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.