TikTok under scrutiny - Livestreams allegedly used for Money Laundering

A recent lawsuit in Utah claims TikTok livestreams were exploited for money laundering schemes, raising serious questions about the hidden risks in the digital world.?

Social media platforms like TikTok have revolutionised how we connect and create content. However, their global reach and anonymity also present an attractive playground for criminals. According to a lawsuit filed in Utah, bad actors allegedly used TikTok livestreams to launder money, a tactic that underscores the growing need for vigilance in the digital age.?

?

Allegations - TikTok as a money laundering tool?

The lawsuit alleges that fraudsters manipulated TikTok livestreams to transfer illicit funds under the radar. Here's how the alleged scheme worked:?

1. Gift Currency Laundering: TikTok's virtual gifting system, where viewers purchase in-app coins to send as gifts, was reportedly exploited. Criminals used stolen or fraudulently obtained credit cards to buy coins, sent them as gifts, and withdrew legitimate cash equivalents, effectively laundering dirty money.?
2. Anonymity Advantage: TikTok's lack of stringent identity verification in its gifting system created a loophole for bad actors to operate.?
3. Global Transactions: The platform’s worldwide reach allowed criminals to obscure the origins and destinations of their illicit funds.?

?

Intersection of Social Media and Financial Crime?

1. Exploitation of Emerging Platforms: New technologies often outpace regulatory frameworks, leaving gaps for misuse.?
2. Undetected Transactions: Livestream gifting systems operate outside traditional banking structures, making them harder to monitor under Anti-Money Laundering (AML) laws.?
3. Reputation Risks for Platforms: Allegations like these can tarnish a platform's image and deter users and advertisers alike.?

?

Safeguarding against misuse?

To address these risks, social media platforms, regulators, and financial institutions must collaborate:?

1. Enhanced User Verification: Introduce stricter identity verification processes for financial transactions within apps.?
2. AI-Powered Monitoring: Leverage artificial intelligence to detect unusual transaction patterns or suspicious activity.?
3. Regulatory Compliance: Social media platforms must align with AML standards, just as financial institutions do.?
4. User Education: Raise awareness among users about the risks and signs of fraudulent activities on such platforms.?

?

The need for proactive solutions?

The Utah lawsuit highlights the urgent need to recognise the evolving tactics of money launderers. Social media platforms like TikTok, with their unique ecosystems, must proactively build defenses against misuse to maintain user trust and regulatory compliance.?

?

Author Sarita Sitaraman

?