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Cognitive Manipulation and Financial Vulnerability in Cyber Fraud: A Search for Trait-Based Prevention and Money Recovery Mechanisms

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29 September 2026

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30 September 2026

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Abstract
The paper addresses digitalization as a global challenge, wherein cyber fraud, unrestricted by national boundaries, poses a major threat to global financial security. It categorizes digital threats into two types, cognitive manipulation and technological breaches. The primary focus of the paper is on cyber fraud falling under cognitive manipulation at the initial stage of financial transactions, and understanding how the internet helps criminals in money laundering operations, as well as how they utilize cryptocurrencies to their advantage. The paper conducts an in-depth study of cognitive manipulative traits that lead to cyber fraud victimization, and examines the subsequent flow of illegal money, including how criminals erase their digital footprints and disappear with illicit funds through cyber channels. The objective is to help devise a system that can protect potential victims and assist investigative agencies in curbing illegal money laundering activities. The main findings of the research include suggestions to incorporate the cost of protection based on the probability of susceptibility to cyber fraud, determined by cognitive traits, as well as the introduction of controls to verify the identity of individuals who receive and forward money. It also recommends blocking transactions in the absence of a traceable identity, along with other measures discussed in the paper.
Keywords: 
cognitive manipulation
;  
cyber fraud
;  
financial security
;  
human behavioral traits
;  
emotional support
Subject: 
Business, Economics and Management  -   Economics

I. Introduction

The number of internet users now covers 74% of the world’s population reaching almost 6 billion in 2025, up from 1 billion in 2005 (Tila, 2025). The widespread reach of the internet has been made possible by the smartphone revolution and its affordability, which has drastically reduced dependence on computers for the average person and the main reason behind 4.7 billion smartphone users worldwide (mobile-internet-users-reach-4-7b-covering-58-of-global-population, 2025).
In 2024, 1,813.9 million mobile phones were sold, of which 1,625 million (88%) were smartphones. The impact of the smartphone revolution can be observed in the steady annual increase in sales, with a decisive shift occurring after 2011, when sales of basic feature phones peaked at 73% compared to smartphones at 27% (how-many-mobile-phones-are-sold-each-year, 2025).
There are more than 20 billion social media accounts that even exceed the total global population, as individuals often maintain multiple accounts through which they communicate their thoughts and share their activities. The top four platforms are Facebook (3,070 million), Instagram (3,000 million), WhatsApp (3,000 million), and YouTube (2,580 million) (Thuy, 2025).
The impact of digital networking is immense, and business opportunities have multiplied significantly. Due to the availability of global product information and online purchasing options, the e-commerce market reached more than $5,630.81 billion in 2024 (Online Shopping Global Market Report, 2025)
The commercial use of cyberspace has given rise to cybercrime, which can be explained by three main factors, the large number of internet users, their widespread engagement with social media platforms where they share personal and professional information, and the extensive use of financial and banking platforms for monetary transactions. Cybercriminals target victims based on information available to them through social media, either posted and shared by the victims themselves or obtained through data breaches from business and government entities due to inadequate cybersecurity measures or flaws in data security software.
In both cases, cybercriminals exploit this information to their advantage, either through cognitive manipulation under which it exploits inner fears, greed, and impulsive behavior or through technological breaches, where technically skilled criminals gain control of victims’ bank accounts.

II. Research Methodology

The research adopts a qualitative approach, employing a descriptive methodology to derive key insights from the collected data. The paper aims to highlight the cognitive traits and technological vulnerabilities that are responsible for the majority of cyber frauds. It conducts an in-depth analysis of human behavioral traits that empower cybercriminals to exploit such vulnerabilities. The objective of the research is to propose effective solutions to protect potential victims and to assist investigative agencies in curbing illicit money laundering activities.
For this purpose, the research evaluates four primary aspects: (i) cognitive dimensions of human behavior linked to potential victimization. (ii) channels of illicit money laundering used by cybercriminals to siphon funds across multiple jurisdictions until they become untraceable. (iii) identification of viable preventive measures to protect potential fraud victims through behavioral analysis and training (iv) determination of necessary procedural reforms to enhance the traceability of financial transactions and ensure robust identity verification prior to their authorization.
The research paper comprises seven sections. Following the introduction in Section One, Section Two outlines the methodology, and Section Three discusses the relevant literature. Section Four examines cognitive manipulation, its meaning, traits, and its relationship with cybercrime victims in detail. Section Five presents an in-depth analysis of how fraudulent money is distributed across different nodes through various money laundering techniques, including the use of cryptocurrencies, and how it is moved beyond the reach of judicial and investigative authorities. Section Six discusses potential solutions to limit cyber fraud and protect both banks and victims, including additional security features offered under privileged banking services, which include cyber fraud insurance available for an additional fee. It further justifies the implementation of technological interventions, such as identity verification mechanisms and transaction-blocking measures within a specified time frame. Finally, Section Seven presents the conclusions drawn from the study.

