The nature of fraud and economic crime is constantly changing. As the Covid-19 pandemic shook the world and forced economies to rapidly adapt, criminals took advantage of the chaos and found new ways to exploit weaknesses and defraud victims – often of millions of dollars – thus driving the rise of a new and devastating form of economic crime: platform fraud.
What is Platform Fraud?
Platform fraud can very simply be defined as fraud that is committed on a digital platform, such as a social media platform, a contactless payment platform, or a remote work platform. In the financial services industry, platform fraud was included under the broad category of “financial crime”, but the rapid growth of platform fraud has led PwC to define it under its own standalone category.
PwC has recently published its 2022 Economic Crime and Fraud Survey report. The newest in a long line of bi-annual reports, the 2022 edition sheds light on the changing nature of economic crime and helps businesses to understand the new threats they face and how to mitigate them. The report notes that…
“Platform fraud isn’t new… but as the prominence and scale of platforms have grown and the means, speed and method of payments have changed, risk has dramatically increased.”
According to PwC, platform fraud has seen a rapid increase in its incidence rate due to the combination of factors that includes the fast-paced digitalisation of commerce, socialisation and work that was driven by the Covid-19 pandemic and saw the use of online platforms explode at an unprecedented rate across the globe. This fast-paced digitalization and shift to digital platforms created new opportunities for criminals to exploit weaknesses and commit fraud.
The rise of platform fraud has been significant. Of the surveyed companies, 39% of the reported incidents of economic crime were platform fraud. Furthermore, of these respondents, 51% reported having fallen victim to platform fraud, which is a four percentage-point increase compared to 2020’s statistics and marks the highest incidence rate in 20 years of PwC’s reporting on economic crime.
How is Platform Fraud Committed – Understanding Weaknesses and Identifying Trends
Analysis of data for platform fraud reveals clear weaknesses and trends that can be used to better protect external business perimeters. The first such data relates to the methods by which platform fraud is executed. The three most common methods of execution include:
- Identity Theft/Account Takeover: 40%
- Device Theft or Cloning: 24%
- Synthetic ID: 21%
These statistics make a strong case for the stringent and widespread adoption of reliable digital tools capable of verifying the legitimacy of users on digital platforms – tools for identity and device verification will likely prove vital in the fight against platform fraud.
Once fraudsters gained access to a platform, there were four dominant types of fraudulent transfers that took place. These are:
- Unauthorised Fraudulent Transactions (e.g., card, digital): 37%
- Victim Initiated Fraudulent Transactions (e.g., scams): 31%
- Unauthorised Transfer/Removal of Data: 26%
- Transaction Laundering: 25%
The type/category of platforms victimised by platform fraud is also notable. Of the respondents to PwC’s survey who had experienced platform fraud, 91% of surveyed organizations had experienced platform fraud on one or more of the following platforms over the last 24 months:
- Financial
- Enterprise
- Social Media
- Knowledge
- Media Sharing
- Goods
- Services
The identification and analysis of this data will help companies to identify weaknesses and predict trends, thereby empowering companies to create tailored risk mitigation strategies that will help organizations across the world to address the growing threat of platform fraud.
How to Mitigate Risk – Solutions for Identity Verification and Information Validation
In the conclusion to their 2022 Global Economic Crime and Fraud Survey, PwC notes that…
“…the answer may lie in technology. Respondents to our 2022 survey reveal a number of solutions they’re using to combat platform fraud, from document verification and validation to anomaly detection.”
Technology is the most powerful tool at the disposal of businesses that can be used to combat new digital threats like platform fraud. Previous novel threats – such as the explosion of customer fraud – posed similar challenges to business.
Nevertheless, customer fraud was a form of financial crime for which “dedicated resources, robust processes and technology have proven effective in prevention”.1 The same will likely prove true of platform fraud: the integration of digital tools, coupled with a greater corporate awareness of the external threats facing a business’s perimeters, will lead to a notable reduction in both the incidence rates and associated financial losses from platform fraud.
Today, these tools are more reliable, cost-effective, and easier to integrate into existing digital systems than ever before. Although new challenges like platform fraud pose worrying risks to businesses, the tools that can be used to mitigate these risks are more accessible than ever.
Secure Your Business Today – Data Validation and Identity Verification Services for South Africa
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- PwC. Global Economic Crime and Fraud Survey. 2020.
