Scam factories are becoming an increasingly sensitive source of threat to the integrity of global financial networks, having caused damage to these functional spaces over the past four years, which, according to various experts, amounts to $75 billion.
The mentioned factories, which are not engaged in production in the usual sense of this process and are a kind of generator of economic destruction, have in some sense a paradoxical systemic feature, which is that in this case, the criminals themselves may become victims of the environment of illegal use of technology.
Claire Greene, a payments risk expert at the Federal Reserve Bank of Atlanta, says that the specified scam platforms operate primarily in developing markets, including Laos, Myanmar, and Cambodia. She reported this on the blog of the mentioned financial institution.
Claire Greene separately noted that in the specified countries, tens of thousands of people face financial difficulties that force them to be involved in illegal activities related to the implementation of fraudulent schemes in the virtual space. In this case, an important factor in the problem is the unfavorable economic situation. In conditions of limited financial opportunities for survival, people are forced to accept jobs that involve stealing money from residents of other countries who do not suspect that performing certain actions in an online environment is a way to lose funds. In this context, the problem of the lack of choice of manners to earn money, which is a kind of result of economic decline, should be mentioned separately. The inability to receive a salary in a legal job causes a willingness to use any methods of generating income, except for extremely radical ones involving the commission of serious crimes.
Claire Greene also notes that some scammers have become such as a result of external coercion, which does not provide for the possibility of choice. Sometimes participants in criminal activities are victims of human trafficking. On occasion, those who are in legal terms scammers have been involved in the criminal world as a result of kidnapping or deception. Employees of scam factories are deprived of the opportunity for voluntary action. This means that they cannot stop their participation in fraud due to strict external control and a categorical ban on the part of the owners of the centers of criminal activity.
The operating scam factories methodology often involves the use of fake online identities to start a fictitious romantic relationship. Victims of such fraudulent schemes receive requests from their partners, who are actually what can be called virtual thieves, to transfer money with a variety of justifications, including particularly dramatic and incredibly tragic, but still false. Illegal cryptocurrency algorithms are used for transactions in such cases.
The mentioned technique is called Pig-Butchering. In this case, the first stage of the fraudster’s interaction with the victim is to gain trust. In a relative symbolic sense, this period of implementation of the fraudulent scheme is similar to fattening a pig. For several weeks, the perpetrator seeks to demonstrate to the victim that his intentions are goodness, and their communication is based on sincere love. At the next stage, the victim learns from the interlocutor about some emergency circumstances that provoked problems, the solution of which involves the need for financial assistance. It is worth noting that the pretexts for encouraging the transfer of funds may be different. For example, a fraudster can tell a very touching story about his alleged illness and unobtrusively mention expensive treatment that consumes money.
Moreover, the Pig-Butchering technique can be implemented not only in the context of a romantic relationship. In this case, so-called investment fraud can also be carried out. As part of the implementation of such schemes, criminals create social profiles and personas. They then manipulate victims into investing in cryptocurrencies or transferring digital assets for profit, which then turns out to be fiction. It is worth noting that in such cases, scammers demonstrate excessive persistence bordering on a kind of aggressive coercion. They can spy on the victim with the help of appropriate technologies acting via apps and text messages. Sometimes fraudsters, as part of manipulating the victim, can formulate additional goals for themselves, which, however, are also associated with the theft of funds.
Last November, in the United States, federal authorities seized nearly $9 million in a cryptocurrency confidence Pig-Butchering scam. At that time, Nicole M. Argentieri, acting assistant attorney general of the Criminal Division of the Department of Justice, said that the scammers target ordinary investors. Criminals create websites that assure victims that investing in certain platforms guarantees profit. Nicole M. Argentieri noted that in all such cases, the result is that international criminal actors steal cryptocurrency, leaving victims with nothing.
In the context of countering fraud, effective risk management and compliance with legal requirements are problematic aspects for payment service providers. The mentioned tasks are significantly complicated because operations are carried out at the international level. Due to this circumstance, it is extremely difficult to track fraudulent transactions. This complexity has a direct impact on the cross-border regulatory framework, traditional anti-money laundering (AML), and know-your-customer (KYC) protocols.
It is worth noting that fraud is developing. Criminals have access to new-generation technologies that make their activities more sophisticated and therefore more effective. Scam factories have not yet faced a drop in productivity, which consists of the financial losses of their victims.
Kate Frankish, chief business development officer and anti-fraud lead at Pay.UK, during a conversation with media representatives, stated that digital technologies, such as deepfake images by artificial intelligence, allow criminals to mimic people at an extremely high level of realism. In this case, even those who have a high level of awareness in the sphere of technology can become victims of virtual deception.
Also, in the context of using AI, the problem of unauthorized access to personal devices is being actualized. An Internet search query such as how to know if my camera is hacked will provide information about signs of such interference.
Kate Frankish says that the more sophisticated the methods of fraud become, the more difficult it is to understand what is right and real, and what in no way corresponds to the relevant concepts. Separately, she noted that the line between truth and deception is blurred, which makes victims more vulnerable to threats.
For businesses and financial institutions that seek to stay ahead of scammers who are constantly changing the way they operate, it is extremely important to use innovative technologies. Some such organizations are making progress as part of their respective efforts. In this case, the way to achieve the goal is to prioritize investing in advanced fraud detection systems.
Last year, in the United States, more than 70% of financial organizations with assets of more than $5 billion implemented solutions using artificial intelligence and machine learning to combat fraud and other economic crimes. This indicator is almost twice as high as the figure for 2022. Also, the mentioned solutions have been implemented by more than 97% of companies with assets of $100 billion or more.
