Scams, Swindles – and Solutions

There is real money in perpetuating scams. The Federal Trade Commission (Off-site) reported more than $10 billion in losses from scam activity in 2023, a 14% increase from the previous year. This number shows how lucrative it can be for fraudsters to swindle businesses and individuals alike.

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 urgent request or 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.

Social Engineering and Malware, Manipulation of Account Owner(s), Playing on Emotions, Creating a Sense of Urgency, and Targeting Security Weaknesses

In 2023, the Federal Reserve engaged with payments and fraud experts to develop and publish an operational definition of scams: the use of deception or manipulation intended to achieve financial gain. In 2024, the Fed-led scams definition and classification work group developed the ScamClassifierSM model, a voluntary scam classification structure to help the industry 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 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.

Education, Technology, Information Sharing Can Help Mitigate Losses from Scams

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.