Opinion: Middle East is new favourite for crypto fraud and digital hawala transfers

Mumbai: In the 1980s, Dawood Ibrahim fled India and established his base in Dubai to continue and expand his underworld operations targeting the rich and elite in India. Some other gangsters, too, followed the trend and settled in the United Arab Emirates to remotely control their unlawful activities through their local pawns.

Now, over four decades later, a new mafia is in the process of replacing the underworld in the Middle East. Though they are not bloodthirsty, they are way more ruthless when it comes to grabbing the money of unsuspecting people.

Helping cryptocurrency fraud

The Middle East is becoming one of the favourite destinations for the transfer of funds generated through cryptocurrency fraud and cheating using gaming apps. It is also gaining prominence among Hawala operators who are now doing illegal money transfers through virtual digital assets.

In the last couple of months, the income tax department conducted raids on some persons suspected of using cryptocurrency to transfer unaccounted money through Hawala to Dubai.

The raids, conducted in multiple States, found that the suspects bought cryptocurrency and loaded the same into their digital wallets. These were then converted into Dirhams for Hawala transactions.

International reach of scammers

Besides this, last year in January, the Justice Department in the United States of America charged an Australian citizen residing in Dubai for allegedly defrauding investors to the tune of $1.89 billion, promising substantial returns through cryptocurrency mining operations that allegedly did not exist. He is still alleged to be pitching new crypto products from Dubai.

Sources in agencies monitoring the racket said that Hawala, through virtual digital assets, is fast becoming a monster, causing big-time trouble for the economy. Officials said the Hawala racket suffered a substantial dent after big-value currency like Rs 2,000 notes were taken out of circulation. “The Hawala traders moved to digital assets and began to buy cryptocurrency using multiple bank accounts,” a Central agency official said.

Besides Hawala, the faceless dupers used cryptocurrency fraud and online gaming cheating to dupe gullible customers and transfer money outside India.

Attracting victims with false high returns

Explaining the modus operandi, cyber law expert advocate Pankaj Bafna said that the criminals promise high returns in crypto investment, and the same is visible to the customer when they monitor the same online. “However, when they go to redeem the money, they realise it’s all gone,” said Bafna.

He said more than 10,000 types or brands of coins are in the market, which are used by certain criminal elements to dupe customers. Bafna said that, in recent times, money made through any kind of fraud, including credit and debit card scams, is transferred abroad using digital currency.

“Any nominal amount duped using any modus operandi and scam is transferred into multiple bank accounts from where they are converted into cryptocurrency and transferred abroad,” Bafna said.

He, however, said that 75 per cent of the money made through gaming app fraud is sent to China.

Modus operandi of crypto scammers

Explaining the modus operandi, he said that the subscribers are asked to make certain deposits to participate in online gaming. On winning the games, they earn points and the same is shown to be credited to their digital wallets in cryptocurrency.

“When the subscribers attempt to withdraw the currency, they learn that no such digital wallets existed in reality,” Bafna said.

Though there are no official estimates about the fraud through these types of modus operandi, Bafna said it would easily cross Rs 1 lakh crore per annum. “In many cases, there are no complaints because the dealings are not done following the legal channels,” he said.

Law enforcement lagging

About the difficulty of tracing the money duped by cyber criminals, former Mumbai police commissioner and director general of police, Maharashtra, D Sivanandhan said, “The digital criminals are using the very latest technology available and the law enforcement agencies are lagging.”

He added, “The lack of one international cooperation protocol is also a big impediment.”

Disclaimer: The views and opinions expressed in the article are those of the author and do not reflect the official policy or position of NewsMeter.