Cryptocurrency theft has been on the rise for years with crypto scams climbing to $1.2 billion in the first quarter of 2019 according to data from CipherTrace. A growing number of those scams are happening on classifieds websites like Craigslist and involve a wide variety of fake merchandise being sold in exchange for cryptocurrency.
In the past, criminals relied on money orders and bank wires to sell fake merchandise and stiff buyers. Today, they’re still using those tried-and-true methods, but cryptocurrency gives them another way to scam buyers.
The best part for the fraudsters is that once an unsuspecting buyer pays with cryptocurrency, the purchase can’t be canceled and the transaction can’t be refunded.
In this post, we’ll cover:
- How a typical classifieds scam works
- Tips for avoiding becoming a victim yourself
- What crypto businesses (i.e., crypto ATM operators) can do to avoid unwittingly processing these transactions.
Typical crypto craigslist scams are well-disguised
Here’s how these scams typically work.
Let’s say you want to buy a used car. You decide to take a look at your local Craigslist to see what’s for sale. You find a great car at a price that sounds too good to be true.
That’s your first red flag that the ad is a scam.
Because rarely in life do “too good to be true” deals turn out to be legitimate.
But for the sake of our story, let’s say you decide to respond to the ad to learn more about the car.
You quickly get an email back from the seller with details about the car, more photos, and a seemingly plausible explanation for why the car is priced so low – the owner is in the military and being deployed, there was a divorce, there was a death in the family, and so on.
After you exchange some email messages, you discover that the owner can’t meet you personally to show you the car for another plausible reason. Remember, they’re being deployed overseas or the car is in storage where the deceased relative lived.
You just got your second and third red flags that the ad is a scam.
Because the seller can’t show you the car in advance, and they can’t meet you in person.
For some reason, you decide to move forward with the sale. After all, the deal is so good!
The seller sends you an email with instructions to pay with cryptocurrency (or sends you a link to pay via eBay, Amazon, or another website). Either the email or website (which is actually just a very good replica of a legitimate site like eBay or Amazon) gives you a QR code and the address of a local crypto ATM that you can use to make your payment.
That’s your fourth red flag that the ad is a scam.
Because the seller asked you to pay with cryptocurrency.
You’re not too sure about paying with cryptocurrency, but the instructions are so detailed and sound so official. You decide to go for it.
What happens next?
You don’t receive a car and the seller disappears.
You’ve just become the victim of a Craigslist crypto scam.
Avoiding crypto classifieds scams
There is a wide variety of fake merchandise up for sale on Craiglist and other classifieds sites. Cars, tractors, event and concert tickets, Airbnb-type vacation rentals, and other high-priced items are commonly advertised in cryptocurrency scams.
Craigslist offers tips to avoid scams on its website. While many of the tips are related to scams involving wire transfers and money orders, they are relevant to cryptocurrency scams as well.
In addition, follow these tips to stay safe and avoid being the victim of fraud:
- Research prices and do some comparison shopping to make sure a price isn’t too good to be true before you buy.
- Don’t pay anyone who won’t meet you in person.
- Don’t buy without seeing what you’re buying in person.
- Only buy from people who are local to your area.
- Don’t let a seller pressure you to buy right away.
- Don’t give out your personal information.
- Pay the safest way possible.
- Never buy a car on Craigslist using Bitcoin.
It’s also important to check the email messages you receive and the websites you visit to make sure they’re legitimate. While scammers have gotten very good at making their email addresses look real, it’s still worth it to take a look.
For websites, scammers often create complete duplicates of well-known sites like eBay for their crimes. You can see a great example in this story on Medium. Do your research and never buy from a link in an email message. Instead, always navigate directly to a website from your browser.
How crypto businesses can protect consumers
For cryptocurrency business owners, particularly BTM operators, fighting this type of crime is all about detection and prevention through surveillance and monitoring. Your AML compliance program should detail red flags that could indicate a Craigslist or classifieds scam, and all employees should be trained to watch for those red flags and follow the same process to follow up on and report unusual, suspicious, or criminal behavior.
For example, an unusually large withdrawal might be a red flag that requires a phone call interview with the client to learn the reason for the transaction. If the person says the reason for the withdrawal is to buy a car and signals other suspicious behaviors, it might warrant additional action, such as filing a SAR.
Your BSA Compliance Officer is responsible for identifying red flags, developing procedures to respond to red flags, and making decisions related to reporting. If Craigslist and other classifieds scams aren’t already included in your compliance policies and procedures, you need to add them as soon as possible because this is a type of fraud that is expected to continue growing quickly in the future.
Key takeaways for bitcoin compliance
Protecting consumers from classifieds/Craigslist scams and other fraud requires an understanding of how these scams work and how to detect them by developing a comprehensive AML compliance program.
If you need help getting your surveillance and monitoring routines in line with current best practices, contact BitAML for a free consultation today.