The rise of organized fraud crime groups

The stereotype of a fraudster being a kid in his room wearing a hoodie is no longer accurate, as scammers are increasingly joining organized crime groups. Such groups should never be underestimated, as they have the resources and operational excellence of a small nation, raising the complexity of the attacks and significantly increasing the chances of, say, an e-commerce business becoming a victim.

From lone wolf to organized crime

It’s no surprise that many people, including e-commerce business owners, see fraudsters as individuals working alone to defraud companies and make dirty money. Years or even decades ago, there were not enough incentives for fraudsters to band together to form organized crime groups, because they had all the capabilities and resources to commit fraud on their own. As a result, we did not see any organized crime groups focused on fraud, but what changes caused the shift?

The rapid pace of digitalization

First and foremost, the shift of fraudsters from working individually to joining organized crime groups was caused by a combination of factors. One of the most important determinants influencing the change was the rapid pace of digitalization. Surprisingly, organized crime groups operate similarly to legitimate businesses, seeking opportunities and potential in specific markets. For some, it could be drugs, guns, or human trafficking, but many saw the potential in the online world because a significant portion of human lives was being gradually transferred into digital spaces.

Increasing complexity of payment systems

Another important factor contributing to the change was the increasing complexity of payment systems. As humanity was experiencing the internet’s renaissance, most of its features, such as e-commerce, were far from perfect. Because most of the systems were experimental and only the beginning of a multi-billion dollar industry, they had many flaws and “holes.” As a result, fraudsters would seek out simple ways to defraud a company. However, as the internet has grown more advanced and sophisticated, fraudsters required significantly more time and other resources to commit fraud, leading to banding together to be more efficient.

Threats of law enforcement

Furthermore, growing law enforcement ambitions to end fraud was another reason for fraudsters to band together. Because law enforcement was constantly developing new initiatives and methods to combat fraud, it became significantly more difficult for fraudsters to operate anonymously and ultimately generate profit, which was, of course, their primary goal. To stay one step ahead of law enforcement and continue making dirty money, fraudsters banded together and pooled their resources to sophisticate their methods.

Current fraud landscape

At the moment, it is clear that fraudsters work in organized crime groups, and this is unlikely to change anytime soon. Scammers benefit from organized crime groups’ resources, expertise, advanced hacking tools, and connections to international networks of other fraudsters. Members of an organized fraud crime group can also distribute their workload evenly, allowing them to remain undetected and ahead of the authorities. All of the advantages point to one conclusion: fraudsters will not return to working alone, and organized crime groups will continue to grow.

So far, fraudsters have developed significantly more complex and lucrative payment fraud, social engineering, phishing, and malware attack schemes by working in groups. They have also learned how to distribute the workload and reduce their exposure to authorities, lowering their chances of being caught. A recent investigation, for example, resulted in more than 200 raids and the arrest of 119 suspects. Before being apprehended, they were able to steal people’s bank accounts, steal crypto coins, hijack social media accounts, and generally scam businesses and people by using the victims’ detailed personal information.

Online business vulnerability

As fraudsters become more creative and sophisticated by working in groups, it can only be bad news for online businesses. The fact that organized crime groups can pull off massive schemes while avoiding confrontation with authorities indicates that they are clearly one step ahead. This means that businesses are currently more vulnerable than ever, and fraudsters will almost certainly try to test their systems at some point.

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