The Hong Kong Police Force cybersecurity unit has launched a metaverse platform, CyberDefender, to promote metaverse crime prevention and highlight the risks associated with Web3. The initiative will equip citizens with skills and strategies relevant in tackling technology-related crimes in the digital age.
The city is also ramping up its regulatory efforts to prevent criminals from using crypto to launder money.
To mark the launch, the police force organized an inaugural event titled “Exploring the Metaverse” within the virtual realm.
This is an initiative to raise public awareness regarding the potential risks linked to the metaverse and Web3, at a time when digitalization is fast growing and gaining traction all over the world.
The launch event took place across three virtual venues and was organized on the newly-launched platform with the aim of engaging participants in proactive conversations about ensuring safety within this virtual realm.
During the event, chief inspector IP Cheuk-yu from the Cyber Security and Technology Crime Bureau (CSTCB) presented on the dangers associated with Web3 and urged the public to exercise caution.
Metaverse a breeding ground for criminals
There have been reports on cases of verbal and sexual harassment within VR games that surfaced last year. Later, campaigners said an avatar of a 21-year old researcher was sexually assaulted in Meta’s VR platform Horizon Worlds.
“All crimes in the cyberspace could also happen in the metaverse such as investment frauds, unauthorized access to systems, theft and sexual offenses,” said the chief inspectator.
UK police forces also recorded 45 cases of child abuse in the metaverse while 30,925 individual offences involving indecent images of children on social media platforms were also recorded in 2021-2022, according to figures from the National Society for the Prevention of Cruelty to Children (NSPCC).
The chief inspector further emphasized that the metaverse presents potential dangers such as hacking and theft of digital assets by modern cybercriminals.
“The decentralized nature of virtual assets in Web3 may also increase the likelihood of cybercriminals targeting endpoint devices, virtual asset wallets and smart contracts,” he added.
Attendees at the event were enlightened about the advancements made in combating crypto crime and the ongoing efforts to mitigate its impact, providing valuable insights into the evolving landscape of cybercrime and efforts taken to curb illicit activities involving digital assets.
Increase in cybercrimes
In 2022 alone, the city witnessed a staggering 2,336 virtual asset related crimes, according to the Hong Kong Police Force in a press release that accompanied the launch.
The incidences resulted in financial losses of $1.7 billion for victims. Figures from the police force also show that 663 cases of a similar nature have already been reported during the first quarter of 2023 alone.
These losses amounted to $570 million, an alarming increase of 75% compared to the same period last year. The police stated that most of the cases involved virtual asset investment.
“Criminals took advantage of the public’s lack of knowledge about virtual assets and lured them into non-existent investments,” they warned.
According to the police, such figures underscored the urgent need for proactive measures to address the rising trend in virtual asset-related crimes and protect individuals from significant financial harm.
City gets tough on money laundering
Concurrent with the introduction of the new metaverse platform, the Hong Kong Securities Regulatory Commission (HKSRC) released revised anti-money laundering (AML) guidelines.
The guidelines outline the tactics employed by offenders to launder money through digital assets and offers comprehensive measures for financial institutions to shield themselves from illicit engagements. Changes include enhanced Know Your Customer (KYC) and due diligence requirements.
Enforcing the enhanced KYC rules means Hong Kong is stepping up efforts to prevent dirty money from flowing through the city, which will also make it less attractive for criminals to use crypto for their illicit transactions.
Under the updated guidelines, institutions that facilitate crypto transactions valued at 8,000 RMB or more must collect identifying information about both sender and receiver.
The increase in cyber-related crimes is pushing authorities to aggressively tackle the problem and raise awareness among the public.
Aside from Hong Kong, other jurisdictions adapting their AML guidelines to keep up with the use of digital assets by criminal networks include Japan, which recently announced stricter AML rules for crypto transfers. The country will specifically impose what is known as the “travel rule,” whereby exchanges must ensure details about the sender are shared with other parties.
If effective, efforts to fight crime are expected to be as international as the criminal networks themselves. Last month, reports suggested the International Revenue Service (IRS) would deploy cyber agents internationally to investigate the use of crypto in financial crimes.