Reported fraud across the financial services industry in Africa has spiked, particularly in South Africa. Despite this, there has been a decline in illicit crypto transactions according to Chainalysis.
This is the word from Eva Crouwel, head of financial crime at cryptocurrency platform Luno, who says: “The 2020 UN Report on Trade and Development, estimates illicit losses of USD 88.6 million each year in Africa alone. In 2019, 2,1% of all global crypto transactions globally were categorised as illicit, in 2020 this number dropped to 0.34% of all global cryptocurrency transactions. This translates to roughly USD 10 billion globally.”
According to Crouwel, there is a perfect storm of three main reasons for the rise in financial crimes in the country. “First, financial education levels tend to be lower in South Africa and combined with financial hardship caused by Covid-19, citizens are seeking good returns.
“Second, crypto is a new technology, so users are uncertain about how it works and how to protect themselves.
“Finally, personal data in Africa has not been well protected compared to Asian and European markets, even though POPIA was recently introduced in SA. This makes it easy for people with bad intentions to get hold of personal information,” she explains.
Among its 9-million customers across 40 countries, in around 95% of Luno’s current financial crime cases, customers have been scammed. This varies from traditional ‘get-rich-quick’ scams to cases where customers are scammed into surrendering their login information to fraudsters, who sometimes pretend to be from Luno.
Regulation, or the lack thereof, is a significant factor. “Luno fully supports regulation of crypto and believes that it will help to combat fraud. But the reality is that even highly regulated sectors experience financial crime, especially scams,” she says.
Given that crypto is so new, crypto businesses have a significant role to play in teaching customers how to stay safe and protecting customers. Luno uses external blockchain monitoring companies and restricts crypto movements when the data indicates that customers are at risk.
Says Crouwel, “Interestingly, there is no specific demographic for victims, despite widely-held perceptions that scammers target either the ignorant elderly, or young mavericks looking to make a quick buck or previously disadvantaged users.”