These 4 costly financial scams are on the rise: How to protect your money
Technological advancements have provided us with countless benefits. We can preorder our Starbucks while waiting in an airport security line, use our smartphone to unlock our hotel room door and stream our favorite shows to our hotel room TV.
However, the same technologies that make our lives easier also make a scammer's life easier. Advances in social engineering, artificial intelligence and our ever-growing digital footprints are making it easier than ever for fraudsters to target victims with sophisticated, complex and large-scale scam operations.
To better understand and combat fraudsters, Visa recently released the spring 2024 version of its Biannual Threats Report, an overview of the most prolific financial threats within the past seven-month period (June-December 2023).
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In addition to identifying the threats, Visa also outlined the more than $10 billion technology and innovation investment it has made to stay one step ahead of scammers and protect consumers. In 2023 alone, Visa blocked $40 billion in fraud, and in the June-December 2023 reporting period, it declined more than 49.8 million presumed fraudulent transactions.
TPG spoke with Michael Jabbara, senior vice president, global head of fraud services at Visa, to learn more about the most common scams affecting consumers and how you can protect yourself and your money.
Here are the four scams that are costing consumers the most money right now.
Pig butchering scams
Pig butchering scams (sometimes referred to as "romance scams") are most often carried out through social media or online dating sites. The fraudster typically poses as someone interested in pursuing a romantic relationship with the victim. The fraudster gains the victim's trust during a courting period, eventually defrauding the victim by convincing them to invest in a fake cryptocurrency platform.
"They're called pig butchering scams because they are carried out over a long period of time," Jabbara told TPG. "Essentially, the threat actor is 'fattening the pig' by gaining their trust and 'butchering the pig' when they ask for the money and clear them out," he added.
It may seem like a lot of work without much payout if fraudsters have to spend weeks or months leading their victims on before defrauding them, but scammers can leverage technology to cast a wider net. Fraudsters can leverage AI and deepfake technology to create a more convincing relationship with their victims or communicate with multiple potential victims simultaneously.
In fact, 10% of adults surveyed for Visa's study reported they had been targeted in a pig butchering scam, leading to billions of dollars lost. In November 2023, for example, the U.S. Department of Justice recovered nearly $9 million in cryptocurrency from more than 70 victims tied to a single organization carrying out these kinds of scams.
However, those who lose money to pig butchering scams aren't the only victims. Many types of scams, including pig butchering scams, rely on human trafficking victims to initiate contact with the victim and carry out the scams.
"Every one of these things has a human cost," Jabbara said. "We talk a lot about numbers and how this type of fraud is growing, but that fraud is funding some very socially destructive activities, and these are real human lives that are being impacted by threat actors out there," he added.
It's easy to blame the person on the other end of the phone or computer screen, but these scams may also victimize people who've been trafficked into helping fraudsters carry out the scams. It's not just those who suffer a financial loss who can be victims.
Inheritance scams
If you've ever received an email notifying you that you were the benefactor of a large inheritance from a long-lost relative, you have likely been the target of an inheritance scam. Unless, of course, you do have a long-lost wealthy relative, in which case, congratulations.
Inheritance scams are typically carried out via email or postal mail and appear to come from a law firm or other professional entity.
Of those who responded to Visa's survey, 15% reported being targeted in an inheritance scam. It can be easy to assume you would immediately disregard a message like this, but fraudsters are highly skilled at playing to your emotions. They often invoke a sense of urgency or secrecy, insisting that the victim not disclose the inheritance to anyone and that they "act fast" to secure the funds before it is too late.
Humanitarian relief scams
Humanitarian relief scams capitalize on tragic current events like natural disasters or global conflicts by defrauding altruistic individuals with fake charities and fundraisers.
There are two primary ways scammers carry out this type of fraud. In one, the scammers will request donations to these fake charities via social media. Rather than sending your funds to a legitimate charitable organization, however, the donated funds go straight into a cryptocurrency wallet controlled by the threat actor. The fraudsters bolster the legitimacy of these social media campaigns with fake shares and comments claiming that other accounts (also likely fake) donated to the charity.
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These scams are also sometimes conducted via phishing emails. Phishing is a form of social engineering in which threat actors attempt to steal sensitive information by posing as a legitimate business, such as your financial institution or, in this case, a charitable organization. A humanitarian relief phishing attack target will receive an email from a seemingly legitimate charity requesting donations. Once you enter your email, credit card number and other sensitive information, the scammers can use it to access your financial accounts.
Triangulation fraud
For many consumers, triangulation fraud can be more difficult to spot than other common scams. That's because the threat actors utilize legitimate online storefronts to execute this scam.
"With triangulation fraud, someone will set up an online storefront that promises deals too good to be true, like a $50 couch," Jabbara explained. "When you take advantage of the 'deal' and place an order, you usually do actually receive the goods you ordered, but there is fraudulent activity behind the scenes," he added.
