Scams, Swindles – and Solutions
There is real money in perpetuating scams – the Federal Trade Commission (Off-site) reported $8.8 billion in losses from scam activity in 2022, a 30% increase from the previous year. These estimates show how fraudsters are out to swindle businesses and individuals alike, and they don’t care how many U.S. laws they break to do so.
Phishing (Off-site) is one common “social engineering” fraud tactic. The fraudster uses emails, text messages or phone calls to trick the recipient into believing an inquiry is from a legitimate business. The goal: convince the victim to transfer money or enable the fraudster to gain funds using sensitive personal information, such as login credentials, account numbers and credit card information. Fraudulent emails and texts also can convince victims to click into a link that downloads malicious software – commonly known as malware (Off-site) – which is specifically designed to disrupt, damage or gain unauthorized access to a business or individual’s computer system.
In 2023, the Federal Reserve engaged with payments and fraud experts to agree upon and publish an operational definition of scams: the use of deception or manipulation intended to achieve financial gain. The scams definition and classification work group currently is working on ways to categorize different scam types more consistently by using this agreed-upon definition as a basis.
In addition, a scams information sharing work group is exploring information sharing approaches to help mitigate scam activity. The group will develop a recommendation for information sharing that likely will include use cases, data types, methods of sharing and an overall framework. The goal is to help improve fraud management strategies, detect scams more quickly and avoid potentially devastating losses within an organization, as well as within the industry as a whole.
These two work groups are just the beginning of building industrywide consensus about practical solutions to the growing and costly problem of scams. Stay informed about the Fed’s efforts to support payment security and mitigate fraud by joining the FedPayments Improvement Community.