Happy New Year, and welcome to our first Secret Crime Fighter newsletter of 2021!
As you may have noticed, Bitcoin recently surged past $40k, and JPMorgan thinks it could reach as high as $146k. Since there is a set number of Bitcoin in existence, the increase in price is being driven by an increase in people trying to buy it. This provides criminals with the opportunity to exploit the perceived complexities of cryptocurrencies, and so unfortunately, this week’s Secret Crime Fighter has seen an increase in crypto-related scams. We think this is relevant for any cryptocurrency exchange, as well as any bank that allows money to move to cryptocurrency exchanges.
As the financial pressures of the COVID-19 pandemic continue, and the lure of becoming an overnight millionaire once again becomes plausible, a slew of cryptocurrency “financial advisors” have begun scouting for victims. By playing on the idea that cryptocurrency is still fairly complicated, they have been able to target the less tech savvy and entice them into making risky investments in the cryptocurrency market.
These “financial advisors” have been contacting victims, mostly European men over the age of 50, saying that bitcoin and other cryptocurrencies are still hard to acquire, and the industry is not mature. These factors mean that there is still money to be made, but they will need the help of the “advisors” to navigate the markets.
Once persuaded, the “advisors” walk the victims through setting up a crypto wallet, and encourage them to make a small bank transfer into the wallet to test that it works. The victims can then buy some cryptocurrency and see that they have control of the wallet.
Next, the “advisors” walk the victims through making the investment play, which involves buying cryptocurrency and then sending it to a different wallet.
Over a period of a few weeks, the victims usually send multiple large payments of £10-20k from their bank accounts to their crypto wallets, exchange the fiat for cryptocurrency, and send it to the “investment” wallet. At times, the total money sent by individual victims has reached 6 figures.
Once the cryptocurrency has been sent to the “investment” wallet, it is of course in the hands of the criminals and disappears. The victims usually realise after a few weeks, although sometimes it can take a few months.
Our Secret Crime Fighter first identified this typology because of customers reporting the scam. Once it was identified, they quickly put in place transaction monitoring rules to block the exchange of fiat to cryptocurrency when the customer was over 50, European, and there was a small test exchange followed by a larger £10k+ exchange.
But the problem is that at the time of exchange, the victims don’t know they are being scammed. Oftentimes they don’t want their “investments” blocked and don’t appreciate getting advice from their cryptocurrency wallet provider.
Ultimately, a risk based approach to blocking fiat to crypto exchanges needs to be taken, seeking consent to continue where the risk is highest, and describing the risks involved - essentially enhanced customer education.
For banks, they should be looking for older customers who have never used crypto wallets/exchanges before, where test payments are made, followed by larger payments. Where this happens, customer education is again the main route to helping victims.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
How Grasshopper Bank Saved 50+ Hours per Fintech Partner with Cable’s Automated Compliance Testing.png)
Why Fintechs Need 24/7 Automated Compliance Testing.png)
Expanding Compliance Testing: New Modules for Reg E, Reg B, and Reg ZHappy New Year, and welcome to our first Secret Crime Fighter newsletter of 2021!
As you may have noticed, Bitcoin recently surged past $40k, and JPMorgan thinks it could reach as high as $146k. Since there is a set number of Bitcoin in existence, the increase in price is being driven by an increase in people trying to buy it. This provides criminals with the opportunity to exploit the perceived complexities of cryptocurrencies, and so unfortunately, this week’s Secret Crime Fighter has seen an increase in crypto-related scams. We think this is relevant for any cryptocurrency exchange, as well as any bank that allows money to move to cryptocurrency exchanges.
As the financial pressures of the COVID-19 pandemic continue, and the lure of becoming an overnight millionaire once again becomes plausible, a slew of cryptocurrency “financial advisors” have begun scouting for victims. By playing on the idea that cryptocurrency is still fairly complicated, they have been able to target the less tech savvy and entice them into making risky investments in the cryptocurrency market.
These “financial advisors” have been contacting victims, mostly European men over the age of 50, saying that bitcoin and other cryptocurrencies are still hard to acquire, and the industry is not mature. These factors mean that there is still money to be made, but they will need the help of the “advisors” to navigate the markets.
Once persuaded, the “advisors” walk the victims through setting up a crypto wallet, and encourage them to make a small bank transfer into the wallet to test that it works. The victims can then buy some cryptocurrency and see that they have control of the wallet.
Next, the “advisors” walk the victims through making the investment play, which involves buying cryptocurrency and then sending it to a different wallet.
Over a period of a few weeks, the victims usually send multiple large payments of £10-20k from their bank accounts to their crypto wallets, exchange the fiat for cryptocurrency, and send it to the “investment” wallet. At times, the total money sent by individual victims has reached 6 figures.
Once the cryptocurrency has been sent to the “investment” wallet, it is of course in the hands of the criminals and disappears. The victims usually realise after a few weeks, although sometimes it can take a few months.
Our Secret Crime Fighter first identified this typology because of customers reporting the scam. Once it was identified, they quickly put in place transaction monitoring rules to block the exchange of fiat to cryptocurrency when the customer was over 50, European, and there was a small test exchange followed by a larger £10k+ exchange.
But the problem is that at the time of exchange, the victims don’t know they are being scammed. Oftentimes they don’t want their “investments” blocked and don’t appreciate getting advice from their cryptocurrency wallet provider.
Ultimately, a risk based approach to blocking fiat to crypto exchanges needs to be taken, seeking consent to continue where the risk is highest, and describing the risks involved - essentially enhanced customer education.
For banks, they should be looking for older customers who have never used crypto wallets/exchanges before, where test payments are made, followed by larger payments. Where this happens, customer education is again the main route to helping victims.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
