What are the Emerging Areas of Fraud?

October 10, 2022

During our first session of Fraud Office Hours, an attendee asked, "What are some of the emerging areas of fraud and financial crimes that we should be aware of?" Watch this video clip to see how Unit21's Head of Fraud Risk, Alex Faivusovich, responded.

Emerging Areas of Fraud: NFTs

I think it's slightly too early to discuss how fraud looks on NFT. But what we do see right now is we see a lot of scams, and we see a lot of account takeovers and people losing their NFTs.

This is mostly because many users still don't understand what a digital asset is, right? How do you handle a digital asset? How do you protect your digital asset?

It's easy for most people today to understand how to not share their social security with everybody, or how to not write the PIN on your debit card, and try your best not to lose your wallet with your physical payment cards in it. But I still believe that a lot of people don't realize how to protect their NFTs. And, a lot of people don't realize what an NFT contract looks like.

We are seeing more and more things we call malicious contracts where basically, you will buy an NFT. You don't fully understand what you are buying, and the contract itself has some type of backdoor access to your wallet.

NFTs and Money Laundering

So you end up buying the NFT, but the person who sold it to you now has access to all your cryptocurrency that you had on the same wallet you used to buy the NFT. It is mostly around scams and not so much fraud. But also, when we think about NFTs and money laundering, there's always a great question of what is the actual value of the NFT.

For example, if somebody created some type of NFT and decided that it is worth half a million dollars, and they had a buyer for it, how do we truly know that this is a legitimate transaction in terms of whether this NFT is actually worth it, or is the creator just using the NFT in a way to launder money and move funds and cryptocurrency from one place to another.

A lot of interesting questions about NFTs are out there, but also, if we talk about money laundering in cryptocurrency - we have a lot of customers who monitor crypto. They also monitor how fiat is converted to crypto and how crypto is converted to fiat. A lot of activities are being monitored on the blockchain.

So money laundering is definitely an issue when it comes to crypto, but we have a way with Unit21 and our partners who provide monitoring for cryptocurrencies to provide a very sophisticated way to identify and address those potentially bad users.

Looking for more insights? Check out our first session of Fraud Office Hours on-demand for a deeper dive into current fraud trends and which preventative measures to consider.

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