III. Literature Review

The digital space invites extensive discussion regarding its usage, benefits, and associated risks across various domains, thereby providing valuable insights. This paper utilizes existing literature to explore human behavioral traits that contribute to digital victimization and establishes their association with money laundering activities conducted through digital platforms to evade enforcement agencies.
The research broadly categorizes the study material into two forms, material related to cognitive traits and technological breaches. The analysis of cognitive traits is further subdivided into studies examining traits that influence individuals to act in certain ways, which cybercriminals exploit, as well as experimental studies on human behavior. Technological breaches include the study of various channels through which illicit money is transferred. The study material related to technological breaches is primarily drawn from enforcement agencies that are actively engaged in tracing and recovering illicit funds in money laundering cases.
The introductory section examines the extensive reach of the internet through various reports, including research by Thuy (2025), which highlights that the number of social media accounts exceeds the global population. In the subsequent sections, cognitive capacities are examined, beginning with definitional aspects and progressing toward their classification based on distinguishing characteristics.
The literature includes Ward’s (2017) explanation of the impact of smartphones on cognitive capacities, whereas the works of Ouytsel (2021) and Phoebe Moh (2024) explore the role of trust within workgroups in digital environments. This is further examined by Ayal (2017) and Abbasi (2025), whose research focuses on password-sharing practices. Additionally, Wash (2021) investigates how internet users create passwords for different purposes, while Ezugwu (2023) further explains how public computers are more susceptible to security breaches for various reasons, thereby increasing opportunities for cybercriminal activity.
Furthermore, the issue of individuals who overshare information on digital platforms has been addressed by Dupuis (2024), Shensa (2016), and Shabahang (2024), who describe the behavioral traits associated with such individuals. Vidal’s (2020) research categorizes social media usage into three themes, exploring the relationship between social media use, depression, and other psychological concerns. The behavior of Generation Z in social media contexts, particularly their tendency to seek social validation, is examined by Edy Susilo (2025). Jain (2021) elaborates on how cybercriminals exploit social media platforms. Sanchez-Rola (2020) specifically investigates link-clicking behavior, while Ellison (2020) examines patterns of user engagement with online content.
The psychology underlying phishing attacks is analyzed by Ribeiro (2024), while Rajivan (2020) and Stylianou (2025) examine targeted phishing strategies. Sarno (2023) employs a three-regression model to explain the association between phishing susceptibility and behavioral traits. Wang (2023) studies the role of impersonation and the creation of fake identities in enhancing the effectiveness of phishing attacks. Furthermore, Norris (2019) examines the construction of phishing messages designed to exploit specific psychological vulnerabilities.
The impact of poor lifestyle choices and habits on individual conscientiousness is explored by Sutin (2010), while Ungvarsky (2024) associates such behavioral patterns with harsh and inconsistent parenting. The Big Five personality traits are analyzed by Alwahaishi (2024) in relation to data disclosure on social platforms. Similar studies were conducted by Lampropoulos (2022), while Koloseni (2021) conducted experimental research in Tanzania.
The technical analysis of illicit money laundering routes and activities is derived from official enforcement agency reports and documented sources. These include the Indian Cybercrime Reporting and Investigation (2026) and review reports from the Budapest Convention (2021), along with other official publications from enforcement agencies.
The use of cryptocurrencies in money laundering operations is also examined. Bryans (2014) identifies five key entities involved in cryptocurrency transactions, while Elad (2025) further elaborates on illicit cryptocurrency usage and the mechanisms enabling exchange within underground markets on the dark web. Finally, Schoenmakers (2023) investigates the attributes that constitute a security mindset by evaluating the characteristics of experts in software system security.

