With crypto frauds, embedding preventive measures is better than reaction

UAE residents will already be familiar with fraudulent calls from individuals posing as government authorities, manipulating them into disclosing sensitive information - but these tactics are evolving.

Authorized fraud and scams are already the top threat targeting financial institutions in traditional finance. However, with the greater adoption of crypto comes the potential for even greater numbers of authorised fraud. Our global figures showed that nearly $10 billion in crypto was lost globally to this type of fraud in 2024.

In the UAE, with crypto adoption accelerating, crypto is also increasingly playing a role – one that is multifaceted and complex, as in some cases crypto is the payment method, in others, it is integral to the scam itself, with victims being persuaded to ‘invest’ in fake crypto opportunities, while in others it is the exit route, where the fraud begins off-chain and crypto is used to launder proceeds, exploiting mixers, chain-hopping and unregulated off-ramps, to evade detection.

Meeting a threat of this complexity and scale demands an equally sophisticated and coordinated response. We cannot rely solely on innovation, nor can we educate, or collaborate our way out of a trillion-dollar problem. To have any lasting impact on fraud requires a balanced approach between all of these.

One adage that holds in crypto is that prevention is better than the cure, and while many firms already possess tools to identify and spot criminals, the increasing sophistication of criminals requires a smarter use of data and tools by both the private and public sectors, which enables the disruption of authorized fraud before it begins.

The very same infrastructure that enables fraud and scams can also be leveraged to stop them. Using advanced analytics and dynamic risk scoring, scams can be fingerprinted as they emerge, whether it is a new phishing contract, a token, or a series of wallets laundering funds. By analyzing transaction histories, wallet behaviors, and on-chain activity, a risk assessment of recipient addresses can be provided even before a transaction is finalized.

Machine learning models are proving particularly effective in this space. Surfacing such warning signs early enables the interception of scammers before they meet users.

APP frauds exploit trust, often by impersonating someone or creating a false sense of urgency, which makes consumer education and awareness a critical line of defence. The Cybersecurity Council in the UAE, for example, has initiated campaigns, such as StaySafe, in partnership with telecom providers, focused on raising awareness about evolving scam tactics, including phishing scams.

While raising awareness is critical, it must be sustained, adaptable, and, importantly, paired with technical advancements that enable early detection and a coordinated response.

Finally, the complexity and cross-border nature of scams necessitates a collaborative approach. Initiatives like public-private investigation sprints across jurisdictions have demonstrated how real-time intelligence sharing can prevent losses before they occur, underscoring the importance of public-private sector collaboration.

Preventing fraud in the crypto ecosystem requires efforts that are both up and downstream to limit harm and reinforce trust in the system.

As the threat of APP fraud and crypto adoption accelerates at a rapid pace, the ecosystem must consider how it will react to protect consumers. By utilizing the tools that enable prevention or through closer collaboration, countries and businesses can work to build a future where fraud, at least as far as crypto is concerned, increasingly becomes a thing of the past.