Crypto again tops FIA’s suspicious reports tally

Mbongeni Mguni | Monday June 19, 2023 06:00

By law, banks, bureaux de change, car dealers, microlenders, attorneys, and others must file suspicious transaction reports with the FIA.

The agency defines a suspicious transaction as one inconsistent with a customer’s known legitimate business, one that gives rise to a reasonable suspicion that may involve the commission of a financial offence, one made in circumstances of unusual or unjustified complexity, one that appears to have no economic justification or lawful objective or made by or on behalf of a person whose identity is unknown, amongst other factors.

The Financial Stability Council (FSC), a watchdog made up of the FIA, the Bank of Botswana and the Non-Bank Financial Institutions Regulatory Authority, this week said nearly half of the 137 suspicious transactions reported to the FIA in the first quarter involved cryptocurrencies.

“In Botswana, the crypto asset market is still at infancy and relatively small, thereby posing limited risks to financial stability,” the FSC said.

“Regulatory authorities, however, recognise the potential for a pervasive and significant effect of the crypto asset business on their functions and mandates and, in general, the broader domestic financial sector, hence, a Virtual Assets Act of 2022 was enacted to regulate trade in virtual assets.”

The trends seen in the first three months of the year echo similar patterns witnessed in 2021 when the FIA found that of the 140 suspicious transaction reports prioritised for analysis, cryptocurrency scams accounted for 31 cases, followed by money laundering and obtaining by false pretence. The FIA says cybercrime continues to escalate in scale and complexity with the increase in online usage, describing the issue as a continuing trend from previous years. “However, we have observed an escalation in the number of incidents and amounts involved.

“Syndicates and individual fraudsters using business and personal bank accounts to funnel funds from the public under the pretext of investing in virtual currency more specifically bitcoins.” The FIA detailed the typical methods used by crypto scammers locally. “The public is coerced using mostly social circles and media to avoid face-to-face contact,” the financial intelligence watchdog said. “New payment methods such as electronic wallets and mobile money transfer services are the preferred avenues to solicit funds from victims.

“Typically, the first few ‘investors’ earn their funds back with interest whilst the rest lose out as their funds are used to settle earlier ‘investors’ and the rest is used to finance luxurious goods and lifestyle of the fraudsters.”

The FIA added: “The luxury lifestyle and goods for some of the syndicate members include luxury hotel stays, purchasing of vehicles and financial gifts to loved ones and associates.” Anecdotal evidence suggests crypto scams have flourished in Botswana in recent years as ordinary households have had their incomes squeezed hard by the pandemic. The growing uptake of social media, which enables word-of-mouth marketing, combined with low financial literacy, has also helped stoke scams from across the country’s borders, often with the help of local intermediaries.