IV. Cognitive Manipulation in Cybercrime victims

The word “cognitive” is derived from cognitus, meaning “to get to know” or “to acquire knowledge.” It is related to the process of acquiring knowledge and understanding through thought, experience, and the senses. In simple terms, it refers to thinking based on learning and understanding.
When an individual’s thinking and understanding are used against that same individual through psychological tactics to subtly control and alter the rational decision-making process eroding critical thinking and fostering dependence based on intuition under the control of a manipulator, is known as cognitive manipulation.
When this is done to seek monetary benefits through indirect communication using internet-based interfaces, where a manipulator with a fake identity is able to convince a victim to part with their hard-earned money, it constitutes cybercrime.
Cognitive hacking is another term used in this context, where phishing tactics are employed to manipulate decision-making by exploiting the victim’s emotions. This weakens logical reasoning and helps in establishing false identities of government agencies or fake causes to extort money.
Victims of cyber fraud can be classified into two categories. The first category includes those where the fault lies with the victims themselves due to personality-related traits, they are the easiest targets for cybercriminals. The second category includes those where cybercriminals need to apply psychological tactics to impair the victim’s ability to think logically and to generate emotional responses to the commands given to them.
Victims in the second category differ in their cognitive skills and respond differently to cybercriminals’ approaches; therefore, they cannot be classified into a common group based on their traits. Cybercriminals must devise individual strategies to compel them to part with their hard-earned money.
Research by Adrian F. Ward (2017) discloses that the mere presence of a smartphone affects two cognitive capacities, available working memory capacity and functional fluid intelligence, which relates to uninterrupted sustained attention so people who depend more on their devices tend to suffer from memory loss and face difficulty in keeping focus.
Victims in the first category can be further divided based on their judgment errors, where inherent traits become the reasons for their actions and choices, providing opportunities for cybercriminals to commit their crimes. This paper elaborates on faults in victims’ actions and the associated personality traits.
Individuals with high interpersonal trust are often gullible and easily fall prey to cyber fraud. Despite this, sharing is often perceived as a token of trust and friendship (Ouytsel, 2021). This is common in family groups, where the level of trust is high. However, even in workgroups, variants of passwords are sometimes shared among participants (Phoebe Moh, 2024).
Similar findings are observed in Ayal (2017), where workers in medical institutions were found sharing passwords, which can pose a threat to the privacy of medical data. In a significant study, Abbasi et al. (2025) state that while some password sharing is voluntary, it is sometimes coerced to satisfy emotional attachments such as mate guarding, jealousy, and suspicion.
Internet users tend to prefer complex passwords for websites containing sensitive information, while using easy-to-remember passwords for other purposes (Rick Wash, 2021). It has been pointed out that public computers are more susceptible than private ones, as people often forget to log out, sometimes leave systems logged in due to slow login speeds out of frustration, or fall victim to cybercriminals who actively exploit such situations (Assumpta Ezugwu, 2023).
Another feature of the digital age is the oversharing of information on social media, which can potentially lead to online shaming, cyberbullying, identity theft, and cyber fraud. Oversharing includes sharing details of one’s personal life and that of close associates beyond reasonable limits (Marc Dupuis, 2024).
Oversharing depends on two types of individual behavior, either sharing excessive personal information or posting too frequently about one’s surroundings (Sydney Elaine Brammer, 2022). Popular social media platforms such as Facebook and Instagram are often used to satisfy inner urges, such as the desire to be perceived as rich and famous, popular within a group, a leader within a circle, attractive and successful, or powerful and dominant. These traits are just a few examples where emotions override rationality, leading individuals to share sensitive material and make themselves vulnerable to cyberattacks.
Scammers look for vulnerability, and vulnerable individuals tend to spend longer periods on social media, disclosing personal information and showing signs of loneliness, isolation, advanced age, disabilities, chronic illnesses, and financial hardship.
Furthermore, Dupuis (2024) points out that people who are high in neuroticism and extraversion, as well as younger individuals, are more active on Facebook and are more likely to share information. In contrast, there is limited evidence regarding oversharing among individuals with traits such as openness, high conscientiousness, and agreeableness.
One of the key reasons for social media use is the expectation of emotional support, where offline relationships are often replaced by online networks. In the search for happiness and meaningful relationships, individuals may devote excessive time to social networking platforms. However, excessive online engagement can harm offline relationships, and research shows that spending too much time online is not necessarily linked to receiving the desired emotional support. People with low self-esteem who overshare often receive less emotional support due to negative responses from their online social circles, resulting in decreased relationship satisfaction (Ariel Shensa, 2016).
