ID fraud surges in payments by 56% in Q3, but drops in Crypto space by 51%: report

Rick Steves

“The actual fraud rate is likely three to 10 times higher, because today’s sophisticated attacks are committed by organized crime groups using AI, deep fakes and other technology to create false IDs nearly indistinguishable from the real thing.”

AU10TIX, an Israeli-based identity verification technology company, has released its Q3 2023 Global Identity Fraud Report. Analyzing millions of transactions from 249 countries during July to September 2023, the report reveals significant shifts in organized identity fraud patterns.

The most striking trend is the 56% increase in fraud within the digital payments sector, contrasted by a 51% decline in cryptocurrency-related fraud.

Payments sector was primary target of organized fraud groups

This shift is attributed to the impending implementation of the EU Market in Crypto-Assets (MiCA) regulation, set to revolutionize the European Union’s cryptocurrency landscape in 2024. Although primarily targeting the EU, the regulation’s influence has led to a global uptick in stricter KYC (Know Your Customer) guidelines, particularly in the crypto sector. This has made it increasingly challenging for professional fraud rings to operate in the cryptocurrency space, prompting a shift of their activities to the less regulated payments sector.

The report indicates that the payments sector was the primary target of organized fraud groups in Q3 2023, accounting for 51% of all financial fraud attacks, a significant rise from 32% in Q2. In contrast, the crypto sector’s share of attacks dropped to 23% from 47% in the previous quarter. This trend highlights the direct impact of regulatory frameworks on the prevalence of fraud.

North America experienced the highest volume of attacks in the payment sector, attributed to the region’s economic recovery and increased spending. The Asia-Pacific region, due to its complex digital transaction environment involving cross-border payments, was the second most targeted. AU10TIX suggests that this complexity presents challenges in identity verification, creating opportunities for fraud.

Facial image capture as a crucial tool for ID verification vendors

Interestingly, AU10TIX’s analysis found that fraud involving selfie capture represented less than 5% of attacks across all regions, indicating the effectiveness of this verification method. This aligns with Gartner’s recognition of facial image capture as a crucial tool for identity verification vendors.

Dan Yerushalmi, CEO of AU10TIX, stressed the sophistication of modern identity fraud, often involving AI and deep fake technologies. “The unpleasant truth is that publicly available statistics regarding identity fraud refer only to the attacks that traditional IDV solutions can detect. The actual fraud rate is likely three to 10 times higher, because today’s sophisticated attacks are committed by organized crime groups using AI, deep fakes and other technology to create false IDs nearly indistinguishable from the real thing. The financial well-being and reputation of a business may be severely impacted by the rise of sophisticated identity fraud. Our commitment at AU10TIX is unwavering—to contribute to the global reduction of identity fraud and make the world a better place.”

Given these developments, there’s an urgent need for robust legislation in the United States and Asia-Pacific to protect consumers in the payments industry. Additionally, payment providers are urged to enhance their KYC practices to combat the rising tide of fraud risks. AU10TIX remains committed to reducing global identity fraud and enhancing security in financial transactions.

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