The 2023 LexisNexis Risk Solutions Cybercrime Report extensively analyses the global digital fraud landscape. Utilising data from the LexisNexis Digital Identity Network, the report outlines significant trends and emerging threats in cybercrime, underscoring the increasing sophistication and volume of digital fraud attacks.
This comprehensive report delves into various aspects of digital fraud, including networked fraud at global and regional levels, the detection of sophisticated bot attacks, scam centre signatures, and mule account classifications.
Rising fraud attack rates
Digital fraud attack rates surged by 19 per cent year-over-year in 2023, continuing an upward trajectory observed in previous reports. North America experienced a 43 per cent increase, while the e-commerce sector saw a dramatic 59 per cent rise.
Gaming and gambling operators, in particular, reported a staggering 103 per cent increase in bot volume, reflecting a shift in fraudulent activities towards these sectors. This rise in attacks highlights the evolving nature of fraud and the constant adaptation of fraudsters to new opportunities and technologies.
The report emphasizes that fraud thrives in changing circumstances, such as the widespread and ongoing adoption of new technologies. For instance, the initial application of generative AI to fraud attacks in 2023 is now a cause for concern.
Still, with the hindsight of a few more years of innovation, it will likely be regarded as unsophisticated. As fraudsters continue to hone their illicit exploitation of instant payment systems, the adoption of these systems will likely see a parallel rise in fraud attempts.
Bot attacks and sophistication
Bots remained a prevalent threat in 2023, with unsophisticated bots still serving as efficient tools for testing data for resale or direct attack. The gaming and gambling sectors faced significant bot traffic following regulatory changes that attracted more legitimate consumers. Advanced bot attacks, exhibiting human-like behaviour, posed challenges for traditional bot prevention solutions, highlighting the need for real-time detection capabilities.
The report points out that traditional bot prevention solutions often focus only on large-scale bot attacks, failing to detect more advanced bots that exhibit human-like behaviour as an evasion tactic.
Detecting advanced bots in near real-time can greatly mitigate their ability to create fraudulent accounts or test login credentials for subsequent account takeover attacks. Advanced bot detection capabilities must monitor for bot traffic that mimics the locations of good customers via IP proxies, abnormal timing of events, unusual on-page or in-app behaviours, and evidence of virtual machines used to mimic real customer devices.
Generative AI and fraud
The application of generative AI in fraud attacks emerged as a new concern in 2023. Although these initial applications may seem unsophisticated now, they represent a potential future threat as fraudsters continue to innovate. Fraudsters have also exploited the adoption of instant payment systems to target consumers through authorized payment fraud. As more consumers adopt instant payments and as more platforms enable international transfers, fraudsters will likely continue to exploit this payment channel.
The report highlights that scams have become a pandemic, leading to significant regulatory activity worldwide in 2023. Many regulators focused on operational or technical requirements to defend against scams, likely waiting to see the results of some countries’ focus on liability and reimbursement, beginning with the UK.
Collaboration is growing worldwide, including regulated data-sharing initiatives in Brazil and Hong Kong and collaborative consortiums beginning in the United Arab Emirates and Singapore.
Scam pandemic and regulatory responses
Scams have escalated to pandemic levels, prompting substantial regulatory activity worldwide. In 2023, several countries focused on operational and technical defences against scams, while others, like the UK, emphasised liability and reimbursement frameworks.
Collaborative efforts, including regulated data-sharing initiatives in Brazil and Hong Kong and consortiums in the UAE and Singapore, are pivotal in combating these threats.
The report underscores the importance of organisations collaborating across international and industry boundaries. Reports of confirmed and suspected fraud and abuse from seemingly unrelated corners of the global market help to improve all participants’ confidence in clearing the path for trusted consumers and transactions.
The contributions of many organisations whose anonymised data provide the basis for the report are acknowledged for their tenacity in making the digital world a safer place.
Human-initiated and automated attacks
Human-initiated attacks increased by 40 per cent in 2023, with the mobile browser channel experiencing the highest attack rate growth at 36 per cent. Automated bot attacks shifted targets, with gaming and gambling organizations seeing a 100 per cent increase. Financial services continued to bear the brunt of these attacks, underscoring the need for robust fraud prevention strategies.
The report notes that the overall attack rate continued a brisk pace of growth set in 2022, up 19% year-over-year at 1.5 per cent. Ill-gotten funds fuel fraudsters’ investments in capabilities to target more consumers and organisations, including more automation and AI/ML to improve operational versatility and efficiency.
The mobile browser channel experienced the greatest attack rate growth, making it the least secure channel. Mobile browsers’ lightweight nature limits the availability of digital intelligence and risk signals, a boon to attackers relying on ambiguity.
Identity abuse index and regional trends
The Identity Abuse Index, which tracks the percentage of daily attacks across the Digital Identity Network, grew by 19 per cent in 2023. North America significantly contributed to this growth, driven by sophisticated bot attacks on retailers and financial institutions.
Each region displayed unique fraud patterns, with APAC showing a downward attack trend due to regulatory measures, while EMEA and LATAM faced persistent and elevated attack rates.
The LexisNexis Identity Abuse Index shows the percentage of daily attacks across the entire Digital Identity Network. This includes human-initiated and sophisticated bot attacks. The identity abuse index grew 19 per cent in 2023, following a similar (20 per cent) increase in 2022. Fraudsters increase attacks on potential victims, with North America contributing significantly to global growth.
Mule accounts and scam centres
Mule accounts, used to facilitate money movement out of victims’ accounts, remained integral to the scam pandemic. Advanced fraud detection models helped classify mule accounts based on activity and age, enhancing scam prevention capabilities. Scam centres, particularly in Southeast Asia, continued to develop sophisticated phishing sites and mobile malware, posing significant challenges to fraud prevention.
The report details how mule accounts can be classified based on activity and account age. Complicit mule accounts are set up and used for a short time or continue to be actively used until closed. Existing accounts may become involved knowingly or unwittingly in mule activity, with regular behaviour changes identifying whether they are complicit.
Identifying mule accounts can help to improve a financial organisation’s scam prevention capabilities, with this intelligence feeding fraud models in real-time.
The 2023 LexisNexis Risk Solutions Cybercrime Report highlights the evolving landscape of digital fraud, driven by technological advancements and global regulatory changes. As fraudsters continue to innovate, organizations must adopt comprehensive and adaptive fraud detection strategies to protect consumers and maintain trust in digital transactions. The report underscores the importance of global collaboration in combating cybercrime and ensuring a safer digital environment for all.
Organisations continue to focus on optimizing their fraud detection solutions. More banks are deploying multiple, targeted fraud models. For example, in Europe, Tier-1 banks all have a traditional, unauthorized fraud model deployed.
In addition, 71 per cent have a separate model targeting authorized fraud, and 29 per cent have a dedicated mule detection model. The first digital banking consortium, founded in the UK in 2019 by two early adopters, now facilitates collaboration between 10 active member organizations, with 37,000 net new contributions added on a near real-time basis every month.
In 2023, new digital consortiums have been initiated in the United Arab Emirates and Singapore, confirming a desire to collaborate more closely to fight fraud.
There are signs of hope. While scam attacks continue to grow worldwide, the losses in the UK and Singapore appear to have stabilized, based on reported numbers for 2023. These two countries have arguably suffered some of the greatest targeted attacks in their respective regions and have, therefore, also implemented significant defences to protect consumers from financial loss and psychological harm.
While regulation will drive change in the long term, most countries do not yet have clearly defined and enforced reimbursement rules for victims of scams.