Carol Vidal (2020) bases her research on four themes, social media use in terms of quantity (time) and quality (types of content), the social aspects associated with social media, and how social media can serve as a tool to analyze mental health symptoms, which may help in predicting depression and suicidal tendencies. The findings show an association between social media use and depression, and that social media posts can be useful in detecting symptoms of depression and other psychological issues. These issues are also visible to scammers, who exploit such personal vulnerabilities.
Muhammad Edy Susilo (2025) specifically studied Generation Z behavior in terms of oversharing on social media and found that fear of missing out (FOMO) and a strong digital presence indicate a need for social validation. Edy added another dimension to Sydney’s research in defining oversharing by incorporating overindulgence in a single topic. Furthermore, social media platforms provide users with the ability to remain anonymous and post freely without feelings of remorse or guilt. The idea that freely expressing and sharing personal feelings will result in sympathy or appreciation within an online circle boosts confidence, encouraging individuals to share more deeply. However, excessive self-disclosure often backfires, leading to depression and psychological distress.
There are more than 83 million fake profiles, and approximately 100,000 websites are hacked daily. The personal information shared online is precisely what scammers need, to target their victims. This paper speaks of three kinds of threats- conventional, modern, and targeted, before discussing possible protective measures. Conventional threats include spam, malware, phishing, and identity theft. Under modern threats, clickjacking, hijacking, de-anonymization, interface attacks, profile cloning, cyber espionage, and cross-site scripting are included. Targeted threats include cyberbullying, cyber-grooming, and cyberstalking. Cybercriminals exploit social media in three main ways, the scale of social media, the trusted nature of these platforms, and the invisibility of security teams (Ankit Kumar Jain, 2021). Reza Shabahang (2024) suggests that anxiety, attention-seeking behavior, and problematic use of social media may predispose adolescents to overshare personal information, exactly the data cybercriminals are looking for.
The act of clicking on malicious links remains a central vector in the execution of cyber fraud, particularly within social media environments. Iskander Sanchez-Rola (2020) identifies two primary categories of threats associated with link-clicking behavior, intentionally embedded flaws introduced by developers and unintentional coding errors. Both forms of vulnerabilities expose users to significant risk by either obscuring the actual destination of hyperlinks or failing to provide adequate information for informed decision-making. This lack of transparency facilitates deceptive practices, allowing cybercriminals to exploit user trust, especially on financial platforms and websites with established reputations.
Expanding on user interaction patterns, Nicole B. Ellison (2020) examines how individuals engage with content on social media, particularly their decision-making processes regarding whether or not to click on links. The study categorizes users into four distinct groups- Engaged Clickers (high interaction, high viewing), Indiscriminate Viewers (high interaction, low viewing), Unengaged Lurkers (low interaction, low viewing), and Engaged Lurkers (low interaction, high viewing). Among these, indiscriminate viewers exhibit the highest level of risk, as their tendency to interact without adequate scrutiny increases their vulnerability to malicious content. Furthermore, clicking behavior is influenced by multiple factors, including gender, network composition, and underlying psychological motivations.
From a behavioral and psychological perspective, Edwin Donald Frauenstein (2020) demonstrates that phishers strategically manipulate social media environments to induce users to click on harmful links. By leveraging high-profile events, generating public interest, and eliciting emotional responses, attackers increase the likelihood of user engagement with malicious content. The study further highlights that, within the OCEAN personality framework, individuals exhibiting extraversion and agreeableness are particularly susceptible to phishing attacks. Extraverted individuals are more likely to respond impulsively to stimuli, while agreeable individuals, characterized by trust and cooperativeness, are more prone to manipulation.
Complementing these findings, Liliana Ribeiro (2024) reveals a paradoxical trend in user susceptibility. Individuals who perceive themselves as having strong phishing-detection self-efficacy, as well as those who engage extensively in routine internet use, demonstrate higher levels of vulnerability. This overconfidence, coupled with frequent exposure to online environments, increases the likelihood of overlooking subtle indicators of malicious intent.
The integration of psychological insights into cybersecurity has significantly enhanced the understanding of user susceptibility to phishing attacks. Ioannis Stylianou (2025) emphasizes the critical role of group dynamics and majority influence, demonstrating that users often succumb to majority pressure even when they believe their own judgment to be correct. Furthermore, individuals are more likely to comply with instructions when they perceive them to originate from an authority figure, frequently without critically evaluating the authenticity of such commands.
