A new report released today by identity verification company AU10TIX Ltd. has found an interesting shift in identity fraud away from cryptocurrency and toward the payment sector.

The Q3 2023 Global Identity Report, based on insights from millions of transactions across 249 countries from July to September, found that professional fraud rings have shifted their focus from crypto to the payments sector. Digital payments saw a 56% increase in fraud while at the same time, the crypto industry, said to be a traditional sandbox for fraudsters, experienced an unusual 51% drop.

Surprisingly, the researchers at AU10TIX believe that the shift was the result of the European Union’s Markets in Crypto-Assets Regulation. The regulation, which was approved last year but doesn’t go into effect until 2024, is aimed at taming the “Wild West” of volatile crypto markets by introducing a new regulatory framework designed to protect investors and consumers.

“Although the new regulations initially target the EU and will not take effect until 2024, many organizations and regions are proactively adopting stricter [know your customer] guidelines to align with the legislation,” the researchers explain. “This is making it more difficult for professional crime organizations to commit fraud in the crypto sector, so they are funneling their efforts into the less regulated sector of payments.”

The payments sector was found to be the most targeted by organized fraud groups in the third quarter, responsible for 51% of all financial fraud attacks, up from 32% in the previous quarter. Attacks on the crypto industry came in at 23% of attacks, down from 47% in the second quarter, highlighting what is claimed to be a correlation between regulatory frameworks and the prevalence of fraud.

North America saw the highest volume of payment sector attacks of all regions studied, followed by the Asia Pacific Region. The report does warn that the figures are likely underrepresented.

“The unpleasant truth is that publicly available statistics regarding identity fraud refer only to the attacks that traditional identity verification solutions can detect,” said Chief Executive Dan Yerushalmi. “The actual fraud rate is likely three to 10 times higher because today’s sophisticated attacks are committed by organized crime groups using AI, deep fakes and other technology to create false IDs nearly indistinguishable from the real thing.”

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