Financial Network Fraud and Legal Regulation

Yurong Zhao

Continuing Education College, Nanjing University of Science and Technology, Nanjing, China

Keywords: Financial Network Transactions, Financial Network Fraud, Social Security.

Abstract: With the development of the Internet, financial network transactions have provided convenience for daily life,

but they have also given rise to the problem of financial network fraud. Fraudsters harm consumers' interests

through false information fraud, leading to financial losses and psychological burdens, and increasing the

public's concern about financial security. This study focuses on the types of financial network fraud, the

implementation process and its impact on victims, and analyzes its impact on market stability and public trust.

Through case analysis, normative analysis and literature research, it explores online loan and investment and

financial management frauds, revealing the fraudulent techniques and victimization process to provide an

effective basis for prevention. At the same time, it analyzes the deficiencies of existing financial laws and

regulations and puts forward suggestions for improvement, aiming to improve the regulations, strengthen

supervision, and enhance the public's financial knowledge, to curb financial network fraud and enhance the

public's trust in the financial market.

1 INTRODUCTION

The development of Internet technology makes

financial network transactions convenient but also

brings serious financial network fraud. This kind of

fraud is covert and efficient, the fraudster with the

complex network environment to hide their identity,

the lack of consumer safety awareness, coupled with

defective laws and regulations and supervision, it

difficult to resist the new fraudulent means, a serious

threat to social security, improve laws and regulations,

and strengthen the supervision can not be delayed.

Financial network fraud endangers personal and

family property safety, disrupts the financial order,

and affects economic stability, if not controlled, it will

reduce public trust in the financial system and hinder

market development.

This paper focuses on financial network fraud

prevention countermeasures, focuses on the

application of financial technology in anti-fraud, and

aims to enhance anti-fraud capabilities. Enhancing

public awareness of financial security, improving the

financial regulatory system, and promoting financial

technology innovation can help build a safe and

transparent financial environment, enhance public

trust, and promote healthy economic development,

while publicity, education, and training are important

ways to reach this goal.

2 OVERVIEW OF RELEVANT

THEORIES

2.1 Explanations of Financial Network

Fraud

Financial network fraud is diverse, sophisticated and

harmful. Using false investments, impersonation of

bank personnel and false loans, fraudsters take

advantage of online anonymity and information

asymmetry to lure victims into transferring money

and undermine trust in the financial market. Victims

not only suffer financial losses but also face the risk

of personal information leakage and identity theft.

To this end, effective measures need to be taken by

multiple parties. The government should strengthen

the construction of laws and regulations, and increase

the strength of the fight; financial institutions should

improve security technology, strict identity

verification, protection of customer information, and

enhance the user's awareness of protection; the public

should improve financial literacy, learn to identify

fraudulent practices, and increase vigilance.

Combating financial network fraud requires the

combined efforts of the government, financial

institutions and the public to build a safe and healthy

network financial environment, maintain social

Zhao, Y.

Financial Network Fraud and Legal Regulation.

DOI: 10.5220/0014293500004859

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Politics, Law, and Social Science (ICPLSS 2025), pages 39-43

ISBN: 978-989-758-785-6

harmony and stability, and protect people's wealth.

2.2 Types of Financial Network Fraud

With the rapid development of the digital financial

ecosystem, fraudsters build a complex full-chain

fraud system, bringing significant risks to the public.

Investment frauds such as

“ Qianbao.com ” ,“OneCoin ” and other counterfeit

foreign exchange platforms occur frequently; credit

fraud, unsecured loans charging high fees, and

campus loans lead to a student debt crisis; payment

fraud through phishing sites to steal information, the

daily average intercept The average daily number of

suspicious visits was 12,000 times. Identity

impersonation and false service fraud are common,

and cross-border financial fraud borrows from

underground money banks and offshore platforms,

making it difficult to combat. Fraud presents the

characteristics of technology integration, life

scenarios and organizational grouping, and it is

expected that the proportion of technology-based

fraud will reach 68% in 2024.

To this end, it is necessary to establish a “technical

interception + manual intervention + public education”

line of defense. Financial institutions to strengthen

intelligent risk control, the public to enhance risk

identification capabilities, the government to improve

cross-border judicial cooperation mechanisms, and

joint prevention of fraud, to protect public property

security.

2.3 Means And Typical Cases of

Financial Network Fraud

With the rapid development of the digital economy,

financial network fraud is rampant, and diverse forms

of harm. False information fraud is frequent, forged

financial website or APP theft account to more than

50-million-yuan loss, P2P platform fraud amount

rose 42% year-on-year, “Jin Sheng wealth” involved

in the case of 2 billion. Technical attack fraud is

serious, phishing to make financial staff lose 12

million yuan, malware leakage of 150,000 bank card

data, and hacking virtual currency platform loss of

320 million U.S. dollars.

