ThreatMetrix Q4 Report: Cryptocurrency cybercrime is growing fast

ThreatMetrix Q4 Report: Cryptocurrency cybercrime is growing fast

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Imagine 10%-20% of funds in your business are owned by criminals? And 4.3% of your new accounts and 4.1% of all payments are fraudulent? If that’s the case, you’re likely running a cryptocurrency exchange or an online gambling site.


Buried inside the new ThreatMetrix Q4 2017 Cybercrime Report is a very interesting section on the increasing risk of cryptocurrency fraud and gambling site fraud.


The growing risk of cryptocurrency crime is not a surprise with some large exchanges opening as many as 200,000 new accounts on busy days. The December theft of more than $530 million in cryptocurrency from Japanese exchange Coincheck illustrates the enormous size of the cybercrime challenge.


In their report, ThreatMetrix shares a revealing case study of a cryptocurrency exchange client worth reading.

10 million exchange customers at risk

The exchange cited provides transactions for both merchants and consumers in various cryptocurrencies including Bitcoin, Ethereum and Litecoin.


ThreatMetrix says cryptocurrency exchanges bring together the features cybercriminals value most: an opportunity to launder criminal proceeds, anonymity and operations outside the jurisdictions of countries and banks.


Most important, these exchanges have a high volume of transactions, handling millions of dollars in transactions daily, some with unsophisticated or new users. There is limited or no regulatory oversight yet.


It’s a natural environment for a variety of fraud techniques, including phishing, spoofing, login and new account opening fraud.


10%-20% of bitcoin is owned by fraudsters

ThreatMetrix notes a estimate that 10-20% of bitcoins are owned by fraudsters.


In December 2017, as cryptocurrency values skyrocketed, the exchange started to see a jump in fraudulent new account openings and login fraud attempts.


As well, the number of new accounts jumped from countries subject to economic and trade sanctions by the US Office of Foreign Asset Control (OFAC).


The ThreatMetrix Digital Identity Network provided intelligence for this exchange to identify potential criminals as soon as they landed on the website. This minimized fraudulent new accounts, reduced money laundering and prevented fraudulent accounts takeovers.


Gambling sites at high fraud risk

Online gambling is also a huge business, worth an estimated $47.1 billion globally in 2017, according to Statista. Many gambling sites provide customers the option to pay and use cryptocurrency for betting and gambling online. This creates another huge opportunity for cybercriminals.


Account creation is the most vulnerable part of the gambling customer journey. An estimated one in 20 new accounts (4.3%) are fraudulent. Stolen and spoofed identities are the most popular techniques used by fraudsters on gambling sites. It appears account logins (0.9%) are a relatively lower risk for online gamblers.


Gambling sites have a higher percentage of payments and wager transactions than many other industries. One in every 23 payment transactions (4.1%) is fraudulent according to ThreatMetrix.


Bots are a growing problem for the online gambling industry, sometimes totaling more than 50% of traffic. Most bots attempt to create new accounts or take over existing accounts using stolen credit card data from the dark web.


The results?

Proactive monitoring and prevention strategies by ThreatMetrix helped the cryptocurrency exchange reduce fraud and lower friction with good customers.


One thing is certain. Cybercrime is growing fast and it’s a problem that will not go away for the cryptocurrency industry.


You can read the full ThreatMetrix Q4 2017 Cybercrime Report here and the cryptocurrency exchange case study and gambling site data are on pages 37-41.


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