Based on the analysis of selected case studies, the most prevalent psychological tactics employed in phishing attacks involve appeals to the principles of authority and reciprocation. The emergence of artificial intelligence has further complicated mitigation efforts, as it enables the creation of highly convincing fake identities that impersonate authoritative figures, thereby increasing the effectiveness of phishing schemes (Ping Wang, 2023).
Expanding on predictive factors, Dawn M. Sarno (2023) utilizes three regression models to assess email discrimination ability- (1) an age-based model, (2) a deficient self-regulation model incorporating impulsivity, response time, and curiosity, and (3) a personality model based on the Big Five traits. The findings indicate that phishing susceptibility is positively associated with higher levels of extraversion and impulsivity, younger age, and faster response times, while it is negatively associated with agreeableness and openness to experience.
Similarly, Parashanth Rajivan (2020), finds that phishing attacks are more successful when they employ consistent and targeted strategies, such as sending notifications, adopting an authoritative tone, exploiting trust through impersonation of acquaintances, expressing shared interests, and conveying urgency or failure. These focused approaches are more effective than employing varied strategies across multiple attempts.
Further analysis by Ioannis Stylianou (2025) highlights the effectiveness of specific phishing strategies. The study reveals that the majority size technique, measured through the Compliance Increase Rate (CIR) is particularly effective in contexts with low initial compliance rates. Additionally, strategies based on authority, commitment and consistency, and reciprocity demonstrate consistently high effectiveness in influencing user behavior.
The psychological underpinnings of phishing susceptibility are further reinforced by the work of Gareth Norris (2019), whose study highlights that phishing messages are often carefully crafted to exploit specific psychological vulnerabilities. In particular, time-limited communications are designed to trigger peripheral rather than central information processing, thereby reducing critical evaluation. Scammers typically target a broad audience to identify individuals who subconsciously respond to such stimuli, subsequently subjecting them to increased pressure in later stages to make decisions that yield financial benefits for the attacker.
Individual personality traits and behavioral tendencies significantly influence susceptibility to such attacks. Less organized individuals or those lacking self-discipline tend to exercise lower levels of caution and are therefore more vulnerable to scams. Similarly, individuals driven by curiosity or greed are more likely to open attachments from untrusted sources, particularly when the content creates a sense of mystery that overrides rational decision-making. Individuals with low conscientiousness are often associated with poorer lifestyle habits, such as smoking, excessive eating, and avoidance of physical activity (Angelina R. Sutin, 2010). They also tend to exhibit impulsive and disorganized behavior in daily life (Ungvarsky, 2024). Such behavioral patterns are frequently rooted in early-life experiences, including harsh or inconsistent parenting.
Empirical findings on the relationship between personality traits and susceptibility to data disclosure remain mixed. Saleh Alwahaishi (2024) finds that, among the Big Five personality traits, only agreeableness shows a positive relationship with data disclosure, while conscientiousness, extraversion, neuroticism, and openness exhibit no direct association. In contrast, Georgios Lampropoulos (2022) identifies extraversion and openness as the most significant predictors. These discrepancies may be attributed to methodological differences, as Alwahaishi’s findings are based on primary empirical research, whereas Lampropoulos relies on an extensive literature review.
Supporting the role of personality in security behavior, Koloseni (2021) reports that conscientiousness, openness to experience, extraversion, and established security habits significantly influence PIN security practices in Tanzania. Moreover, security habits themselves are shaped by conscientiousness, agreeableness, and neuroticism, indicating a complex interaction between personality traits and habitual behavior.
In the context of security maintenance, Prashanth Rajivan (2020) examines why individuals delay the installation of security updates. The study suggests that such delays are influenced by users’ prior experiences and their tendency to evaluate the perceived costs of installation against potential risks. Individuals with a higher risk tolerance are more likely to ignore or postpone necessary updates, often preferring to maintain the status quo. Conversely, individuals who demonstrate a stronger sense of responsibility toward their work are more proactive in updating their electronic devices. Those seeking zero-cost solutions or exhibiting high risk-taking behavior are particularly inclined to avoid updates.
Beyond financial considerations, behavioral factors also play a crucial role in update adoption. Resistance to change, difficulty in processing information, especially among older individuals and impatience younger users contribute to negligence in maintaining cybersecurity practices. Procrastination, lack of discipline, and limited maturity further exacerbate this issue. Ultimately, decisions regarding system updates and investment in antivirus software are strongly influenced by an individual’s ability to perceive risk and their level of awareness regarding potential cyber threats.