Impersonation of identity fraud is common,

disguised as a financial institution requesting a

verification code for more than 200 million yuan in

losses, posing as a public prosecutor and social

software theft fraud of 470 million yuan. Induce the

operation of class fraud hidden, live platform false

“stock god”, brush single rebate caused 280 million,

more than 500 million yuan loss. Cross-border

composite fraud borrowing virtual currency and

offshore server money laundering, the amount of

money involved is expected to increase by 67% year-

on-year.

The government, financial institutions and society

need to cooperate to improve regulations, strengthen

technical prevention and control and publicity and

education to prevent and manage fraud and protect

public property.

3 THE CURRENT SITUATIONS

AND PROBLEMS OF

FINANCIAL NETWORK

FRAUD

3.1 Current Status of Financial

Network Fraud

The rapid development of science and technology in

recent years, network financial fraud technology,

scene, and hidden trends are obvious, bringing great

challenges to society. Sharing screen fraud has

become a new type of means, and the amount of

money involved in the first half of 2024 increased by

67% year-on-year; AI face-switching and mimicry

technology is used for fraud, such as a marriage

platform that cheated away 470 million yuan; false

investment and financial management fraud is

rampant, and a certain platform ran off the road after

absorbing more than 2 billion yuan of funds in 2023

(The State General Administration, 2024).

Analysis shows that in 2023, the average age of

victims of telecom network fraud is 37 years old, and

the proportion of people aged 18-40 is 62.1%. Brush

single rebate type of fraud is the largest volume of

cases, accounting for 28.7%, such as Jiangsu Cao was

cheated 420,000; false network investment and

finance fraud cases with large losses, such as Anhui

Zhang's investment foreign exchange losses of more

than 1.4 million (Ministry of Public Security, 2024).

The online loan fraud problem is serious, 2025 A

short video platform exposure of 23 illegal online

lending platforms, involving 630 million yuan,

habitually “unsecured”, “violent collection” means,

there is a “write-off of school loans”. The increase in

scams, the frequent appearance of false APP, cross-

border money laundering difficult to track and other

characteristics, cross-border crime is prominent, the

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

amount of money involved in 2024 increased

significantly. Preventing financial fraud requires a

multi-pronged approach to technology, regulations,

and public awareness.

3.2 Problems Posed by Financial

Network Fraud

First of all, in the digital era, network financial fraud

means technologization, covert, and mainly

technology-driven. Fraudsters set up a scheme with

the help of AI face-swapping and other technologies,

such as a dating platform that cheated 470 million in

2024 by relying on an AI virtual tutor (Zhang, 2024).

New types of fraud penetrate emerging fields such as

the meta-universe and iterate quickly (Xu, 2023).

Secondly, there are structural contradictions in the

current regulatory system. Legal norms are lagging,

and the Cybersecurity Law lacks detailed provisions

on new cybercrime(Zhang, 2024); cross-border

collaboration mechanisms are missing, and it is

difficult to collect evidence from outside the country;

and financial institutions' technological prevention

and control are lagging, which increases the risk of

loss (Yang, 2024).

Finally, network financial fraud affects individual

victims, but also deepens the financial market trust

crisis, 23% of Internet users due to fraud reduce

online financial activities, a bank loss of more than

500 million. At the same time, the cost of social

governance climbed, and the hidden social cost of

telecom fraud in 2023 reached 2.8 trillion, the

problem is widespread and serious (Chen, 2023).

In summary, in the face of increasingly complex

online financial fraud, effective prevention and

governance mechanisms need to be constructed from

technology, law, public education, international

cooperation and other levels.

4 ANALYSIS OF THE CAUSES OF

THE PROBLEM OF

FINANCIAL NETWORK

FRAUD

4.1 Technology-Driven Escalation of

Crime

In the digital age, the rapid development of

technology has changed the means of online financial

fraud. Fraudsters use AI face-swapping and deep

forgery technology to build “full simulation” fraud

scenarios, increasing the difficulty of identification.

For example, in 2024, in the case of a dating platform,

the fraud gang cheated 470 million yuan through the

AI virtual investment mentor, and the difficulty of

identification increased by 300%. 2023, the account

theft cases caused by AI disguise surged by 147%

year-on-year, which is a serious threat to financial

security (Zhang, 2024).

The darknet ecology and vulnerability economy

provide a hotbed for cybercrime, and the average

price of financial vulnerabilities on darknet trading

platforms reaches $150,000, leading to frequent

cyberattacks (Xu, 2023). Technical outsourcing

promotes the specialized division of labor of criminal

groups, forming the “development - theft - money

laundering” industry chain. Virtual currency money

laundering technology is becoming increasingly

complex, cross-border fraud funds after multi-layer

currency mixing operation, the recovery rate is less

than 5%. Criminals use privacy coins and cross-chain

technology to hide traces, making it difficult for law

enforcement authorities to track and combat.

Technological advances have made online

financial fraud more efficient and covert, challenging

financial security and social stability, and urgently

requiring a tripartite synergy of technological

upgrades, legal improvements and public education to

reduce the incidence of crime.

