25 September 2024 , 21:25
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Fraud is involved in around 20 percent of the world’s online sales each year, netting criminals trillions of dollars, according to a report from a national security research group.
Pirated goods accounted for $4.5 trillion of the $20 trillion generated globally from e-commerce in 2023, the Washington D.C.-based International Coalition Against Illicit Economies (ICAIE) said in its latest report.
The proceeds from selling counterfeit goods online far exceed profits generated by drugs or human trafficking, ICAIE said. Those crimes carry much stronger penalties, making fraudulent online sales more attractive to criminals.
Manufacturers, intellectual property rights-holders, suppliers, wholesalers and vendors are all vulnerable to losses from counterfeiters.
One reason for the surge in e-commerce fraud is the ease in which mobile devices can access the global financial system, according to ICAIE.
“Today more people have smartphones than have electricity and running water,” the group said in its latest report.
These growing links between the global digital economy and cybercrime have also given rise to new methods of money laundering, ICAIE said, as criminals are “increasingly using e-commerce to diversify their criminality.”
For example, mobile apps that utilize digital wallets like WeChat allow users to transfer funds that might have been flagged had they gone through local banking networks. Currency converter apps, meanwhile, provide criminals an avenue to obfuscate the illegitimate source of their money, especially if the app is encrypted.
Cryptocurrencies are also becoming increasingly used in e-commerce for criminal activity. In less than 15 years since the emergence of Bitcoin, more than 21,000 cryptocurrencies have emerged. They can be a volatile investment option, but one well-suited for illicit activity.
Today, more than one in four millennials are involved in the crypto market, while companies like Microsoft and AT&T accept payment via Bitcoin and BitPay. Crypto payments can provide vendors with secure processing, and allow end-to-end traceability of transactions – if they are well managed.
Some governments are now scrambling to catch up with these developments, creating legislation to manage digital currencies in the same manner that hard currency is regulated in the global financial system.
One piece of legislation proposed by the U.S. is the SHOP SAFE Act, which would require online third-party sellers to verify the authenticity of their wares in an effort to curb counterfeit sales.
Another proposed law is the Combating Cross-Border Financial Crime Act of 2023, which would mandate that U.S. financial authorities begin leveraging all existing data in investigations against illicit cross-border financial activity, including money laundering.
But there is no date for when either bill will be voted on in the Senate.