Disrupting Crypto Scams in Australia Webinar – Recap and Recording

‍Australia has been hit hard by various types of financial scams. According to the Australian Competition and Consumer Commissions’ (ACCC) latest scam activity report, Australians lost AUD $3.1bn to scams in 2022, an 80% increase from 2021. Of these, AUD $221m in scam losses was paid through crypto. While this is still a small percentage of overall losses, the number was 162% higher than 2021.

To mark Australia’s National Scam Awareness Week, TRM’s Angela Ang and Jonno Newman were joined by Martin Burke (Detective Sergeant, South Australia Police (SAPOL), Joint Policing Cybercrime Coordination Centre (JPC3)), Gabby Lewis (Fraud Manager, Swyftx) and Simon Callaghan (CEO, Blockchain Australia) to unpack efforts to fight crypto scams in Australia.

Watch the video for a replay of the full discussion and check out the recap below for the key takeaways.

Same scams, different methods

Mr. Newman kicked off the discussion by outlining the anatomy and underscoring the long history of scams. He pointed out that Ponzi scams were actually named after Charles Ponzi, who had perpetrated precisely such a scam over a century ago. Fundamentally, all scams rely on an attractive but false proposition to entice victims to hand over their funds. The premise has remained the same, even though the medium of exchange has evolved over the years. Crypto, with its promise of instantaneous, borderless value movement, has gained popularity with scammers in recent times. However, it is important to remember that the tech itself is neutral, and can be used for both good and bad. Promisingly, the ability to track down nefarious actors is embedded in the blockchain tech that powers crypto.

Three lines of defense – education, prevention, disruption

The discussion then moved to how good actors could combat crypto scams, which Ms. Ang framed in “three lines of defense.”

• Education: consumers themselves are equipped to identify scams
• Prevention: industry players step in to identify and save consumers at the precipice of handing money to scammers
• Disruption: law enforcement and industry work together to recover scammed funds and apprehend scammers

Educating Australians about scams is a collective effort

Stressing the importance of cross-sector collaboration, Mr. Callaghan discussed the work of the Australian government’s newly established National Anti-Scam Centre (NASC) which brings together different ecosystem stakeholders to educate the public and fight scams. Noting that the entry and exit points of a scam could be in different industries, he was encouraged by involvement across telcos, social media companies, banks, and crypto companies in scam prevent work via various NASC fusion cells and working groups. He also highlighted the importance of better data transparency and sharing mechanisms, noting that the vital role that blockchain intelligence tools like TRM play in enhancing the quality and availability of data.

Mr. Burke outlined SAPOL’s significant scam education work across different types of media, and the role of the JPC3 in ensuring “consistent messaging” across Australia. With the very real constraint of finite resources, this sharing and coordination of efforts across different agencies is a force multiplier in education efforts.

However, with scammers rapidly evolving their targeting methods, keeping new scam typologies front of mind for consumers is a big challenge. Many individuals tend to pay attention to information on scams only after they’ve fallen victim, which is too late. To incentivize Australians to pay attention, TRM partnered with Swyftx to launch a world-first trial where consumers will be paid to complete a scams education course and enable two-factor authentication (2FA) on their accounts. Ms. Lewis explained that this was akin to getting people to lock their doors (2FA) and teaching them not to open the door for bad guys (scam education). The course also educates consumers about Chainabuse, a global crypto scam and fraud reporting platform run by TRM, where they can look up and report fraudulent platforms and blockchain addresses. Mr. Newman also highlighted that such a global platform brings efficiencies in a world of finite resources and a borderless crypto ecosystem.

Preventing scam losses is a hard but gratifying job

Unfortunately, individuals do still get taken advantage of by skilled and convincing scammers. This is where the fraud teams at financial institutions can play an important role by detecting potential victims, and dissuading them from handing over their hard-earned money to a scammer. Mr. Burke and Ms. Lewis both highlighted that this could prove challenging especially in long-cons where scammers have completely won the trust of their victims. In such cases, it can be difficult, even for police officers in uniform to convince a victim that they have been scammed. Scammers also invest significant effort in understanding financial institutions’ controls, in order to successfully coach their victims to pass these checks.

Ms. Lewis shared one such case where a victim of a romance scam had been coached by the scammers into successfully completing all levels of verification with Swyftx, to the extent that they sounded like a cryptocurrency expert. Fortunately, Swyftx’s transaction monitoring system detected unusual transactional movements, and the team conducted a secondary compliance call where the customer eventually shared with the team the full extent of what had happened. The team looked up the wallet address to which the victim had withdrawn their funds, and found that the scammers had not yet cashed out. They were able to get the victim to withdraw the funds minutes before the scammers got to it. The transparency of public blockchain data, leveraged by Swyftx’s well-trained fraud team, prevented the victim from losing AUD $55,000 to the scam. In fact, the Swyftx team had prevented losses totaling ~AUD $3m this year alone.

On the government front, Mr. Burke shared that one effective strategy has been actively taking down scam websites. This not only prevents potential victims from accessing such fraudulent platforms, but helps to identify existing victims. When these victims are unable to access the sites, they contact the police to report a “hack,” and from there, officers are able to assist them. Looking at financial information of apprehended criminals has also helped to identify early stage victims, and prevented larger losses.

Disrupting scammers’ fund movements may be easier in crypto than cash

Finally, the discussion turned to disrupting scammers through asset recovery efforts. Unpacking the notion that asset recovery was difficult in crypto, Mr. Newman said that it all comes down to knowledge, tools, and experience. With the right combination of the three, seasoned investigators like Mr. Newman actually find it easier to trace stolen cryptocurrencies than cash. Vitally, cryptocurrencies are transacted on an immutable, public ledger that is accessible to anyone, and crypto transactions are “very rarely […] actually anonymous.” On this front, TRM has equipped investigators through its training and certification programs. The TRM tool also provides investigators with enhanced information on cryptocurrency ownership, transaction patterns, and more, informed by a team of dedicated experts.

Elaborating on the intricacies of cryptocurrency investigations, Mr. Burke highlighted that blockchain technology enables investigators to reach beyond national borders. In the world of traditional finance, once funds move out of jurisdiction, authorities’ ability to get information from financial institutions is limited. However, in crypto, this was “just a hop on graphs” they could follow using blockchain intelligence tools like TRM. This has enabled them to investigate more thoroughly, and engage their international law enforcement counterparts with well substantiated cases. He also noted that the crypto industry had a more global mindset to fighting financial crime, with Australian law enforcement having successfully engaged with exchanges outside of Australia, to get them to freeze funds.

Australia needs a united front to fight scams

Concluding the webinar, the panelists shared a common hope for Australia’s efforts to combat scams – a unified effort. Scammers do not operate in silos, and neither can we.

Mr. Callaghan and Mr. Newman both stressed the importance of a collaborative approach, and the vital role that bodies like the NASC and Blockchain Australia play in strengthening partnerships. Ms. Lewis also touched on the crypto industry’s bid to play its part by educating counterparts in law enforcement, banks and other financial institutions on the nuts and bolts of crypto, so they could better identify potential scams with a crypto nexus. Finally, Mr. Burke expressed his hope for better and faster communication between different stakeholders – to simply be able to call or email the right person quickly for the right response.

In sum – let’s talk, educated, and collaborate more.

TRM Academy – training and certifications

To learn more about investigating scams and other types of crypto crime, check out TRM Academy’s training and certifications.