4.2 The Governance Dilemma of

Internet Fraud

In the digital age, telecommunications network fraud

is rampant, posing a serious threat to the rights and

interests of citizens and social stability, and because

of the popularization of the Internet and smart

devices, fraudulent means are varied, and governance

is urgent.

China has built a legal framework with the Anti-

Telecommunications Network Fraud Law, adopting

full-chain governance, real-name system and multi-

sectoral synergy, with heavy sentences of up to life

imprisonment and sentencing based on the amount of

money, and the joint formation of relevant laws to

deter. However, there are problems such as vague

norms in legal governance, poor cross-sectoral

cooperation, insufficient corporate support, loopholes

in the protection of personal information, and non-

transparent anti-fraud technology.

Cross-border crime is difficult to combat, and

international cooperation is urgently needed. Public

Financial Network Fraud and Legal Regulation

awareness of prevention is weak, education and

publicity are scarce, compensation channels are poor,

and some enterprises violate the law to assist fraud,

increasing social security risks.

In addition, telecom network fraud governance is

also facing systemic problems: fragmentation of the

regulatory system, multi-sectoral management of

authority and responsibility is chaotic and poorly

coordinated; technological regulation lags and data

sharing is difficult (Yang, 2024); cross-border

regulation is weak, and any dark-network crimes;

there are insufficient incentives for corporate

compliance, and the penalties are small; and the

mechanism of social co-governance is deflated, with

ineffective reporting incentives and a limited role for

industry self-regulation.

5 COUNTERMEASURES IN THE

FACE OF FINANCIAL

NETWORK FRAUD

5.1 Three-Dimensional Construction of

Technical Defence and Control

System

The rapid development of digital finance, the

complexity of fraud risk in financial institutions, and

building and upgrading AI anti-fraud systems have

become the core tasks of commercial banks. For

example, the deployment of intelligent risk control

systems based on federal learning to model user

transaction behavior can improve the accuracy of risk

prediction, a bank introduced the new technology

after the fraud identification accuracy of 99.8%, the

response time is reduced to 0.3 seconds (Hu, 2023).

Blockchain technology provides a new solution for

financial security, after the promotion of payment

platforms, transaction data is uploaded to the chain in

real-time, the traceability time is greatly reduced,

transparency is improved, tampering is effectively

prevented, and it is conducive to the prevention of

fraud and the protection of consumers.

Multimodal biometrics technology is used for

financial security protection, and a bank piloted a

three-dimensional authentication system combining

iris, voiceprint recognition and vivo detection,

reducing the risk of identity fraud to 92% and

enhancing verification security.

Financial institutions are changing traditional

financial security protection through AI anti-fraud

system upgrades, blockchain applications and

multimodal biometrics to enhance security and create

a safer financial environment for customers.

5.2 Multi-Dimensional Construction of

Anti-Fraud Defence

The situation of telecommunication network fraud is

grim, and there is an urgent need to govern it from

various aspects.

At the legal level, the ambiguous provisions of the

Anti-Telecommunications Network Fraud Law

should be clarified, and technical regulatory rules

should be formulated; in terms of the regulatory

system, a national coordination center should be set

up to coordinate multiple departments, clarify

responsibilities, and ensure fairness in regulation, and

the government should increase its investment in

technological research and development and set up a

data-sharing platform.

Cross-border crime-fighting, signing treaties such

as mutual legal assistance, borrowing big data and

Interpol to improve the efficiency of the fight.

Enterprise management, giving policy support to

compliant enterprises, penalizing non-compliant third

parties, reviewing the implementation of the real-

name system, and rectifying non-compliant

enterprises. From the perspective of social co-rule, we

will innovate publicity and education, set up a

compensation fund and legal aid, optimize reporting

incentives, and guide the improvement of industry

conventions.

Adopting the above measures will enhance

governance capacity, protect citizens' rights and

interests, and maintain social stability.

6 CONCLUSION

Financial network fraud has evolved into a complex

social problem, impacting the economy of individuals

and families, and also bringing psychological

pressure. Because of the complexity of the network

environment in which they operate, consumers' weak

sense of prevention, lack of financial knowledge, and

lagging laws and regulations, the risk of economic

damage, personal information leakage, and identity

theft has risen.

Today's common types of fraud are investment,

credit and payment, and the application of new

technology has made them more insidious, with

young people between the ages of 18 and 40 being the

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

main victim group.

To deal with financial network fraud, the

government and financial institutions need to increase

investment in cybersecurity, strengthen regulations

and popularize public financial knowledge. All

sectors need to build a systematic governance model,

create a technical defense and control system,

improve laws and regulations, and carry out public

education and psychological intervention.

Internationally, it is necessary to strengthen cross-

border cooperation and data sharing, enhance the

ability to regulate virtual currencies and emphasize

support and risk education for small and medium-

sized financial institutions. Through the multi-

dimensional governance framework of technological

innovation, legal improvement, social co-governance

and international cooperation, we can break down

sectoral barriers, curb the spread of fraud, and

safeguard the safety of public property and market

stability.

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Financial Network Fraud and Legal Regulation