Will the Fintech Startup Scene Open Door to Online Fraud?
Feb 16, 2016|
One of the main reasons fraud losses in the banking sector are relatively under control is the limited options fraudsters have when it comes to transferring money out of the victim's account. The first part is easy - stealing the victim's account credentials or convincing victims to transfer money to other accounts is something fraudsters do very well and can do en mass.The second part is much harder - finding an account to which the victim transfers money and the fraudster can easily withdraw that money without being traced back.Fraudsters can't just go and open bank accounts to which the stolen money is transferred, as this makes it easy for law enforcement agencies to trace back the money and get to the fraudster. So they use mule accounts and these mules then transfer the money to the fraudster in untraceable channels such Western Union or Money Gram. Law enforcement agencies then reach the mule but are unable to reach the fraudster. Another tactic is to open fake bank accounts in China and other countries where account opening procedures are weak and western law enforcement reach is limited.But recruiting mules and opening fake bank accounts is hard and this is the real bottleneck when it comes to fraud. This what keeps fraud losses under control.The new fintech scene may break this balance. All these hundreds of money transfer platforms, payment and e-wallet platforms, online loan and credit lines platforms and marketplaces are perfect channels for transferring money between victims and fraudsters. Once the money is transferred from the victim's account to one of these platforms, it's very hard to trace it back to the fraudsters and it's much easier for the fraudster to withdraw. Organizations will want to stay on top of this.