Cryptocurrencies and digital currency trading and exchange platforms have been becoming increasingly common in recent times. For the first time, investors and crypto enthusiasts entered the market because of the sudden boom in the value of Bitcoin. As cryptocurrency’s core nature is anonymity, financial institutions are becoming increasingly aware of a rise in money laundering cases. To minimize the risk of fraud in digital currencies, financial institutions need to follow the best fraud prevention tips for digital currencies.
The nature of cryptocurrency relies on exchanging coins online or via a phone or computer. This also means that payments can be made almost instantaneously and without many legal protocols. Credit and debit cards have legal protection, this allows you to dispute a payment and get your funds back in case of fraudulent activity. With cryptocurrencies, reversing payment isn’t possible unless the exchange itself has regulations regarding it.
With the growing interest in cryptocurrencies, the rate of money laundering fraud is also increasing. There are also a series of third-party websites that offer cryptocurrency mining opportunities. The use of these sites will boost the growth of new cryptocurrencies and provide a base of credibility for upcoming currencies.
Digital fraud is also increasingly committed by tricking crypto enthusiasts and new investors into sharing their personal details including bank statements and ID documents to make an investment or deposit into a legit business. These stolen bank details can be used to deposit money out of a person’s accounts and move it into a fraudsters’ behavior.
Digital currency fraud including growing and well-known cryptocurrencies is becoming increasingly common. Plus, the fraudsters are becoming increasingly sophisticated. This is making it harder for financial institutions to detect fraud.
We’ve come up with a list of the best fraud prevention tips for digital currencies that can be followed by individuals and financial institutions.
Most Popular Online Scams in 2022
1. Social Engineering
Social engineering scams involve tricking customers into sharing their personal information. There are only two types of social engineering scams that you can find online including digital currencies:
- Baiting Scams: Baiting scams include tricking customers by offering them something. The scams usually are based on impersonating an investment professional, representative of a legit crypto firm, or representative of a non-existent entity. Scammers tend to offer special rewards or extra earning to trick customers into divulging their personal information.
- Scareware: A scareware attack involves customers being tricked by false threats and alarms. If you’ve ever visited a third-party website, you must have seen a pop-up something along the lines of “Your Device is Being Attacked”.
2. Phishing Scams
When it comes to the cryptocurrency industry, phishing scams trick customers into providing their information regarding digital wallets. Specifically, hackers are interested in crypto wallets’ private keys. Scammers will try to take control of customer e-wallets and encourage you to disclose your password or other authentication measures. A phishing email asking you to share your information regarding digital wallets.
3. Website Cloning
More sophisticated scammers are able to create a webpage that looks exactly like the original e-wallet website. Once you try to login into the fake website the fraudster will have access to your information. Once you put a little more attention to the website, you’ll find some inaccuracies. These types of sites can usually be identified by differences in the URL link.
How to Prevent Digital Cryptocurrency Fraud?
As cryptocurrencies are becoming increasingly popular globally, crypto exchanges have to comply with KYC regulations and AML regulations. Customers are required to complete thorough ID verification for consumers in order to buy and sell cryptocurrencies.
Here are the best fraud prevention tips for digital currencies:
- Familiarize yourself with all the basic fraud prevention tips offered by your crypto exchange provider.
- Check email addresses and contact names thoroughly before conducting any activity.
- Make sure to not share sensitive data such as personal details, passwords, and card numbers to new sites.
- Keep on the lookout for clone websites or website URLs.
- Don’t sign up with crypto exchanges that don’t comply with KYC or AML regulations.
If you feel like you’ve been a victim of fraud, then the first thing you need to do is report to the nearest authority.