The threat of fraud networks in the APAC: KYC and beyond
With a seemingly unstoppable rise in online transactions, organized crime groups are increasingly targeting this lucrative market. Instead of individual would-be fraudsters trying to impersonate genuine consumers and businesses with stolen credentials, groups are forming that share data, methods, lists of softer targets, and intelligence on circumvention of preventative measures. To discuss this rising wave of more advanced crime, Tech Wire Asia spoke exclusively to Pavel Goldman-Kalaydin, Head of AI & ML at Sumsub, to get to the bottom of the problem.
Pavel has extensive experience in both finance and advanced machine learning technologies, with a background in data science, analysis, and research. We asked Pavel first to describe what we mean by the phrase ‘fraud network’ and, broadly, how their activities can be counteracted.
“Fraud networks are organized groups or individuals that collaborate to carry out fraudulent activities. [They] exploit gaps where [an organization’s] infrastructure is not connected to transaction or event monitoring. Fraud networks, or fraud rings, are groups of individuals – operating globally or within the same location – who jointly participate in fraudulent activities, such as multi-accounting, money laundering, money muling, and personal data breaches. They collaborate to take advantage of a digital platform like a cryptocurrency exchange, fintech app, dating service, or online casino. By connecting who the person is (with IP addresses, payment details, and so on) to what they actually do on the platform, we can detect and act on fraudulent patterns.”
Although such groups operate globally, there is a greater instance of this type of crime in the APAC region, plus the problem is growing faster there too. Pavel told us that attack numbers are growing about eight times faster than in Europe and the Americas. The issue is not necessarily linked to national economic status: Singapore and Hong Kong are among those countries where fraud networks operate commonly. Singapore, with the highest GDP (PPP) per capita in the world, saw 4,800 people investigated for ‘money muling’ (the transfer of illegally-gained funds on behalf of others) in 2020 alone, according to Singapore Police data. There were 4,700 similar cases in Singapore in the first three months of 2023 alone.
“In Asia, fraud rings are affecting both developed and developing markets alike. For example, Bangladesh has an average fraud network incident rate of a worrying 10.2%, with alarming rates in other growing economies such as Thailand (6.6%), Vietnam (3.7%) and Indonesia (2.2%),” Pavel said.
Of course, the problem isn’t limited to the APAC. In Estonia – arguably one of the most digitized countries in Europe – a group of several dozen cryptocurrency exchange applicants uploaded identical Proof of Address documents from an unlicensed foreign bank in an attempt to get multiple cryptocurrency-based payment cards issued to the same address. , Sumsub, discovered the attempt. “This is just one case of how serial fraud operates; other instances include money muling schemes, tech support scams, ransomware, and phishing attacks, and account takeovers.”
Legacy methods of combating the types of fraud we see today depended on only initial KYC (know your customer) checks. Once a new user had passed those, their activity was not monitored. Fraudsters can, in those circumstances, persuade legitimate citizens to ‘lend’ (or sell) their credentials, to then go on to use the account to perpetrate crimes. “Continuous monitoring and analysis ensure that even those applicants who’ve passed initial verification are consistently under observation,” Pavel told us. But there are significant challenges in deploying full-lifespan countermeasures. These include:
- High volumes of data mean manual identity of suspicious activity is resource-intensive,
- False positives can impact genuine users and sour relationships between customers and provider,
- Evolution of methods used by fraudsters means training and adaptation are required constantly by enforcement organizations,
- Regulatory compliance means there are boundaries that simply cannot be crossed during investigation,
- Customer experiences are easily compromised by heavy-handed anti-fraud measures,
- Costs rise and profits take a hit because of the need for fraud prevention.
Pavel told us that today’s machine learning algorithms are a huge boon in fraud detection. “AI is a powerful tool for detecting fraud networks. Should users show signs of fraud after being onboarded, they won’t go unnoticed. Through leveraging AI, companies can implement behavioral analysis and risk scoring algorithms, which were previously challenging to implement effectively. Such advanced capabilities enable continuous monitoring of users’ activities, meaning early detection of suspicious behavior and enhancing fraud prevention measures.”
Sumsub holds an ever-evolving database that has identified and reported over 2 million fraudsters and operates a KYC platform built on over a billion identities. It analyzes more than 5,000 fraud attacks daily, building a comprehensive picture of the digital landscape that examines historical connections and relationships among entities, using ML-powered algorithms.
It’s in proactive, constant monitoring that the company’s platform excels. Its platform pre-screens service applicants using ID verification and behavioral intelligence that adds an invisible layer of fraud prevention. Verification processes detect deepfakes, suspicious device fingerprints, create risk scores, and detect the activities of today’s fraud networks. On an ongoing basis, Sumsub oversees login behavior and looks deeply into account activity using AI that ensures near-zero instances of false positives, guaranteeing a highly accurate and reliable detection of fraudulent activities in real-time.
“We adopt a multi-layered approach, offering a solution with ‘Detect & Act’ capabilities in one platform. This goes beyond traditional anti-fraud or KYC methods to ensure a fortified defense against a wide array of fraud, including account theft, romance scams, payment fraud, and many more. We provide the ability to set action alerts to automatically trigger additional checks, to simplify the decision-making process and reduce false positives.”
Given the sums of money that change hands daily over the internet, it’s perhaps no surprise that fraud networks are constantly developing new methods to launder and steal money from legitimate sources. Sumsub is the only platform that uses technologies that are in advance of those employed by these cyber criminals, preventing fraud and illegal activity in the APAC and across the world.
To find out more about Sumsub, head over to the company’s website and join over 2,000 companies that protect themselves and their customers with preventative measures that don’t impact customer experience or statutory compliance. Sign up for the free demo today.
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