Non-fungible tokens (NFTs) ‘highly susceptible’ to use in fraud, scams, first-ever report avers

Non-fungible tokens (NFTs) are highly susceptible to use in fraud and scams and are subject to theft, according to a report issued Wednesday.

The first-ever NFT illicit finance risk assessment issued by the Treasury Department also determined that “illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime,” according to the report

However, the report uncovered little evidence to date of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, Treasury said.

The risk assessment, according to Treasury, was aimed at discovering how vulnerabilities associated with NFTs and their platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.

Among the contributors to the risk of fraud and theft related to NFTs and platforms: inadequate cybersecurity protections, challenges related to copyright and trademark protections, and “the hype and fluctuating pricing of NFTs,” Treasury said.

“Moreover, some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, and sanctions evasion,” Treasury said. “The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate such risks.”

Treasury Releases First Ever Non-fungible Token Illicit Finance Risk Assessment 

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