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The Bank of Russia, in its latest report, revealed a concerning rise in financial scams with crypto-related elements in 2023. The number of entities involved in illegal activities, including financial pyramids, allegedly increased by 15.5% compared to the previous year, reaching 5,735 identified cases.
Online Scams Skyrocket As Crypto Takes Center Stage
The report highlights a growing trend of illegal participants in the financial market utilizing cryptocurrencies. In 2022, every second pseudo-investment project involved cryptocurrency, and by 2023, the bank claims that almost all financial pyramids and illegal brokers offered investments in domestic tokens or accepted contributions in cryptocurrency.
Per the report, these scams primarily operate as “small pseudo-investment projects” created and conducted online. Their reach is amplified through social networks and messaging app Telegram, with organizers actively engaging “popular lifestyle bloggers” for advertising purposes.
Moreover, foreign payment services and cryptocurrencies emerged as the most popular methods of transferring funds to these alleged pyramids.
The report notes that over 45% of identified scams encouraged investors to use foreign payment service systems. At the same time, nearly 1,500 fraudulent projects accepted contributions in cryptocurrency, allowing organizers and beneficiaries to maintain anonymity.
To address the continued existence of these illegal activities, the Bank of Russia has taken measures to restrict access to domains and subdomains used by entities engaged in illegal financial activities.
According to the Central Bank of Russia, fraudsters often create duplicate resources after the main sites are blocked. In 2023, more than 1,500 financial pyramids had their domains and subdomains blocked using this mechanism.
In addition, nearly 44% of illegal lenders advertised their services exclusively online, without physical offices, relying on social media pages, groups, and popular advertising platforms.
Crackdown On Illegal Financial Activities
The Bank of Russia also observed a decline in organizations providing property-secured loans, indicating a downward trend in this sector. Furthermore, the regulator identified 820 illegal forex dealers and 42 illegal brokers and managers.
It is alleged that many of these companies attract customers by offering the illusion of bidding on foreign forex sites. Fabricated ratings, where legal participants are mixed with illegal entities, further mislead consumers. In 2023, the Bank of Russia identified 48 such sites.
To counter the activities of illegal organizations and financial pyramids, the Bank of Russia has recommended that credit institutions apply anti-money laundering (AML) legislation to entities listed as engaging in illegal activities in the financial market.
These measures aim to reduce the lifespan of financial pyramids, impede fundraising by illegal financial service providers, and minimize the harm caused to citizens by such schemes.
To enforce its efforts, the central bank shares information about identified illegal participants and financial pyramids with law enforcement agencies, the Federal Antimonopoly Service of Russia (FAS Russia), and the Federal Service for Supervision of Communications, Information Technology, and Mass Media (Roskomnadzor).
As of 2023, the Bank of Russia’s actions have opened more than 125 criminal cases and over 620 administrative cases and implemented over 1,300 other response measures.
Additionally, access to more than 11,200 online resources belonging to illegal participants and financial pyramids has been restricted.
Featured image from Shutterstock, chart from TradingView.com
