Financial Crime World

Rise in Complex Financial Crimes in Eritrea: Fintechs and Payment Providers Face New Challenges

In a rapidly evolving landscape of financial crime, Eritrea is witnessing a surge in sophisticated scams and money laundering schemes. As fintechs and payment providers continue to expand their services, fraudsters are adapting their tactics to exploit the gaps in anti-money laundering (AML) and Know Your Customer (KYC) protocols.

Sophisticated Scams and Money Laundering Schemes on the Rise

Fraudulent companies have been impersonating legitimate businesses by setting up fake accounts with merchant sites, payment software platforms, websites, and bank loans. In some cases, these scams involve hiding behind “front” owners who appear clean to businesses without advanced technology.

Examples of Sophisticated Scams

  • A recent case involved a business owner running an online merchant site who was vetted for KYC by a payment provider, only to reveal that the true owner was a convicted narco-trafficker with six shared addresses and two phones over a 15-year period.
  • Account takeover is another emerging trend, where fraudsters request duplicate cards or set up additional signors on fraudulent accounts using stolen data.

Combatting Fraud: Recommendations for Fintechs and Payment Providers

To combat these emerging trends, experts recommend:

Enhancing KYC Protocols

  • Require a scan and verification of state driver’s licenses to confirm the document’s authenticity.
  • Use advanced technology to detect synthetic identities and prevent account takeover.

Synthetic identity fraud remains a significant concern, with fraudsters creating fictitious identities using real and contrived personal information to defraud banks, retailers, government services, or individual consumers. Real estate money laundering is also on the rise, with $2.3 billion laundered through U.S. real estate over the past five years.

Government Efforts to Combat Financial Crime

The Biden administration has urged the Treasury Department to revoke regulatory exemptions for agents mandated to identify their ultimate clients or report suspicious activity. The Corporate Transparency Act, set to take effect in 2023, aims to expose the true owners behind shell corporations.

As financial crime evolves, experts warn that fraudsters will continue to adapt and exploit gaps in AML and KYC protocols. It is essential for fintechs and payment providers to stay ahead of these emerging trends and update their protocols accordingly.