Rising Fraud Sophistication: A Deep Dive into Scam Operations

What do we know about fraudsters?

To gain a deeper understanding of the increasing sophistication and success of online fraud, we must familiarize ourselves with the characteristics and background of those attempting to deceive consumers. The more we know about fraudsters and their modus operandi, the better equipped we are to protect ourselves—and our customers—against their schemes. 

Cybersecurity threat actors—i.e., individuals or groups who initiate deceptive or fraudulent activities on the internet with the intent to gain financial or other benefits at the expense of others—are becoming more advanced, more tech-savvy, and can exploit human or system vulnerabilities with breathtaking efficiency.   

It is, therefore, no coincidence that fraud losses are reaching record numbers in many places of the world. For example, US consumers lost a total of $10 billion to fraud in 2023, whereas the Global Anti-Scam Alliance (GASA) estimates that scammers stole over $1 trillion from victims globally. 

Generally, there are several types of these actors: from individuals with personal motivations to organized groups and hacktivists to nation-state actors and cyber terrorists. However, threat actors can be categorized into many other groups depending on their affiliations and motivations. 

Understanding online fraudsters 

Threat actors who target banks’ end customers and who use various techniques (social engineering, account takeover, RAT attacks, etc.) to deceive these consumers in order to steal their money or sensitive data usually have a straightforward core motivation—profit. 

Although some fraudsters may act purely on their own, often they are highly organized groups that resemble a regular enterprise in their set-up. This is often matched by the industrial scale of their operations, the sophisticated organizational structure, and coordination that mimics legitimate businesses. 

The case of Southeast Asia  

The issue of cyber criminals operating in online fraud is very complex, as the example of Southeast Asia shows. In this region, according to information from organizations such as the United Nations Office on Drugs and Crime (UNODC), a large multibillion-dollar cyber-scam industry has emerged, supported by human trafficking. 

These activities proliferated especially during the COVID-19 pandemic, when the then-illegal casinos started a new business of online scams. Most industrial-scale operations are located in Chinese-run special economic zones and other regulatory voids in Laos, Myanmar, and Cambodia. Some can also be found in the Philippines and Malaysia. 

According to the UNODC Policy report, there are three main reasons why organized crime groups in Southeast Asia have rapidly increased the operations of online scams and fraud since early 2020: 

• The pandemic interrupted the ambitions of organized crime groups to attract masses of gamblers from China and Southeast Asia to the casinos in the special economic zones of the Mekong region.
• In 2021, the Chinese government encouraged its nationals living or traveling in Southeast Asia to return to their homeland or face strict penalties, resulting in a major labor gap for organized crime groups.
• The pandemic increased the popularity of digital payments, e-commerce apps, cryptocurrencies, and digital activities in general, creating a new important market for crime groups to invest in. 
• The pandemic partially prevented law enforcement from inspecting organized crime in remote areas due to travel and investigation limitations.

In response to these challenges, organized crime groups identified opportunities to develop new revenue streams by committing online scams and fraud, targeting people in Asia, North America, Europe, and other regions of the world, states the report. 

As a result, large-scale organized crime groups defraud consumers around the world for billions of dollars. The UNODC report estimates that in one Mekong country alone, the scam industry can generate between $7.5 billion and $12.5 billion—about half of that country’s official GDP. 

Trafficking in persons for forced criminality 

Unfortunately, the actors of online scams can’t be easily divided into innocent victims and bad fraudsters. Many of those who participate in fraud are very often doing so involuntarily and are just other victims of organized crime groups as they profit from the mass “trafficking in persons for forced criminality,” (UNODC term). 

Under the guise of a legitimate job offer, organized crime groups lure unsuspecting job seekers, often from foreign countries, and then force them to carry out scams in inhumane and often very cruel conditions of scam compounds.  

The United Nations Human Rights report states that there may be as many as 100,000 victims of this type of human trafficking in Cambodia, with other sources putting the number of victims across Myanmar as high as 120,000. Victims usually include well-educated, tech-savvy young people with professional experience and language skills. 

Impact of sophisticated scams 

Although Southeast Asia is a typical example of an area where scam centers have been thriving recently, it is certainly not just a problem in this region. Organized crime groups are often transnational and establish operations in regions where they see opportunities. As the first INTERPOL operation targeting the phenomenon of human trafficking-fuelled fraud has revealed, evidence exists that this crime trend is expanding beyond Southeast Asia. New scam centers are appearing as far afield as Latin America. 

The geographical spread of these practices is not the only problem. Another warning sign is the increasing sophistication of scams, which reflects the elaborate business of which they are a part. Fraudsters are more frequently using artificial intelligence to increase their credibility and therefore the success of their scams. 

Read more about AI-driven fraud 

An anonymous international organization representative in the UNODC report commented: “The types of crimes we saw at the beginning, they weren’t basic, but the level of sophistication that we’re seeing now is incredible. I’m not even sure we’re aware of the level of crime that they are perpetrating.” 

The significance of cooperation 

The recent transcontinental police operation HAECHI IV targeting online financial criminals resulted in 3,500 arrests and seizures of $300 million (approx. EUR 273 million) worth of assets across 34 countries. The operation focused, among other types of fraud, on voice phishing, romance scams, investment fraud, and business email compromise fraud. 

This example perfectly illustrates the global scale of the threat we face from sophisticated scams. Fraud threatens the economic stability not only of individuals or financial organizations but often of entire nations. 

The fight against fraud is thus not only a fight to save money but also human health and often human lives as well. However, to succeed against highly organized and sophisticated criminals, we must be at least as organized and sophisticated. 

At ThreatMark, we focus our efforts on both aspects comprehensively. Through our Behavioral Intelligence Platform, we provide financial institutions with an effective, state-of-the-art tool to protect their customers’ assets and reliably detect even the most advanced types of scams, such as investment and romance scams, social engineering, and the increasingly common APP scams.  

Our collective strength lies in sharing knowledge. That’s why we organize Fraud Summits where we discuss and advance industry knowledge alongside accomplished and experienced professionals from the financial sector. Because when it comes to fighting fraud, we are all in this battle together.