V. The Technical analysis of illegal money laundering activities:

The resources available to cybercriminals for conducting illegal financial transactions across national boundaries are vast and complex. These transactions often span multiple bank accounts and involve various payment modes, including different currencies, e-wallets, vouchers, cryptocurrencies, and prepaid cards. Such diversity significantly complicates the process of tracing illicit funds. Moreover, effective investigation requires coordination among multiple national criminal investigation agencies operating under distinct legal frameworks, which leads to procedural delays. These delays provide cybercriminals with sufficient time to disperse illicit funds beyond their jurisdictions, rendering them virtually untraceable.
The cyber domain encompasses not only money illicitly obtained from individual victims but also proceeds derived from drug trafficking, ransomware attacks, terrorist financing, tax evasion, and other unlawful activities. Furthermore, even funds from legitimate businesses are sometimes routed through these channels to obscure corrupt practices prevalent in many economies. Overall, cyber-based financial transactions form a crucial component of broader money laundering networks. These networks often involve financial institutions such as banks, payment and remittance service providers, and virtual asset service providers, and they employ sophisticated techniques to conceal the origin of illicit funds.
Cybercriminals derive significant support from virtual financial service providers that allow them to open online accounts in foreign jurisdictions with minimal due diligence. Simultaneously, they recruit “money mules”, individuals in financial need who permit cybercriminals to use their identities to open bank accounts for conducting illicit transactions in exchange for a percentage of the proceeds. Cybercriminals are often well-educated and technically competent professionals who operate under the guise of legitimate service providers while offering illegal services to clients seeking to process illicit funds.
Furthermore, the possible involvement of professionals such as lawyers, accountants, financial and tax advisors, company secretaries, and bankers, often operating within organized networks or under the cover of legitimate consulting services, strengthens these illicit ecosystems. Their ability to assist clients in converting illegal funds into ostensibly legitimate assets or in evading tax authorities enhances their appeal within the criminal underworld.
Traditional money laundering methods, such as hawala and gold smuggling, require physical movement of cash and personnel and therefore involve higher risk. In contrast, cyber-enabled channels are comparatively safer and more difficult to trace due to the involvement of multiple foreign jurisdictions and the use of anonymity-enhancing technologies such as Virtual Private Networks (VPNs) and The Onion Router (TOR) within the dark web. In this environment, cybercrime increasingly adopts a service-based model, with specialized actors offering distinct services within the broader money laundering ecosystem.
Additionally, illegal call centers operate across the globe, providing services across different time zones. These entities often function from rented premises, enabling frequent relocation and the continuous alteration of IP addresses to evade detection.
Law enforcement agencies face the challenging task of tracing, securing, and recovering illicit proceeds, as cybercriminals employ sophisticated techniques such as smurfing and account hopping across multiple jurisdictions. These activities often involve transferring funds through different account holders in various countries and converting them into diverse financial instruments, including e-money, prepaid cards, and virtual assets. During these transactions, mule-operated accounts are frequently used to withdraw cash via ATMs or to purchase high-value goods that can later be resold for cash. Common money laundering techniques also include false or inflated invoicing for consultancy services, as well as the purchase of easily disposable valuables or goods that can be transported across borders and subsequently sold to legitimize the proceeds.
The emergence of cryptocurrency has further facilitated global illicit fund transfers. The increasing use of Bitcoin ATMs, along with the use of varied identifiers such as different dates of birth or phone numbers during deposits and withdrawals, complicates enforcement efforts. Additionally, obfuscation techniques such as mixers or tumblers make it difficult to trace the original source of funds. Decentralized finance (DeFi) platforms, which operate on blockchain-based systems for lending, borrowing, and trading without reliance on traditional banking networks, provide criminals with multiple layers of protection and avenues to obscure or erase digital footprints associated with their activities.
Even legitimate financial instruments are often exploited for illegitimate purposes. For instance, Virtual International Bank Account Numbers (vIBANs), which are issued by financial institutions to facilitate and categorize payments from multiple sources, can be misused to reroute and consolidate funds from numerous accounts into a single account. This practice effectively masks beneficial ownership by fragmenting and nesting transactions across payment networks, thereby concealing critical information that could otherwise lead to the identification of the perpetrators.

