Fraudsters are blurring the lines between art, property and digital assets in the online age

Around 330 million people are victims of online crime each year, a number so large that the amount spent on fraud detection is expected to climb to $129 billion worldwide this year.

The rise of cryptocurrencies has exacerbated this problem, and last year cybercriminals stole a record $3.2 billion, a fivefold increase from the previous year. This rise in crime has put law enforcement under pressure to deal with new and innovative fraud schemes. Despite this, criminals’ use of physical assets as stores of wealth for the proceeds of crime has increased alarmingly.

At an annual Fraud, Asset tracing conference held recently in Geneva, leading figures in the field were brought together. A who’s who of senior fraud litigation, asset tracing, dispute resolution and insolvency officials shared techniques for pursuing and catching these increasingly resourceful criminals.

In the second year of the pandemic, 2021, as law enforcement struggled with limited resources, criminals laundered a staggering $8.6 billion through rising cryptocurrency. 30% compared to the previous year. Although cryptocurrencies themselves act as a valuable store of wealth, criminals are aware of the relative ease of tracing these assets and have therefore reverted to storing their wealth in physical assets.

The anonymity traditionally offered by the art market continues to attract criminals who want to hide their ill-gotten gains. Once upon a time, only a select few wealthy collectors gambled in the art market – today art is traded as a commodity and is an increasingly important vehicle for money laundering. Mathilde Heaton, general counsel at auction house Phillips, warned the conference about the rise in examples of art-related fraud given the increased digitization of the industry.

While criminal forgers were limited in their criminality by the speed at which they could paint, today’s non-fungible token scammers can simply copy and sell an artist’s work online without the knowledge of the artist. author or with his consent. In March, two 20-year-olds, Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna, in the United States, were charged by New York prosecutors in connection with an alleged $1.1 million NFT scam, for defrauding investors, highlighting the ease with which the art of fraud can now be committed.

As art-related fraud and money laundering increases, the administrative and accounting obfuscation that criminals traditionally engage in is also on the increase. Jonathan Addo, a partner at law firm Harneys, told the conference he lamented the access to international banking and financial services that fraudsters now have with the growth of online banking and international travel.

In the second year of the pandemic, 2021, as law enforcement struggled with limited resources, criminals laundered a staggering $8.6 billion through cryptocurrency.

Zaid M. Belbagi

While some criminals choose to launder the proceeds of crime through cryptocurrencies, the offshore structures offered by some overseas territories continue to be a hotbed for criminals. According to one estimate, up to $50 billion from the sale of narcotics, out of an annual global total of $500 billion, is laundered through the Caribbean. By depositing the money in offshore financial institutions where no questions are asked and where the origin of the money is hidden.
Offshore structures that are not openly linked to their owners remain just one of the ingenious ways criminals launder money. The conflict in Ukraine has exposed illicit funds linked to Russia, particularly in the United Kingdom, where wealthy individuals and companies from Russia and around the world are legitimately investing in the property market.

These bricks-and-mortar investments are identified by the nonprofit Transparency International as being worth up to £1.5billion. These properties owned by Russians accused of financial crimes or with links to the Kremlin come on top of what the UK Home Office said was higher spending on luxury goods, cars and donations to institutions cultural, allowing individuals to whitewash their reputations.

In 2018, the UK government introduced unexplained wealth orders to limit the potential for criminal funds to buy property in the country. But as Keith Oliver, head of international fraud at UK law firm Peters & Peters, told the conference, of the nine times they’ve been used, only one has resulted in the disposal of property. until now.
In addition to the growth of physical purchases of goods and art by criminals, an increase in fraud and counterfeiting among products is also staggering. In a booming watch market, where prices are rising by up to $90 a day, Christie’s Dubai director Remy Julia, said the industry has been identified as susceptible to counterfeit copies, with up to $400 million counterfeits produced per year, at an estimated value of $1 billion.
Criminal gangs also profit from counterfeit household items. About two-thirds of the olive oil on supermarket shelves is believed to be counterfeit. The estimated turnover of fake Parmesan around the world is more than 2 billion dollars per year, more than 15 times the amount of real Parmigiano-Reggiano. With increased demand for consumer goods outpacing production, today’s criminals are filling the void with impunity, supplying counterfeit and often untaxed goods.

The increase in online crime cases has not replaced traditional criminal practices, but rather created another area where fraud can be committed and the proceeds stored. The scale of financial crime has grown so large that it has led to an increase in the use of physical assets used by fraudsters. As always, the best way to combat these practices is prevention, but law enforcement must also invest more resources in curbing this disturbing trend.

• Zaid M. Belbagi is a political commentator and private client adviser between London and the Gulf Cooperation Council.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News