From reimbursement to prevention: why fraud frameworks must evolve for crypto

Jordan Wain, Policy Advisor, Chainalysis, shares how legislative initiatives coupled with smarter technology help build a future where fraud is not just managed, but prevented and potential victims meaningfully protected.

Fraud has become one of the most persistent threats facing modern economies. What was once the domain of lone criminals is now a trillion-dollar global industry run by sophisticated syndicates that operate across borders. In 2024 alone, scams across various sectors and asset classes are estimated to have cost the global economy USD 1.03 trillion, affecting businesses, individuals, and governments alike.

The UK has hardly been spared. Reported fraud in 2024 reached an estimated GBP 550 million, with a record 421,000 cases logged in the National Fraud Database. Fraud has grown not only in scale but also in complexity, as criminals exploit new technologies and platforms to target a wider pool of victims.

Nowhere is this challenge more visible than in crypto. Operating at the frontier of innovation, this sector often falls outside traditional fraud reporting frameworks, meaning that the true scale of scams is likely undercounted. Recent analysis identified USD 10 billion globally in transfers to on-chain crypto-related scams in 2024 alone.

Acknowledging the scale of the threat, the UK Government is expected to soon publish the latest update to its flagship Fraud Strategy. Meeting a threat of this scale demands an equally sophisticated and coordinated response, and we hope not only that crypto is a central part of it but also that the approach is one that balances the trifecta of legislation, education, and innovation.

Legislation: liability-sharing is progress, but frameworks must go further

The UK has taken a notably proactive stance on legislating against fraud. The Companies Act, the Fraud Error and Recovery Bill, and the Economic Crime and Corporate Transparency Bill (ECCTA) are all important steps intended to reshape elements of how fraud is detected and prevented. However, the October 2024 Authorised Push Payment (APP) rules on reimbursement have even greater potential to impact the fight against fraud.

Under these rules, UK firms are legally required to reimburse victims of APP fraud, provided that the victims have taken reasonable care and the firms have failed to meet the prevention standards. Early results were encouraging: in the first six months, 87% of APP money lost was returned to victims, totalling approximately GBP 66 million.

Crucially, today’s case data likely still undercounts the problem. APP fraud cost the UK GBP 321 million in 2023, with scams under GBP 1,000 accounting for 80% of the 252,000 reported cases. Yet these figures only reflect reports from 14 UK banks and only cover fraud that occurs over traditional payment rails. But while much of the scam activity that we have seen in crypto would be categorised as APP fraud, since they are not captured by the rules, they would sit outside of official numbers. 

Twelve months on from the introduction of the APP rules, there is still much that needs to be addressed to ensure these rules have the impact they can. In March 2025, the UK Government announced its intention to abolish the Payment Systems Regulator (PSR), leaving it to an already stretched FCA to deliver. Given recent moves from the FCA to waive certain rules for the sector, it might not be at the top of the list of priorities for how fraud is measured and addressed. However, without including crypto and other emerging payment methods, data will continue to understate the real scale of the threat from APP fraud.

Education: going beyond awareness

Alongside legislation, education is equally vital, but it must go beyond awareness campaigns. Consumers need not just the ability to recognise when they are being scammed, but also have the confidence to act. Too often, stigma and embarrassment prevent victims from reporting their losses. According to the National Crime Agency, only 13% of fraud against individuals is reported to Action Fraud.

Improving reporting mechanisms is key. When victims feel their report won’t lead to anything, participation drops, and with it, our understanding of the full scope of the problem. The UK has launched public awareness campaigns such as Take Five, Scam Smart, and Stop! Think Fraud. But to be effective, education must fundamentally empower victims to report, recover, and prevent future losses.

The replacement of Action Fraud with a new centralised reporting centre is a positive step, particularly as it is set to receive greater resources and closer alignment with the National Fraud Intelligence Bureau. This clear pathway to restitution should lead to faster triage, stronger intelligence, and ultimately more enforcement outcomes.

Innovation: next-generation fraud requires a next-generation response

Fraud tactics are evolving rapidly, as criminals increasingly look to technology to enhance the complexity and impact of their operations. But while technology plays an increasingly large role in the complexity of the threat, the conversation about a genuinely data-driven response often lags. Next-generation fraud requires a next-generation response.

The technology exists to detect suspicious patterns, analyse anomalies, and flag fraudulent behaviour at scale and address vulnerabilities early. What is missing is the mandate for universal use. Smarter application of data and machine learning should become the regulatory baseline, not an optional add-on. This includes predictive modelling to flag threats in real time and prevent scams before they happen.

At the same time, advances in generative AI mean voice cloning and synthetic identity creation are threatening to outpace traditional identity verification tools such as liveness checks and facial recognition. This underscores the importance of shifting the focus from detection after the fact to proactive prevention.

Embracing change

The UK has made meaningful progress in confronting fraud. With the government placing fraud prevention at the heart of its agenda, there is a clear opportunity for the UK to lead a global response. The principle of liability sharing, rather than placing the burden solely on victims, marks a significant step forward.

But legislation alone will not solve the problem. Empowering victims and accelerating innovation are equally critical. A growing arsenal of tools — from data analytics to AI-powered detection — means we no longer need to wait for fraud to occur before acting. The challenge now is to embrace smarter technology as part of the solution rather than just the problem, and in doing so, enable earlier interventions that will build a future where fraud is not just managed, but prevented and potential victims meaningfully protected.

About the author

 

Jordan Wain is Policy Advisor at Chainalysis, advising governments and industry on global digital asset regulation, applying on‑chain insights to advance key regulatory and policy thinking around consumer protection, market integrity, and financial crime prevention. Prior to joining the company, Jordan spent over 6 years at the UK’s Financial Conduct Authority advising on all manner of traditional and emerging financial policy areas, including cryptoassets and DeFi.

 

About Chainalysis

Chainalysis is the blockchain data platform, making it easy to connect the movement of digital assets to real-world services. Organizations can track illicit activity, manage risk exposure, and develop innovative market solutions with intelligent customer insights. Our mission is to build trust in blockchains, blending safety and security with an unwavering commitment to growth and innovation.