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With AI tools and crypto aiding financial fraud, cops and industry gear up for a fight

With AI tools and crypto aiding financial fraud, cops and industry gear up for a fight
 

The fraudulent practice of “pig butchering” continues to be a major concern in financial fraud, as highlighted in a recent report from the International Criminal Police Organization (Interpol). These scams exploit emotional connections by masquerading as romantic partners, business associates, or friends. Once trust is established, the scammers introduce victims to seemingly lucrative investment opportunities. A pair of arrests in California and a new tech industry partnership represent green shoots of pushback against the practice.

The Interpol Global Financial Fraud Assessment report underscores the use of modern technologies, such as artificial intelligence, to deceive victims by creating deepfakes. Fraudsters can utilize deepfake audio and video created with generative AI tools to convincingly impersonate trusted individuals. Furthermore, large language models can build coherent and persuasive messages, aiding scammers in their deception.

“The use of Artificial Intelligence (AI), large language models and cryptocurrencies combined with phishing- and ransomware-as-a-service business models have resulted in more sophisticated and professional fraud campaigns without the need for advanced technical skills, and at relatively little cost,” Interpol’s report states.

A recent indictment in the Central District of California shows an example of such a pig butchering scam involving crypto for money laundering. Two Chinese nationals, Daren Li and Yicheng Zhang, have been arrested and accused of laundering a minimum of $73 million through shell companies associated with cryptocurrency investment scams.

The conspirators used multiple shell companies to open U.S. bank accounts, where the illicit funds were transferred from these U.S. bank accounts to other domestic and international accounts and cryptocurrency platforms. Much of the laundered money was converted into Tether (USDT), a stablecoin, and transferred to bank accounts in The Bahamas.

“Complex financial fraud schemes such as pig butchering present a clear and present threat to the financial infrastructure of the United States as countless numbers of Americans continue to be victimized by this predatory activity,” says Assistant Director of Investigations Brian Lambert of the U.S. Secret Service.

Interpol has identified several modi operandi used in financial fraud, including impersonation, investment, romance, advance-payment, and identity fraud, which pose significant global threats. Identity fraud involves gaining unauthorized access to individuals’ personal information, such as credit card credentials and biometric data, for illicit financial gain.

“We also need to encourage greater reporting of financial crime as well as invest in capacity building and training for law enforcement to develop a more effective and truly global response,” Jürgen Stock, Interpol secretary general, says in a statement.

Tech companies coalition collaborate on anti-scam strategies

A newly formed coalition, Tech Against Scams, comprises technology firms such as Match Group, Coinbase, Meta, and Ripple. This group’s objective is to prevent and disrupt financial scams by providing a unified front against online fraud and financial schemes targeting consumers across various industries.

Notably these platforms are among those that can be used by criminals to connect with victims (Match, Meta) or acquire crypto that can be used for money laundering (Coinbase, Ripple).

Last summer, Match Group, Coinbase, and Meta joined forces to focus on complex scams like pig butchering. The goal of the collaboration was to leverage each other’s capabilities to identify adversarial trends and drive collective action to protect consumers on a global scale. Tech Against Scams builds upon these companies’ investments. The coalition also plans to work closely with law enforcement agencies worldwide.

“Scammers and the organized criminal groups behind pig butchering schemes target people across many internet services, making it hard for any one company to see the full picture of malicious activity and counting on each of us working in silos,” says Guy Rosen, chief information security officer at Meta.

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