8% of occupational fraud involves cryptocurrency

8% of occupational fraud involves cryptocurrency

Occupational fraud is most likely the most expensive and widespread financial crime worldwide according to the 2022 Report to the Nations. Occupational fraud refers to the fraud perpetrated by employees against their employers. There are three major types of occupational fraud: asset misappropriation, corruption, and financial statement fraud. 

With the advancement of technology, perpetrators of fraud use more sophisticated methods to rack up a sheer amount of  money from victims in the form of cryptocurrency. 

The proliferation of blockchain technology, including the incorporation of cryptocurrencies into more organizations’ operations, creates greater potential for individuals to commit fraud. The 2022 Report to the Nations study found that cryptocurrency was involved in 8% of the fraud cases.

The nature of cryptocurrency: an ideal breeding ground for fraud

Giving bribes and kickback payments in cryptocurrency (48%) and converting misappropriated assets to cryptocurrency  (43%) are the most prevalent methods of occupational fraud. Other methods are laundering proceeds of fraud using cryptocurrency, misappropriation of organizational cryptocurrency assets, and manipulation of reported cryptocurrency assets in financial statements.

The nature of cryptocurrency which enables transacting parties to paradoxically remain anonymous while being transparent makes it ideal for fraudsters. All transactions are recorded and traceable in perpetuity. However, making a crypto transaction does not always require a user’s verifiable personal information. 

For some cryptocurrency exchanges, users can use fake personal information. Hence, anonymity offers fraudsters the opportunity to not get caught while committing heinous acts of fraud using cryptocurrency. 

Battling crypto fraud

The use of cryptocurrencies in occupational fraud raises new challenges of business opportunities and risks. As the well-known Latin aphorism says, “scientia potentia est”, meaning “knowledge is power”, by understanding digital currency and preparing carefully for the advent of new cryptocurrency applications, businesses can be better prepare d to lower the risks. 

At the same time, as a concrete effort to prevent fraud, companies should implement a whistleblowing policy. According to the report, a hotline or whistleblowing system is the most effective fraud detection tool. It was found that losses due to fraud are two times higher in companies without hotlines.

Whistleblowers are the ones most likely to lead the way in detecting the use of crypto in occupational fraud. They are usually the people inside the business who understand the business, the technical sector, and the people involved. 

Through this system, they can raise concerns regarding signs of fraud that they witness or experience. For organizations, a whistleblowing system that works effectively allows fraud to be detected as early as possible to minimize the risk of loss that will be borne by the organization.

Integrity Asia, with more than two decades of experience working in the field of compliance, provides whistleblowing services for clients of various business backgrounds. Through our Canary Whistleblowing System, Integrity Asia provides a combination of various reporting channels that are centralized on our website application, thereby increasing our client’s accessibility to reports, whilst ensuring the anonymity of the whistleblowers.

Safeguard your business from cryptocurrency scams. Contact us today!


Cryptocurrency photo created by diana.grytsku – www.freepik.com

Share this post: