Real fraud in an increasingly cyber world


Financier Worldwide Magazine

February 2016 Issue

February 2016 Issue

It’s an unfortunate truth that fraud has been around for as long as there were people to steal from. Every day, huge technological advances are being made in order to better protect consumers from fraudsters, however while technology evolves, fraudsters are also adapting to keep up.

Examining recent trends allows anti-fraud professionals to predict what types of new opportunities fraudsters may be looking to capitalise on. From looking at how minor data breaches occur every day to how cyber currency is playing a role in fraud, it is more important than ever for those in the fraud field to keep up-to-date on the latest technology and to work closely with IT professionals to uncover and prevent fraud.

Identity theft through smart phones

The world has seen a huge surge in data breaches and the cyber fraudsters do not discriminate on whom they hit. Skilled thieves hacked into health insurers, dating websites and even a database of US federal employees in 2015. While these data breaches make the news, individuals’ having their identities stolen happens much more frequently and can often be blamed on something that everyone has in their pocket – a mobile device.

Mobile devices, and specifically smart phones, are often touted as a way to make your life easier. They boast small size for easy transport, hardware that can be used as a high quality camera, video camera and music storage, and the ability to download any number of applications that strive to provide services that had never before been able to happen remotely. A smart phone may make your life easier, but it also can make life easier for hackers.

Many people do not think about where they are when they are using their smart phone. If their phone is using an unsecured, free wifi network, at a coffee shop for instance, fraudsters can easily get into the same wifi network and track the actions or keystrokes of the phone user. This can range from innocuous activity to hackers being able to record your bank username and password. It is extremely important for anyone using a smart phone, tablet or laptop to never access important financial portals while connected to a free or unsecured wifi network.

Using bitcoins to commit fraud

Technology is also changing in a way that allows fraudsters to cover their tracks more carefully. Bitcoin, an unsupported cyber currency, first popped up around 2008. The currency is not legal tender and is usually bought or created through cryptographic protocol. The creation and trading of bitcoins is usually wrapped under layers of secret IP addresses, allowing the buyer or seller in a Bitcoin transaction to remain completely anonymous. Since it has not been established as an officially recognised form of currency, it remains completely unregulated and without any sort of protection from fraud.

Since they are so difficult to trace, bitcoins have become a preferred tool in money laundering. A fraudster wishing to hide their illegal gains produced by a Ponzi scheme or from embezzlement may take their legal currency and exchange it for bitcoins on a Bitcoin exchange site, like Mt. Gox. Once they receive their bitcoins, they can use them like normal currency on the deep web to buy a variety of goods and services, including valuable items such as untraceable firearms. Once they’ve purchased goods, they can potentially sell those to regain legal currency.

Bitcoins can also be easily used to bribe officials without leaving a clear trace. While it may seem a bit suspicious for a politician or other person in power to have a large personal holding of bitcoins, it is not illegal and nearly impossible to ascertain how they received the bitcoins or how much they own. The main issue for anti-fraud professionals is that even if they have mountains of evidence that proves someone committed fraud, if they cannot find the money, or if it’s hidden in an unsecured currency, it makes it incredibly difficult to prove the fraud ever occurred.

Recognising the IT department as the new toolbox for fraud prevention

As the landscape of how fraud is committed continues to change, anti-fraud professionals must think outside the box in relation to what tools they have at their disposal. A tool that has been ignored for the most part in the past is the knowledge of IT professionals. Those trained in more complex systems, and who have deeper understanding of the intricate framework of various web architecture are an invaluable source in fighting new types of fraud.

When faced with predicting the best ways to prevent future fraud, it is a good idea for anti-fraud professionals to consult with those in the IT world to create an integrated security system in addition to setting up an easy-to-use reporting tool to make it easier for whistleblowers to come forward. Working in congress will benefit clients or employers by finding workable solutions to common fraud risks.

As technology will never stop growing, it is important for those in the fraud field to familiarise themselves with all potential new risks. Although the online world may seem at times more like the Wild West than a sleek vision of the future, with the right preparation and understanding, fraud can still be conquered no matter what the platform may be.


Sarah Hofmann is the public relations specialist at the Association of Certified Fraud Examiners. She can be contacted on +1 (512) 478 9000 ext. 324 or by email:

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