Trisha Kothari, the co-founder and CEO of Unit21, presents the new battlefield for fraud in web3 and the metaverse and offers solutions on how to stop fraud from damaging this new space.
Many types of fraud are related to the metaverse and decentralised web3 world. Most notably, the mass adoption of metaverse products will raise several questions concerning fraud.
Some things that come to mind are:
Identity: How will organisations be able to link the true identity of the operator to their meta representation?
Authentication: If you wish to authenticate an entity in the metaverse - how do you do so if the entity is disconnected from the metaverse?
Similar to encrypted chat rooms and dark web forums, will the metaverse provide grounds for bad actors to ‘meet’ and communicate discretely?
How do you enforce and prevent paedophilia and monitor predators?
If a ‘crime’ was committed in the metaverse, is it punishable in real life? Who would be liable?
Can one operator control several metaverse entities? Can those be used for money laundering?
Trust & Safety: How can ban evasion be enforced?
Ultimately, anti-fraud approaches haven’t kept pace with the rapid growth of the metaverse, which is why so many questions remain unanswered.
This nascent space creates openings for fraudsters to take advantage of inexperienced new users through cyber-attacks like phishing and social engineering.
Similar to what we see in the crypto space, it is important to understand how the end user will protect their metaverse representations and assets.
Who is liable for the potential loss if a user’s meta entity gets hacked and the hacker gains access to the bank account they linked to the meta entity?
There are a lot of grey areas when it comes to culpability that will need to be addressed as the industry evolves.
Because the metaverse is so new, there’s very little regulation in place to protect customers from falling victim to having their assets stolen. To mitigate these risks, organisations must invest in customer education to help keep them safe from exploitation.
It is also critical for organisations to put proper controls in place. To adequately do this, they must have an agile approach to fraud monitoring. Using software that can be easily customised and updated without requiring engineering support is crucial for catching bad actors quickly.
Unit21 is a risk and compliance infrastructure that helps organisations monitor and analyse data by providing a simple API and dashboard for digital ID verification, customer onboarding, identity fraud, and regulatory compliance. The no-code interface enables risk teams to set up rules and alert workflows on the fly, which gives them the ability to test and optimise in minutes instead of days or weeks.
Our customers benefit from reduced false-positive rates, shorter investigation times, and automated reporting so that they can focus on catching the bad guys instead of doing manual administrative tasks. This is key to reducing fraud losses and mitigating risk effectively.
Finally, staying up-to-date with the latest scams will ensure that the fraud team understands what to look for when setting up their monitoring workflows in a solution like Unit21.
Many web3 companies are considering ways to incentivise users for their online presence, which is a new concept for most consumers. Yet these companies that plan to incentivise users with tokens must understand all the potential use cases of abuse that might occur on their platform.
End users who will choose to participate in DAOs must understand the true weight of their voice in an online-democratic group and learn how bad actors might try to manipulate them.
About Trisha Kothari
Trisha is the co-founder and CEO of Unit21, a platform for risk and compliance operations teams in fintechs to fight fraud and money laundering. Unit21 works with companies like Mercury Bank, Chime, Coinbase, Binance, and is backed by Tiger Global, Gradient Ventures, and South Park Commons. Trisha previously worked at Affirm, where she led product for the risk and identity teams.
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