their disruptive strategies. The fintech sector, just like any other, experienced a whopping increase of 15% in the identity fraud rates in 2021. However, the insurance sector that implemented strong ID verification solutions, saved around $1.3 billion via AI-based solutions.

Online Dating Platforms

Unlike the financial sector, the online dating platforms are not guarded by strict KYC and AML regulations, hence they are the scammer’s easiest target. Moreover, people looking for the perfect match through online dating websites fall prey to romance and catfishing scams. The year 2021 experienced the highest rate of money mules and dating scams where the scammers took advantage of the vulnerabilities of the people. As per a study, the renowned dating app, Tinder, experienced nearly 3 billion swipes in a day.

Crypto industry

The already thriving crypto industry experienced a major boom during the pandemic and the need for digital transactions rose significantly. With that, the criminal intervention also hit the highest rate i.e $14 billion$14 billion dollars in 2021. Where the countries adopted measures to cope with the potential of cryptocurrency, they are struggling with the adoption of strict measures to prevent cybercrimes

ID Document Frauds encountered in 2021

Ever since Shufti Pro emerged in the ID verification market, it has been subjected to various frauds within the course of time. Most cases it has dealt with are the frauds attempted by the use of government-issued ID documents. The whopping increase in fraud cases all over the world has increased the demand for authentic ID verification services. Where the businesses were struggling to maintain strict security regulations to combat ID document fraud, the criminals were busy exploiting biometric ID verification systems.

ID Fraud Prediction 2022

The year 2021 marked the highest rate of ransomware attacks that disrupted the business processes. Since technological advancements are subjected to continuous evolution, the year 2022 should be well prepared for the attacks coming it's way. Here’s a look at what the frauds might appear to be:

• The exploitation of Remote Working: Several companies experienced phishing emails that led to the breach of sensitive information, providing the attackers will all the necessary data that they could misuse in 2022.
• Targeting Crypto, NFTs etc: Considering the rise in cryptocurrency usage and the advancement of metaverse, money laundering also increased significantly. Therefore, analysts have predicted a major increase in cybercrime in 2022.
• Deep Fake Attacks: Similar to 2021, the year 2022 is expected to suffer from even more deep fake attacks.
• Synthetic ID fraud: Based on the basis of the surge in synthetic ID frauds in 2021, the CTO of Shufti Pro has predicted a major increase in synthetic ID fraud in 2022.

Conclusion

In the light of the discussion above, the year 2021 was a challenge for the survival of businesses amidst the significantly increased financial crime cases. Considering the rapidly evolving technological advancements, the year 2022 is expected to experience even major ID thefts and other financial crimes. Therefore, to fight these crimes, a more robust AML and KYC regulatory framework is required.