Keeping up with the Krypto

Peter FitzGerald and Amalia Neenan at Peters & Peters Solicitors LLP argue that UK government and law enforcement must increase funding, education and collaboration to battle the surge in cyber criminality

 

In early October, it was announced that Kim Kardashian had agreed to settle an investigation by the US Securities and Exchange Commission into unlawful cryptocurrency advertising.

 

This was a rare example of successful law enforcement action in the crypto sphere. Kardashian had drawn the attention of the authorities with an Instagram post promoting the crypto-asset EthereumMax. The catch? She failed to disclose that she had been paid $250,000 to put it on the Gram and ended up agreeing to pay a $1.26 million fine to the SEC.

 

Whilst the likes of a billionaire reality star is unlikely to attract much sympathy, that shouldn’t stop us asking whether targeting celebrities is truly the best way to deal with the increasing flood of crypto fraud and other cyber-enabled criminality.

 

Could it be the case that the powers that be are dangling a shiny, headline grabbing, celebrity story in front of us, instead of tackling the root of the problem?

 

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There were almost 500,000 reported incidents of fraud and cyber crime in the UK in 2021, with the nation losing over £2.5 billion to fraudsters and cyber criminals. The unreported figures are, of course, likely to be even higher.

 

According to a recent study, the ever-advancing threat of cyber-criminality will cost businesses globally approximately £1 trillion by the end of 2022, both in security and preventative measures and in actual losses caused by cyber-attacks.

 

On top of this, yet new methods of technological criminality continually crop up. As the tech develops, so does the sophistication of those who seek to exploit it. So what is being done to counter this threat, and will it make a difference?

 

The City of London Police, the UK’s national lead force for fraud and cyber crime, clearly recognises that more action is required. It announced last year that it is searching for a new and improved cyber crime and fraud reporting and analysis service – a replacement for Action Fraud and the National Fraud Intelligence Bureau, the body that analyses Action Fraud reports with a view to assessing emergent trends, serial offenders, etc.

 

The current analysis service contract was due to expire this year, but has been extended to ensure a smoother transition. The new system will be aimed at providing larger-scale prevention of cyber crime and other forms of fraud, although limited practical details have so far been made available.

 

Regardless, a meaningful campaign to reduce cyber criminality must also rely on three further weapons.

 

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First, more funding. The new analytical system can be as technologically sophisticated as possible, but without proper funding behind it, its success can only ever be limited.

 

Take for instance the launch of the new Public Sector Fraud Authority in August 2022. According to the Government’s website, the body is backed by £25 million in funds to ‘modernise the government’s counter fraud response’ and has been tasked to reach a £180 million target in its first-year hunting down fraudsters who have pinched from the public purse.

 

This funding package is a drop in the ocean compared to the billion-pound losses due to fraud and cybercrime and the huge resources which are needed to combat those crimes effectively. Usually necessitating cross-border investigations and highly trained experts, cyber investigations do not come cheap. The rapidly increasing scale of the problem demands further state funding across the board.

 

Second, more education. As a society, we need to strengthen the general populace’s understanding of cyber crime. Cyber criminals target the ill-informed and technologically naïve.

 

Cryptocurrencies are the perfect example, with their technological complexity leading many uninformed investors to be cheated out of their money. It is therefore no wonder why the SEC has gone for the jugular in pursuing pop-culture icons linked to cryptocurrencies, as it sends a powerful message of deterrence.

 

Unchecked celebrity influence is a vast platform for information dissemination. Combining this with crypto-products, which are widely mis-understood, creates the perfect environment for confusion and criminality to thrive. Whilst there have been advances in the field of crypto-tracing, it is also vital to educate as a counterbalance to the general lack of public knowledge, the use of confusing jargon, and the superficial enticement of high-reward investment schemes.

 

Third, more cooperation. Cyber crime is a global crime, in which stolen funds can be bounced around the world via proxy servers in a matter of minutes.

 

In order to combat the exploitation of this technology by criminals, there must be greater and swifter intra-jurisdictional coordination. The UK is one of the 66 signatory states to the Convention on Cybercrime (also known as the Budapest Convention), alongside the US, Australia and most of Europe. Two Additional Protocols to that Convention have been signed, the second as recently as May. That Protocol is aimed at strengthening international cooperation and the disclosure of electronic evidence to aid the investigation of cyber crime.

 

The EU also announced in September its proposals to introduce a Cyber Resilience Act which aims to beef up cyber security on products with digital components.

 

Whilst our European friends charge on at super-fast speed, is the UK troubled with connectivity issues? Unless more rigorous efforts are made to combat cyber-enabled fraud and other forms of cyber criminality, in particular through greater funding, education and cross-border cooperation, law enforcement efforts in this sphere will continue to be outpaced by the swiftness of developing cyber crime trends.

 

Perhaps the UK should take a leaf out of Kim K’s book. SEC rule-breaking aside, Ms Kardashian is undeniably a trend-setter. The UK too should endeavour to be a pacesetter– keeping up with times instead of trailing behind. 

 

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Peter FitzGerald is Of Counsel  and Amalia Neenan is Trainee Solicitor at Peters & Peters Solicitors LLP

 

Main image courtesy of iStockPhoto.com