VI. Discussion

Technological Measures: Tracing money trails, verifying each account, and implementing withdrawal and conversion checks to confirm identity are essential so that, in the event of a scam, links can be established. Overall, robust safeguards must be put in place to prevent money from vanishing. Although various enforcement agencies are working at a multilateral level to trace and recover fraudulent funds, there is a consensus among them that the most effective way to stop fraudulent transactions is to act within 24 to 72 hours of the fraud being initiated.
Psychological Traits Analysis: Individuals within certain age groups who possess specific psychological traits may be more susceptible to fraud. To identify such individuals, a brief psychoanalytical assessment prior to opening an account may be necessary. This would enable institutions to provide an additional layer of protection or offer insurance coverage based on their specific needs. Categorizing customer accounts on the basis of risk associated with their operations allows banks to provide enhanced security measures and allocate the necessary costs for maintaining such protection, including the option of integrating insurance coverage.
Awareness and Incentive-Based Measures: Training sessions and information campaigns regarding cybercriminal activities are beneficial but not entirely effective, as customers often lack the time and understanding to grasp intricate security details, even when these are in their best interest. To reinforce security awareness, it is advisable that banks impose additional charges on accounts classified as high-risk while offering discounts to customers who demonstrate higher awareness. A periodic evaluations of customer awareness could further strengthen this approach. A knowledge score is based on regular psychological assessments, after certain time period during which major and minor updates are given, could be used for evaluating risk component and either offering discounts or asking for additional charges under maintenance and service charges required to protect the customer account.
The policy of offering discounts and charging for additional protection may encourage customers to adopt secure practices. However, its effectiveness depends on uniform implementation across all banks, either through mutual agreement or under the direction of the central bank. Otherwise, instead of serving as a protective mechanism, it may create competitive imbalances, leading customers to shift between banks based on convenience.
The strategic approach requires coordination among various sections of the government, including enforcement, judicial, regulatory, and information and communication bodies. Investigative agencies need to adopt a multifaceted approach to decipher digital forensic evidence, which comprises IP addresses and identifiers linked to internet domains. The first transnational public–private information-sharing mechanism is the European Financial Intelligence Public Private Partnership (EFIPPP). It collaborates with law enforcement agencies, Financial Intelligence Units (FIUs), and private entities from various EU and non-EU member countries to address cyber fraud threats.
In India, the Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS) is part of the National Cyber Crime Reporting Portal (NCRP), developed to report and prevent fraudulent financial proceeds by integrating financial entities such as banks, e-wallets, payment aggregators, payment gateways, and e-commerce platforms. The aim is to initiate immediate action on complaints reported through CFCFRMS. Since its inception in 2021, the system has been able to intercept ₹81,890 billion across 2.361 million complaints, while the total number of complaints registered on the NCRP in 2025 alone is 24,02,579 involving an amount of ₹22.49 billion (Cybercrime Reporting and Investigation , 2026).
While INTERPOL remains the primary enforcement agency for global crimes, including cybercrime, and is recognized by 190 nations, a more specialized and focused effort under the United Nations Convention against Cybercrime was adopted in 2024. However, it has only 70 signatory nations, with the majority of countries choosing to remain outside it. The perception that its adoption may curtail freedom of expression and lead to increased state and global monitoring has led many countries to refrain from joining, instead relying on their domestic agencies to combat cybercrime within their respective jurisdictions.
Legal Challenges to Cyber Frauds: Tracing cybercrimes is difficult, but proving the involvement of cybercriminals is far more challenging, as digital evidence is wrapped in multiple layers. With the passage of time, such evidence loses its relevance in the absence of recovery and definitive leads linking the accused to the crime. In many cases, investigative agencies are only able to trace mule accounts, whose holders are often unaware of the fraudulent activities carried out through accounts registered in their names. The inability to prove mens rea is one of the fundamental challenges. To address this, some jurisdictions have introduced sub-clauses that include knowledge and suspicion within the scope of participation in a crime.
The Budapest Convention provides a framework to facilitate cooperation and establish procedural powers among its signatories (20 years of the Convention on Cybercrime, 2021). Similarly, the Warsaw Convention, in Article 9, paragraph 3 (Thematic Monitoring Review of the Conference of the Parties to CETS No. 198 on Article 9(3) “Laundering Offences,” 2021), states that the offence of money laundering occurs when the offender suspects that the money involved is the proceeds of a crime.
The emergence of Crypto currency and its role in extending money laundering activities: The traditional routes of money laundering, like use of money mules, the creation of offshore accounts, smuggling channels, and fake invoicing, are well known to investigative agencies and carry higher risks for individuals. In comparison, the transfer of cryptocurrency across national boundaries, coupled with the deletion of digital footprints, rapid multiple transactions, and rerouting through numerous accounts, helps conceal identity and delay investigative processes. This provides sufficient time to withdraw illicit funds from the system or convert them into legitimate forms, thereby evading punitive action.
The fact that, in many countries, cryptocurrencies are not recognized as legal tender means that laws applicable to money laundering may not be strictly enforceable in a legal sense. In such jurisdictions, cryptocurrencies often remain outside the scope of financial supervision by government authorities. Nevertheless, mechanisms for exchanging national currencies and cryptocurrencies are widely available across the globe. A typical cryptocurrency transaction generally involves five entities, the sender (the person who initiates the transfer) through a crypto network; the receiver (the person who accepts the transaction); the generator of cryptocurrency, who may intervene during the transaction; the processor (an entity that updates crypto codes in exchange for a commission or fee); and, lastly, the crypto exchange, which facilitates the conversion of fiat currency into cryptocurrency and vice versa (Bryans, 2014).
Cryptocurrency is based on Blockchain technology, which reduces the need for traditional banking intermediaries, as transactions, involving Bitcoin are conducted directly between digital addresses. Despite Blockchain maintaining a verifiable ledger that is publicly accessible through open-source platforms, it still preserves a degree of anonymity because these addresses are not directly linked to individuals. Each transaction can involve newly generated crypto addresses with unique identifiers, accessible only to the owner through secure login credentials.
In contrast, opening a bank account requires verifiable personal information and takes time to become operational, which encourages criminals to prefer cryptocurrencies over conventional banking channels for illicit activities. The primary limitation of Blockchain technology, however, is that historical transaction data is permanently recorded and publicly available. Despite this transparency, tracing individuals remains difficult because wallet addresses do not reveal real identities. Moreover, individuals can generate multiple wallets and split funds among them, a practice known as address hopping, while also using mixing and tumbling services. Additionally, certain cryptocurrencies are specifically designed to conceal transaction data. Furthermore, illicit funds are often transferred across multiple Blockchains and routed through exchanges that maintain weaker standards regarding customer identification.
It is estimated that in 2024, approximately $40.9 billion was transferred to illicit cryptocurrency addresses. Within this, stolen funds constitute the dominant category, with 85.1% of illicit funds being sent to mixers, 6.3% flowing into dark-net markets, 3% associated with ransomware, and the remainder linked to scams and other forms of fraud (Elad, 2025). The Onion Router (Tor), which provides an anonymous browsing experience, is widely exploited by cybercriminals to access underground markets on the dark web and conduct illegal transactions.
The use of cryptocurrencies serves two primary purposes for criminals, first, it significantly enhances their ability to obscure money trails; and second, transactions typically involve one or more intermediary addresses before funds are ultimately withdrawn for spending, further complicating traceability.
Koloseni (2021) rationalizes research findings by suggesting that conscientious individuals are more likely to avoid insecure behaviour in order to protect their banking and financial data. They tend to follow best practices in generating secure PINs and safeguarding their electronic devices. Agreeable individuals also exhibit consistent adherence to safety norms, while those high in neuroticism are generally more anxious and worried; as a result, they may be more inclined to adopt secure practices, such as regularly changing PINs and being extra cautious when sharing information on social networks. Extroverted individuals are socially active and may possess awareness of e-security issues, however they may still engage in risky behaviours, such as using weak passwords. Conversely, another perspective suggests that extroverts may seek to avoid risks by adopting the latest technical knowledge.
In his research, Koen Schoenmakers (2023) evaluates experts in software system security to identify the qualities that constitute a security mindset. Three key aspects are identified- first, the unconscious habit of monitoring potential security flaws; second, the conscious investigation of systems to detect such flaws; and third, the evaluation of the seriousness of a given flaw within a broader context. This integration of monitoring, investigation, and evaluation of threats forms the foundation of a cybersecurity expert’s mindset, but a similar security-oriented mindset is also employed by cybercriminals.

