Financial Crime World

Brazil’s Financial Revolution: Combating SIM Swap Fraud and PIX Scams in the Tech-Friendly Nation

Brazil’s transformation into a global financial powerhouse has left the world in awe with its unprecedented financial revolution driven by groundbreaking policy decisions. However, this progress comes with challenges, as the rapid pace of financial transactions and thriving FinTech industry have brought about a surge in fraud, particularly SIM swap fraud and PIX scams.

Risks Accompanying Brazil’s Financial Growth

A primary concern involves sophisticated scams carried out by organized criminal syndicates, threatening to undermine consumer trust and hinder Brazil’s burgeoning tech sector. At the core of most fraudulent activities is the SIM swap or SIM jacking technique.

The Process of SIM Swap Fraud

  1. Creating a synthetic ID: Fraudsters begin by constructing a synthetic identification document with stolen and genuine information using the original Brazilian National ID (Cedula de Identidade) template.
  2. Gathering sensitive information: They obtain contact information and other personal details of their targets from social media and the dark web.
  3. Fooling the system: The fraudster uses the synthetic ID to bypass document scanning KYC checks and acquire a new SIM card with the victim’s cell phone account.
  4. Leveraging the new SIM card: The fraudster then establishes a digital bank account, called “Contas Laranjas, using falsified credentials and utilizes it for various illicit activities, such as loan applications with no intention of repayment and committing PIX fraud.

Understanding PIX Scams

  1. Forced transfers: Criminals force victims, often at gunpoint, to transfer funds to the fraudulent orange account established through SIM swap.
  2. Emergence following the PIX system introduction: PIX scams rose significantly following the implementation of PIX, Brazil’s instant payment system, leading to a 40% increase in “lightning kidnappings” in São Paulo.

The Brazilian Central Bank’s Response

The central bank imposed a $200 transfer limit for P2P payments between 8pm and 6am to deter criminal activity during these hours. However, this intervention burdens legitimate customers and does not address the core issue: insufficient identity proofing.

Mitigating Risks with Trust Score™

To combat SIM swap fraud and other identity-related risks, companies in Brazil can utilize advanced digital identity technology like Trust Score™. This dynamic measurement of a phone number’s reputation offers valuable insights into potential fraud scenarios by:

  1. Analyzing behavioral patterns
  2. Examining Phone-Centric Identity signals from reliable sources

Trust Score enables companies to make informed decisions during transactions that require identity verification and authentication by serving as a trust indicator before sending a One-Time Passcode (OTP) to assess potential risks, such as insecure VOIP lines, SIM swap, and low SIM tenure.

As Brazil continues its digital financial evolution, banks and companies must adopt the latest digital identity technologies to safeguard against threats and maintain consumer trust while embracing the benefits of FinTech and Instant Payments.

To discuss how Trust Score can help prevent SIM swap fraud in Brazil, speak with a digital identity expert today.