Fraudsters can access your sensitive information when you submit your credit card information and place your order. "What is happening here is that when you submit your order, the fraudster buys an actual couch with stolen credentials they harvested from previous purchases just like yours. Now, they can use your stolen card to defraud the next victim, and so on," Jabbara said.
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To make their illegitimate businesses more believable, scammers will go so far as to request positive ratings from happy customers before fraudulently using their compromised credit card information. These positive reviews boost search engine results and credibility to help perpetuate the scheme.
Because the fraudsters use stolen credit card information to purchase from legitimate businesses, triangulation scams lead to billions of dollars in losses to merchants. A recent Financial Services Information Sharing and Analysis Center report stated merchants lost $660 million during the busy November 2022 shopping season alone.
How to spot financial scams
Being a target of one of these scams is not uncommon, but you can avoid being a victim and suffering a financial loss if you know what to look for.
First and foremost, you must accept that nobody — including you — is too smart to be scammed. "Victims of scams rarely think of themselves as being the typical victim of scams," Jabbara said. "Most of us have a level of confidence that tricks us into thinking it can't happen to us. But these threat actors use their keen understanding of human psychology and our biases to emotionally manipulate their victims. A sense of overconfidence could get you into trouble," he explained.
The second thing that applies to all of these scams is that the fraudsters will often frame their schemes in a way that appears beneficial to the victim. You don't feel like you are being scammed until it's too late.
For example, in a pig butchering scam, when the fraudsters finally ask you for money, they will make it seem as if you are doing them a favor or deepening your relationship by sending them money to buy a plane ticket so they can visit you or help to keep their finances afloat. Or, in a triangulation scam, you give a fraudster your credit card number because you see a deal so good that it makes you feel like you are the one taking advantage of them.
If something sounds too good to be true, it probably is. It seems like common sense, but Jabarra warned that victims often forget that because they don't want to miss out on a good deal, a chance at love, a big payout or an opportunity to help those in need.
Other red flags to look for include secrecy, a sense of urgency and a request for sensitive information like your credit card number, Social Security number or online account logins. Here are specific red flags to watch out for:
- Pig butchering scams: Asking you to invest in an unfamiliar cryptocurrency or download a trading platform app, promising a large return on investment, or asking for your trust in an otherwise suspicious situation.
- Inheritance scams: A relative you've never heard of, or a law firm or business, requests an initial payment or financial information for you to secure the funds.
- Humanitarian relief scams: You cannot verify the charity via a third-party source like Charity Navigator, or the donation site doesn't use a Secure Sockets Layer certificate (URL starting with "https") to encrypt your information.
- Triangulation fraud: If a deal seems too good to be true, it probably is. If the price doesn't make sense, it's likely because what you are actually selling is your data.
What to do if you are targeted
If you are the target or victim of a financial scam, report the situation to law enforcement, regardless of whether you suffer a financial loss. Most of these scams are carried out by large-scale, sophisticated organizations, and, according to Jabbara, every case is another piece of the puzzle. "If nobody reports what's happening, then law enforcement will never get to the level of evidence necessary to really bring down these groups," Jabbara said.
Jabbara also recommends that targets of financial scams sign up for credit report monitoring and turn on transaction alerts for their credit card and bank accounts.
If you have a credit card account, you are likely eligible for free credit reports that include information on your credit score, credit history and accounts that have been opened or closed.
If you don't have access to any of these through your credit card account, there are ways to check your credit score for free through a service like Credit Karma. Most credit and identity monitoring services also allow you to set up alerts so you can receive a text or email if they identify any breaches or changes.
Setting up account notifications is also fairly simple. The exact steps for this will vary by the financial institution, but you can typically sign in to your account and go to your profile settings; there, you should see an option for "alerts" or "notifications" that you can customize to receive an email or text message whenever your card is used.
How to lessen your chances of becoming a victim
There are ways to lessen your odds of becoming a target. Essentially, by keeping your information secure, you can make yourself less appealing to fraudsters. Here are Jabbara's tips:
- Don't use the same password for multiple accounts. Fraudsters can access your important accounts more easily if you reuse passwords.
- Turn on two-factor authentication on your accounts. In addition to your passwords, this secondary barrier to entry makes it that much more challenging for fraudsters to gain access to your accounts.
- Be conscious about what types of data you share on social media. The less information about your family, location or other personal information you share online, the less information fraudsters will have to create customized attacks against you.
Bottom line
Unfortunately, fraudsters aren't going away anytime soon. As we find new ways to protect ourselves — and companies like Visa find ways to thwart their attempts — fraudsters' tactics become more advanced, utilizing emerging technologies to carry out their criminal activities.
As scammers get better, so should you. Staying up-to-date on the latest scams and how to protect yourself can help ensure you don't fall victim to this costly form of deception.
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