E-commerce fraud on the rise worldwide – Report

In 2023, the value of pirated goods was estimated at $4.5 trillion out of the $20 trillion generated globally from e-commerce, according to a new report by the Washington-based International Coalition Against the Illicit Economy (ICAIE).

The revenue from selling counterfeits online far exceeds that generated by drugs or human trafficking, ICAIE said. These crimes carry much harsher penalties, making fraudulent online sales more attractive to criminals.

Manufacturers, intellectual property owners, suppliers, wholesalers and retailers are all vulnerable to losses caused by counterfeiters.

According to ICAIE, one reason for the dramatic increase in e-commerce fraud is the ease with which mobile devices enable access to the global financial system.

“Today, more people have smartphones than electricity and running water,” the group said in its latest report.

The growing links between the global digital economy and cybercrime have also led to the emergence of new methods of money laundering, as criminals “increasingly use e-commerce to diversify their criminal activities,” according to ICAIE.

For example, mobile wallet apps like WeChat allow users to transfer funds that could be flagged if they went through local banking networks. Meanwhile, currency conversion apps provide criminals with a way to obscure the illicit source of their money, especially if the app is encrypted.

Cryptocurrencies are also increasingly being used in e-commerce for criminal activities. In less than 15 years since Bitcoin’s emergence, more than 21,000 cryptocurrencies have emerged. They can be an unstable investment option, but well-suited for illegal activity.

Today, more than one in four millennials are involved in the cryptocurrency market, while companies like Microsoft and AT&T accept payments via Bitcoin and BitPay. Cryptocurrency payments can provide providers with secure processing and enable end-to-end transaction tracking—if managed well.

Some governments are now trying to keep up with these changes and are creating regulations to govern digital currencies in the same way that hard currency is regulated in the global financial system.

One of the bills proposed by the United States is the SHOP SAFE Act, which will require online sellers to verify the authenticity of their goods to curb the sale of counterfeits.

Another proposed bill is the Cross-Border Financial Crime Prevention Act of 2023, which would require U.S. financial authorities to use all existing data in investigations into illegal cross-border financial activity, including money laundering.

However, no date was given for when any of the bills would be voted on in the Senate.