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Feb 21

How Fraudsters Operate Scams In Money Remittance Operations: Interview with Yotam Dar

Reading Time: 4 mins

Unfortunately, online crime has seen an unprecedented rise in the last few years. It’s tragic to hear stories of people who’ve lost their lives savings because of fraud, but all too common.

One common area for these scams to take place is in money remittance operations. For those unfamiliar with the term, it’s any transfer of money, but particularly applies to transfers abroad. Increasingly, blockchain technologies are being used with money remittance operations to make them more effective for scammers and harder for victims to seek justice.

Tech entrepreneur and blockchain security expert Yotam Dar is here to help us better understand what is happening.


Why are money remittance operations so susceptible to scams?

Yotam: The key aspect of money remittance scams that make it an attractive proposition for scammers is it often needs a third party involved. These processes can be expensive and there are so many legitimate providers that it becomes confusing for the average web user.

The normal course a money remittance scam will follow is targeting someone who is vulnerable and playing to their insecurities. Once they have them in their net, they’ll ask for money to be transferred to them.

I’ll run down three of the most common scams for you.

First up are lottery scams. It’s a sad fact that many people are struggling financially, so when they receive an email telling them they’ve won some money, they want to believe it is true. The scammer will usually tell the victim to transfer some money first to prove their account is valid, and they’ll steal this money without ever delivering the reward.

Dating scams were highlighted brilliantly by Netflix in their show “The Tinder Swindler” recently. The idea is the scammer will convince their target they are in love and use this to extract gifts or plead for money to get them out of a rough patch.

Finally, shopping scams prey on people who are on the hunt for bargains. They’ll create a site that looks like a legitimate eCommerce site, but they never actually deliver any of their products. The websites will often lack security, and they can steal your card details when you pay for non-existent goods.

Typically, these companies are based abroad, and it’s very difficult to track them down and hold them accountable.


What’s changed to make them more common?

Yotam: As people spend more time online, it’s natural that there will be more opportunities for scammers to trick unsuspecting web users into handing over their cash. It would always be expected for online crime to be more common in a more digitally enabled society.

What took cybersecurity firms and regulators by surprise was the sheer speed of adoption forced by the pandemic. All the services and products people would previously have bought in person were suddenly shut down because of the government restrictions. This forced even the technologically inexperienced to make financial transactions online. For many, it was the first time they’d have ever been using money remittance operations.

This meant we had a perfect storm of not only more people using money remittance operations, but more people who were less aware of the security threat they posed. 49% say they are now more comfortable making digital payments as a result of COVID-19, but this comfort can come despite ignorance of how to protect themselves. For instance, 98% of people don’t understand the basics of blockchain technology.

This information gap can be ruthlessly taken advantage of by people who are technologically competent and have malicious intentions. It’s much easier to trick someone if they doubt their own understanding.


What in particular about blockchain aids scammers?

Yotam: The blockchain is a massive innovation, and the web is likely to look very different in ten years’ time as adoption increases.

The main tenet we are interested in when it comes to money remittance operations is the decentralized aspect. Traditionally, any fraud would need to go through a recognized financial institution that is subject to laws and regulations. If you’re scammed, you can complain to your bank and claw some money back.

In the decentralized model of blockchain, there is no authority to go to in order to report fraud. There is no one who can reverse the transaction and get your money back for you. Blockchain transactions are what we call immutable, which means once the block has been added to the chain, it is technologically impossible to remove it. For a scammer, this means once they have your money, they don’t need to worry about any reprisals for the most part.

Another aspect of the decentralized model that aids fraudsters is anonymity. To open a traditional bank account, you normally need to prove your identity, but this isn’t the case to the same extent as opening a cryptocurrency wallet. There’s no public record that shows who own what cryptocurrency wallet, so criminals can operate with impunity.


Is there any way to put obstacles in the fraudster’s way?

Yotam: As a very first step, if you have any doubt whatsoever about a website before you make a transaction, don’t make it. It’s better to delay than to potentially lose your life savings to a fraudster.

The issue of security is a major talking point within the blockchain industry at the moment, and there are several innovative solutions coming to the forefront. Even today, a savvy user can use the ledger of a vendor to see their recent transactions and to see if there are any red flags. For example, if it looks like the wallet is new or the transaction volume seems suspiciously high.

NFTs in the future can be used to publicly check whether someone is providing the goods they are legally entitled to be able to sell. This is a growing area of innovation and I expect to see significant changes in the next few years.

Zero-Knowledge Technology is a public blockchain industry privacy solution. It allows users of the blockchain to share specific information that helps with verification and to ensure a vendor is who they say they are without actually sharing the information. For example, a vendor could prove they operate in the United States without actually revealing their address.


Final thoughts

It was fascinating to learn more about money remittance scams from Yotam. Our key takeaway was to always stay alert and if you don’t understand blockchain technology then avoid using it for money remittance operations as much as you can. It’s unlikely any real vendor will force you to use cryptocurrency for a sale. Be alert to check out the vendor credentials too, and you’ll be able to stay safe.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.


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