The world of cryptocurrency, forex and online stock trading is changing so rapidly that by the time all can be written about it, the opposite will likely be true. As of this writing, the price of cryptocurrencies has crashed by nearly $1.3 trillion, with Bitcoin, the most popular cryptocurrency, losing almost half of its value in April. Although some investors bought on the downside, it did not recover. The Gamestop ($GME) stock case earlier this year showed that smartphone app “traders” could shake the hearts of the financial world.
Despite this, more people than ever are hoping to get rich by investing in cryptocurrencies, trading currencies or buying stocks online, and wherever money changes hands there are people looking to get it. take. Cryptocurrency exchanges have been particularly hard hit by fraud, with $12.6 billion stolen since 2011 (adjusted for inflation). The average value of a hack on a crypto exchange is $24 million, making them extremely lucrative. Although there are supposedly ‘major flaws’ in the security of desktop and app-based trading applications, they are not the target of nearly as many hacking attempts, although the Low-level fraud like multi-account to get sign-up bonuses is always a post.
We found from experience that digital fraud in online commerce, especially in the crypto space, requires more active security, and machine learning (ML) was the only way to create security protocols that also work. quickly and efficiently than modern fraudsters.
Fraud and money laundering in crypto, stocks and FOREX
Multi-million dollar exchange hacks will make the news, but for fraud and compliance professionals working in e-commerce, particularly in crypto, every day means putting out fires and wondering if the fraud attempts you’ve prevented are just the tip of the iceberg.
Multi-accounting, the practice of opening multiple accounts to get sign-up bonuses or move funds between accounts for money laundering purposes (which we will discuss later) will always be prevalent on online trading platforms . Although rare in crypto, many FOREX trading sites offer free trades as sign-up bonuses and it can be potentially lucrative to create bulk accounts to harvest them.
Account takeover is also common and rarely discussed in the press. On stock and FOREX trading platforms, an account takeover is relatively simple: find an account’s login information, change its payment information to that of a bank account that you can use but cannot be traced back to you, then empty their account. With cryptocurrency exchanges it’s more complicated because theoretically every transaction can be traced through the blockchain that underpins the technology and simply “cashing out” one’s holdings is usually more complicated and time-consuming than on fiat currency-based platforms.
However, it always happens. There are lesser-used altcoins that make traceability much more difficult, and the proceeds of account takeovers can be laundered through them to get rid of any trace of their origin before being returned to more easily usable currencies. Although the use of cryptocurrency for actual purchases is becoming rare as it becomes more of a speculative asset than a currency, there are still online retailers who will accept it as payment, allowing criminals to convert their gains in resalable goods, and dark web marketplaces like Russian site Hydra that would convert stolen cryptocurrency into narcotics, gift certificates, prepaid credit cards or just cash through specialized money launderers.
Hot and cold safety
Despite its reputation as the “Wild West” of financial assets, cryptocurrency is becoming more legitimate by the day, with more and more exchanges using Know Your Customer (KYC) verification, two-factor authentication for bank-level connections and security protecting their servers. . Sophisticated and security-conscious users are increasingly moving to keep their coins in places other than on the main trading apps, such as “cold” wallets and even USB drives.
In terms of security, a “hot wallet” is an account on an internet-connected device, such as the servers powering cryptocurrency exchanges. Being connected to the internet, it can be hacked, and since cryptocurrency exchanges do not provide the same assurance as banks, in the event of a hack, a trader could potentially lose everything. Some exchanges will work to compensate customers in the event of a major security breach, but they are not obligated to do so, and some will simply lack the funds to do so in the event of a multi-million dollar loss.
However, in some respects, cryptocurrency could be considered even safer than traditional stock and FOREX trading sites – if you were to buy a stock, for example, you would still need to have an online account” hot” with a trading site, which could be hacked. If you cashed out your account, you would not be able to benefit from any growth in that particular stock. In the cryptocurrency space, there are “cold” wallets that are not connected to the Internet, storing an individual private key on a USB stick or even a hard copy rather than allowing access to an account via usernames and passwords much more easily hackable. The advantage here is that even when stored in a cold wallet, bitcoin is still bitcoin and can grow accordingly until you want to trade it or convert it to fiat currency. On the contrary, the security of these cold wallets can prove to be too good, causing users to lose thousands or even millions due to lost passwords.
Reconciling ease of use and security
Whereas over the past decade, the technical challenge of setting up a cryptocurrency wallet and the sheer difficulty of trading stocks and foreign currencies online (or at least doing so profitably ) have prevented many people from potentially risky online trading. That’s no longer the case – even as recently as the start of this year, the Gamestop affair showed millions that there was potential for incredible profits from readily available apps, and even before this black swan event, online brokers were already experiencing tremendous growth as US citizens. invested their stimulus checks. The record price of bitcoin has led to similar growth in cryptocurrency investments, although due to the nature of the crypto space it is difficult, if not impossible, to know how many people own cryptocurrency (although that there are some estimates).
As cryptocurrency becomes more commonly accepted and online stock trading and FOREX continue to grow, security and compliance measures will of course be standardized, but the number of unsophisticated users and fraudsters looking to exploit them will be too. While massive exchange hacks are carried out by highly sophisticated groups and may be impossible to completely prevent, equally damaging but less headline-worthy daily account hijackings and multi-account scams tend to work. on a “quantitative not qualitative” basis, firing after hundreds or thousands of attempts and hoping some stay. Artificial intelligence (AI)-based fraud prevention enables companies behind online trading platforms to cope with the amount of attacks. Machine learning allows systems to stay on top of the ways fraudsters attempt to gain access to accounts and securely share massive amounts of data from companies around the world to make anti-fraud systems even more powerful.
Modern trading platforms need modern fraud solutions, and the only solution capable of dealing with fraud on the scale and level of sophistication of the fraud problem they face is artificial intelligence just as sophisticated. By using the very latest technology, it is entirely possible for businesses in the field of crypto, FOREX and online stock trading to balance growth, ease of use and security.