Technology, Cybercrime, and Recessions: An Untimely Trio
Welcome to RDC Insider Insights. This monthly series covers a multitude of modern-day financial crimes. We’ve analyzed our global datasets to understand how certain types of crimes and risks are changing over time, both globally and in regional splits, to uncover trends and provide insights.
As technology is increasingly part of business and personal life, financial markets become significantly more vulnerable to various types of fraud and cybercrime. From data breaches to internet scams, organizations and individuals around the globe are negatively impacted by the growing criminal trend that has been shadowing technological advancement since the early 2000s. Financial institutions and other corporate entities need to be on high alert for criminal activity; timely and comprehensive customer screening is an accurate and efficient way to stay protected, especially during an economic crisis.
Cybercrime Knows No Season
During times of economic or political uncertainty and global disruptions, cybercrime and online fraud rise. As the trends of the Great Recession show, not only is cybercrime recession-proof, it thrives in a struggling economy. Our data shows an average rise of 40% in cybercriminal activity for the two years following the recession’s 2009 peak, likely caused by:
- Cyber criminals take advantage of those in need of income and are thus more susceptible to internet and phone schemes.
- Companies, in addition to laying off workers, are often forced to cut budgets, including for their security departments, leaving their private data more susceptible to cyber criminals.
- Highly-skilled, laid off technology workers may commit criminal acts against their employers in retaliation during a recession.
Our current volatile economy and worldwide upset is the perfect set up for those who take advantage of uncertainty. And right on time, the fraudsters – who never really went away – are capitalizing on the global pandemic. One such example, reports of fake websites promising Coronavirus tracker maps, that then encourage visitors to install malicious software. As noted in reason 2 above, this current uncertainty may have organizations re-allocating personnel or eliminating positions to keep the business afloat, and the fraudsters take advantage of the gaps left in security departments. As the evidence from the Great Recession tells us, there will be gaps.
Technology as an Enabler
The first jump in cybercrime in the early 2000s mirrors the then relatively-new daily application of technology to personal and professional tasks. In one particular example, cybercrime’s rise in the early aughts can be attributed to a measurable upswing in cellular and internet providers. With each new technology comes gaps in security coverage, in turn leading to a rise in internet fraud. Similarly, reviewing the past 5 to 6 years, the cracks in security coverage account for the steady upward trend in cybercrime since 2014 to today (Figure 1).
Bad actors also take advantage of the speed at which technology is growing. Organizations in pursuit of disruption and innovation often rush to be first to launch new technology. Too often, however, new products lack proper security measures, making ordinary consumers vulnerable to cybercriminals.
RDC’s data, sourced from major publications across the world, confirms that this trend is on the rise, with over half of the crime coming from five countries, within seven cities. As seen in Figure 2 below, the countries with the highest rates of cybercrime (CYB) captures are the U.S., Nigeria, India, the United Kingdom, and Russia. These 5 countries alone account for half of all the CYB captures in the last 10 years, due to high cybercrime reports in some of their major cities.
Increased Regulation and Enforcement
RDC has been covering other trends which are important indicators of cybercrime growth. Given its importance and impact, the United Nations tracks and analyzes global cybercrime regulations. As Figure 3 shows, nearly 140 countries have regulations to address cybercrime.
RDC has completed an additional analysis including a world map of reported cybercrime by country, where the darker blue denotes the countries with the highest reported incidents of cybercrime in the last five years (Figure 4). The countries with no legislation have little to no reports of cybercrime incidents. It’s not that those countries are crime-free, the difference highlights how increasing regulations increases enforcement, which ultimately protects both organizations and individuals. Overall, the financial systems are benefited by increased regulation and enforcement and technology has aided in the rapid identification and recording of criminal activities
Technology as the Solution
While technology has presented opportunities for fraudsters, and they have taken advantage of weaknesses, it is also critical to stopping them. Without opinion or human error, technology can use facts and behavior patterns to identify nefarious actions quickly and methodically. Identifying criminal activity patterns and surfacing webs of individuals working in concert are two examples of how information can help isolate the unlawful activities.
RDC plays a key role in helping to identify these criminals before they enter the financial system and we can identify patterns of monetary flows if and when activities begin. With new AI integrations, machine learning systems, and enhanced name matching software, we stand ever committed to our mission to prevent criminal infiltration into the world’s financial system. And we remain vigilant in our fight to spot trends, identify any risk relevant activities on behalf of our clients, and together navigate through uncharted territory of today’s risk environment.