Technological advancement has brought convenience and countless other benefits to the lives of many, yet it has also increased the amount of potential risks that many individuals and businesses have to face. Cybercrime has risen to become one of the most reported forms of fraud, where it has incurred a hefty bill of USD 6 trillion globally within the first half of 2022 alone. It is undeniable that this issue is becoming increasingly severe and measures have to be implemented as soon as possible to mitigate the risks.

A Financial Price to Pay

One blatant consequence of cybercrime and online fraud is the financial losses incurred. For instance, USD 1.22 billion worth of cryptocurrencies has been laundered or stolen within 2022, although the year has not ended. It would financially impact two main parties in this case — companies and their clients or investors. The former may lose a noticeable amount of their assets if fraudsters directly steal from the company’s wallet and they could also make a loss because of obligations to compensate clients when fraudsters steal from their clients. An example of a case illustrating such consequences would be the hacking of Harmony’s Horizon Bridge in June 2022. From a customer’s perspective, it is possible that they would suffer losses even if the company reimburses part of their assets.

In 2021, there were over 1.4 million complaints concerning identity theft filed in the United States. Through identity theft, the fraudster could conduct account takeover fraud and drain an individual or business’ funds. 

The Unaccounted Prices

Most of the time, we do not consider the mental and reputational harm done to organisations and their clients or investors. Businesses would have their operations and standing as an organisation ruined because of a loss of trust in the reliability and security offered by the company. Even if they were to impose strict regulations for users in order to increase the level of security, it might potentially backfire and further drive away consumers due to organisations overly controlling their services.

Clients or investors would also be negatively affected psychologically. Their situation could be further exacerbated as the majority of the crimes are often complex and high-profile cases that require months and years to resolve. This adds to the frustration that one may experience, because of the huge financial burden incurred and the possibility of not being able to get any funds back. Investor of the infamous Bernard Madoff, the mastermind of a USD 19 billion Ponzi scheme, has reportedly committed suicide after having to pay the hefty financial price. Similarly, the recent case of Celsius Network facing bankruptcy and claims of it running a Ponzi scheme have led to severe distress in their retail investors, where many of them ‘homeless’ and ‘suicidal’, have begged the court for help.

Defences Against Online Fraud

There are several ways for both organisations and individuals to safeguard themselves against online fraud cases. For organisations, especially those heavily involved in the usage of digital assets, it is highly recommended to adopt Know-Your-Customer (KYC) and conduct Customer Due Diligence (CDD) to obtain and verify a customer’s identity. Having a rigorous KYC onboarding and security processes can prevent cases of identity frauds and any suspicious intruders, which minimises the chances of organisations aiding any illicit financial activities. In many cases, fraudsters disguise themselves as customers and also pretend to be legitimate businesses with fake merchant accounts. As such, it is crucial for organisations to understand the common types of merchant fraud and how Know-Your-Business (KYB) processes, which focus on identifying the person accountable (or legal representative) of a business, can be adopted to protect themselves against merchant frauds.

For individuals, it is most essential to be cautious of sharing any sensitive information online. Common online frauds such as phishing scams often use fraudulent emails and websites to trick users into disclosing private account or login information. Individuals should also be aware of clicking any suspicious or unsolicited links that could potentially contain malicious files.

The Future of Online Fraud Cases

The rise of digital assets such as cryptocurrencies along with the market’s unprecedented worldwide growth has made financial crimes ever more attractive and lucrative. As technology advances, it is expected that online frauds will only get increasingly novel and sophisticated. Organisations and individuals need to remain vigilant of any suspicious entities and activities constantly ‌to prevent paying the prices of online frauds as much as possible.