VII. Conclusion

The rapid expansion of digital technologies and their integration into the global financial system have created increased investment and income-generating opportunities for individuals possessing the means and willingness to utilize them. However, this same expansion has also provided criminals with sophisticated tools to exploit modern technological advancements in order to obscure financial trails, evade detection, and accelerate the cross-border movement of illicit funds through the use of digital currencies, blockchain networks, and anonymization techniques. Although traditional methods of money laundering remain relevant, the digitalization of financial systems has introduced significant challenges for law enforcement agencies, which now face the complex tasks of tracing transactions, establishing jurisdiction, and proving criminal intent (mens rea).
This research paper focuses on cognitive manipulation techniques, emphasizing individual behavioral traits as primary determinants of victimization in digital fraud. It argues that individuals exhibiting conscientious traits are less likely to engage in insecure behaviors and are generally more aware of the necessary measures to safeguard their banking and financial data. Based on assessments of individual vulnerability, the study proposes a differentiated framework involving service charges and digital fraud insurance for individuals identified as having a higher probability of victimization. Such measures would provide an additional layer of technological and personal protection, along with financial coverage for potential losses.
The assessment mechanism may be analogous to the due diligence processes employed by financial institutions when issuing loans, wherein the probability of repayment is evaluated. In this context, however, the focus shifts to assessing the likelihood of an individual becoming a victim of cyber fraud, determined through psychological profiling and evaluation of digital security awareness. Individuals with a higher assessed risk may be subject to increased service charges, whereas those with lower risk profiles may benefit from reduced service and maintenance fees.
The second part of the paper addresses the investigative challenges faced by international law enforcement agencies in tracing illicit financial flows. It highlights the technical difficulties associated with establishing financial trails, verifying digital footprints, and reconciling differing jurisdictional requirements within constrained timeframes necessary for the detection and recovery of illicit funds, as well as the identification and apprehension of individuals involved in such transactions at various stages. The study advocates not only enhanced cooperation among national agencies but also the development of a coordinated international legal framework, potentially administered through a dedicated global body, to expedite investigative and enforcement processes.
Furthermore, the research findings underscore the need to identify fraudulent or high-risk accounts, particularly those in which account holders have failed to provide sufficient identity verification, thereby impeding traceability in cases of cyber fraud. In addition to strengthening identification protocols, the financial system should incorporate mechanisms to regulate and, where necessary, delay the transfer of funds at each transactional stage until legal requirements of traceability and accountability are fully satisfied. Recently it has been reported that Reserve Bank of India (RBI) is considering high value person to person UPI payment over Rs. 10,000 to be delayed by one hour, allowing sufficient time to take necessary action in case of fraudulent transaction. Although such measures may slow the pace of financial transactions, particularly across international borders, they would significantly enhance transparency, ensure traceability, and facilitate the prioritization and expedited processing of legitimate transactions that meet established compliance standards.
It is essential to monitor behavioral traits that increase an individual’s susceptibility to cybercriminal targeting, alongside the evolving mechanisms employed by offenders to transfer illicit funds. Robust verification processes play a critical role in tracing the digital footprint of criminal activity, establishing accountability, and enabling the effective enforcement of legal measures against those involved in such transactions. Both behavioral and technical safeguards are indispensable for the prevention and control of cybercrime. Achieving this objective requires continuous knowledge upgradation. Individuals must either invest in appropriate security measures or proactively update their awareness and practices to protect their financial assets.
In conclusion, the effective mitigation of cybercrime necessitates the integration of technological innovation with legal reforms aligned to international cooperation frameworks. Equally important is the identification and analysis of behavioral patterns, cognitive biases, and psychological traits prevalent among cyber fraud victims, which must be systematically addressed to enhance individual resilience and provide comprehensive protection against cyber threats.

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