Financial Crime in 2022 and beyond

Many households across the world have experienced extreme economic hardship as a result of the prolonged effects of the Covid-19 pandemic, with plummeting interest rates and rising inflation causing a sustained period of uncertainty for banks and the general population. With a fourth wave on the horizon, will this uncertainty give rise to new financial scams? How will this affect the world of crypto? 

From the risks of remote working to geographic shifts in vulnerability, Eva Crouwel, Head of Financial Crime at Luno shares her thoughts on the patterns and trends likely to await us in the coming year. 

A sustained economic downturn will lead to an increase in scams

In times of economic hardship, people fall under pressure to replace the funds they’ve lost, whether that’s due to lower returns on investments or simply less earning power than they would have had before. As a result, this pressure creates an ideal breeding ground for malicious scams as people overlook what might have previously seemed suspicious. Now with a fourth wave of covid all but guaranteed, this outcome is looking more likely. 

“As the economy goes down, scams go up,” Eva explains. “Now what that means in my world is that we’re going to go through another year of people trying anything they can to find economic relief, including the well-known scams.”

Developed countries to experience rise in scams

A common misconception when it comes to scams and who falls prey to them is that the majority come from less economically developed countries where there is a lack of education on the subject. However, as no country has been left unscathed from the economic hardship brought about by the pandemic, Eva believes that more developed countries will take on their equal share of criminal activities.

“Because of the economic downturn of investment returns on fiat (government-issued money) in the European markets […] we’re increasingly seeing higher value customers falling for scams involving investments, so I am inclined to think that we’re going to see a little bit of a geographical shift towards the more developed countries,” Eva added.

Another development can be found in the “remote working” environment that has transformed the traditional employer- employee power dynamic. While this is seen by many as a positive step towards achieving a more balanced work life, the transfer of technology from the office to the home office has opened up corporations to the increased threat of cyber and ransomware attacks, often translating in the flow of funds into cryptocurrency. 

As adoption increases, so does vigilance

However, not all trends of the last year have been negative. While the large increase in cryptocurrency adoption has resulted in a number of more creative scams, Eva has also noted a big increase in customers proactively monitoring their assets.

“What I do see is that people are starting to become more aware of the safety of their own crypto,” she said. “As adoption increases, we see that customers are increasingly reporting irregularities happening with their wallet or personal details.”

But there is still a long way to go. While economic misfortune continued to be a great equaliser, we uncovered disparities in areas you might not have expected.

Willingness to adopt new tech

While it can be said that the more economically advanced nations often lie in the west, the same cannot always be said for technological adoption. According to Eva, less economically developed countries like South Africa and the African continent as a whole are adopting beneficial financial technology like biometric verification at a much faster pace than European and UK customers. One reason for this may simply be a case of timing.

“Biometric verification in South Africa has been around for many years,” Eva explained. “Money changes hands in Africa at a much higher rate than in Europe or the UK. So when I look at the adaptability and adoption of advanced fintech, our African customers have a much more adoptive attitude.”

While it may not seem too consequential, innovation brought about by the rapid adoption of fintech, such as the use of biometrics (the process of verification using defining characteristics of the individual such as fingerprints or facial features) are an essential tool in the fight against impersonation scams and account takeovers, among others.

2022 and beyond

With the pandemic likely to continue into the new year, so too will the prevalence of financial crime in all shapes and sizes. However, it is not all doom and gloom, with Eva’s examples proving that the financial awareness of many has improved over time as the adoption of cryptocurrencies continues to rise. Despite the ever-changing landscape of the economy and financial crime, one piece of advice will always continue to be relevant: If something looks too good to be true, it probably is.