Nepal Targets Crypto Fraud with Awareness Campaigns

Nepal combats crypto fraud by monitoring transactions, conducting public awareness campaigns, and enforcing stricter regulations to combat rising cyber-enabled financial crimes.

Nepal Faces Rising Crypto Fraud

Nepal’s Financial Intelligence Unit (FIU) is intensifying efforts to combat crypto fraud, which continues to grow despite a nationwide ban on cryptocurrency trading. The FIU, part of Nepal Rastra Bank, identified digital assets as a rising medium for laundering illicit funds, complicating financial oversight.

In its recent “Strategic Analysis Report,” the FIU outlined how fraudsters leverage cryptocurrencies to transfer funds internationally, making detection and recovery more challenging. These schemes often involve converting illegal gains into crypto, exploiting its decentralized nature to bypass regulatory scrutiny.

Underreporting Hinders Crypto Fraud Detection

The report highlighted that around 64% of fraud cases reported to Nepalese authorities by May 2024 were cyber-related, many linked to crypto fraud. Victims are frequently targeted through social media and online advertisements, lured by promises of high returns.

However, the illegal status of cryptocurrency trading in Nepal discourages many from reporting scams, resulting in underreporting. Nevertheless, the FIU noted the need to tackle the issue through enhanced transaction monitoring and public awareness.

Recommendations include training financial institutions to identify and report suspicious activity and strengthening inter-agency cooperation. The report also emphasized updating regulations to address digital payment fraud effectively.

The authority remarked that the fear of legal repercussions and personal embarrassment are key deterrents that prevent crypto fraud victims from seeking help. This complicates efforts to track fraudulent schemes in the country.

Proposed Measures to Tackle Crypto Fraud

Some proactive steps proposed by the FIU to counteract these challenges include educating the public on recognizing fraudulent schemes and conducting detailed scrutiny of crypto-related transactions. Meanwhile, the ease of transferring cryptocurrency to offshore accounts remains a significant obstacle, enabling fraudsters to operate across jurisdictions.

This has prompted the FIU to call for international collaboration and stricter compliance measures. Nepal’s approach mirrors efforts in other nations facing similar challenges.

For instance, South Korea recently introduced mandates for businesses handling cross-border crypto transactions to register with authorities and report transaction details monthly. The FIU’s recommendations also align with global efforts to curb the misuse of digital assets for financial crimes.

Nepal seeks to mitigate the risks associated with crypto fraud by bolstering monitoring systems and enhancing public awareness.

Polter Finance Gets Hacked for $12M

Meanwhile, Polter Finance, a decentralized lending platform, has suspended its operations after experiencing a $12 million flash loan attack. Immediate analysis showed that the exploit was attributed to faulty oracle pricing in its newly launched SpookySwap (BOO) market.

The hack drained Polter Finance’s total value locked (TVL). Investigations revealed that the stolen funds were routed through wallets on Binance, prompting the platform to collaborate with the crypto exchange for recovery efforts.

The Flash Loan Exploit Details

Web3 security firm TenArmor identified the attack as a flash loan exploit, exposing vulnerabilities in the platform’s smart contracts. Thus, the attacker siphoned off $12 million worth of assets, including $1.03 million in wrapped USD Coin (USDC), $7.87 million in Fantom (FTM), $251,000 in Magic Internet Money (MIM), and $2.1 million in Stader sFTMX.

Polter Finance’s pseudonymous founder, “Whichghost,” confirmed the hack in a police report filed with Singapore authorities. The report outlined that the breach also resulted in $223,219 in personal losses for the founder.

Negotiation Efforts with Hacker

Polter Finance reached out to the attacker via an on-chain message, offering a chance for negotiation and immunity if the funds were returned. As of now, the hacker has not responded.

The platform has also partnered with the Security Alliance Information Sharing and Analysis Center (SEAL-ISAC) to track the stolen assets and identify the attacker. The hack has raised concerns within the crypto community, with some speculating about insider involvement.

Critics questioned the timing of the police report, suggesting it might deflect scrutiny from potential internal lapses. Polter’s next steps will likely involve addressing community concerns while ensuring such a breach does not occur again.