A growing wave of deception is sweeping across America, leaving more and more victims defrauded. In our highly interconnected lives, there are seemingly endless points of entry for thieves to strike, including digital devices, social media platforms, phones, and even in-person scams.
Last year, consumers reported a staggering $8.8 billion in fraudulent losses, up 44% from the previous year.
The stats for phone scams are even more alarming. Truecaller, which makes an app that blocks spam calls, estimates around 70 million Americans lost nearly $40 billion in 2022. Even legacy scams, like check fraud, are resurgent.
Despite the illegality of such activity, there is only so much platforms, banks, and law enforcement agencies can do. The best prevention is education on the issue. Financial advisors urge people to remain vigilant of such activity and to follow some practical measures to ensure their financial security.
Old Dogs, New Tricks
Scamming plays upon timeless psychological tactics with innovative technology. Scams go through new trends as criminals learn from one another and try new tricks to squeeze even more ill-gotten cash out of their victims. Once one ploy shows a clear success rate, others quickly adopt it, proliferating the scam technique.
One emergent category of scam – property seller impersonation fraud – is gripping the nation. Conditions are ripe for this kind of deception. The U.S. is chronically short of affordable housing. With the stubbornly high prices and interest rates, con artists have found fertile ground to lure desperate home buyers with fantasy deals. Fraudsters impersonate property owners and pressure the unsuspecting buyer to pay them a “down payment” before making off with their victim’s hard-earned savings.
So-called ‘pig butchering’ cons, which typically begin as romance or confidence scams, are soaring too (so named because victims get ‘fattened up’ by a fake relationship and are then ‘butchered’ and swindled out of their money). Typically, the victim is contacted on a social media platform or a dating app by someone who tries to woo them and win their trust before introducing a fraudulent investing scheme or other bogus transaction, leaving them in a financial lurch.
Last year, 70,000 people reported they were a victim of a romance scam, with a median loss of $4,400, according to the Financial Trade Commission. Yet that might be the proverbial tip of the iceberg as many are too embarrassed to report they’ve been defrauded.
Steven Schoenberger, Financial Advisor and Founder of Open Door Financial, concurs that scams and scammer sophistication are rising rapidly, and people must be on guard.
“There are multiple strategies to combat these schemes, but one of the most effective is using common sense and checking with others regarding any suspicious transactions,” Schoenberger says. “If a so-called family member is calling you, suggest you hang up and call back. If they say it is not possible, red flags should be flying. If a financial institution is calling, call back on a known phone number, not the one they provide you with.”
Schoenberger recognizes these measures may sometimes feel awkward but that they are well worth the effort.
“In retrospect, we always feel foolish for falling for these scams, but don’t feel bad for acting naive, suspicious, or skeptical when you get the call. If it is legitimate, the caller will appreciate your actions. A scammer will take every step they can to make sure you don’t verify things.”
Scammers are increasingly harnessing artificial intelligence (AI) tools to devastating effect, especially when using synthetic media to clone someone’s likeness. In one high-profile case, scammers used AI to perfectly clone the voice profile of a teenage girl in Arizona. When her mother received a phone call, she heard her daughter’s voice screaming for help and was convinced she was kidnapped. After several tense moments, the mother was able to get ahold of her daughter away on a ski trip and confirm the call was a hoax.
However, there is another side to automation. It can be turned around in the fight against scams to keep more people safe.
“By processing large datasets more efficiently than humans, machine learning can help identify suspicious patterns and behaviors more quickly, reduce the time spent on manual review, and make better predictions,” says Jorey Bernstein, CEO of Bernstein Investment Consultants. “Additionally, machine learning can be cost-effective, requiring less manpower than traditional risk management methods.”
Bernstein adds the technology is being deployed by titans of global finance, like JPMorgan and Bank of America, to protect customers and monitor their activity.
“As machine learning technology develops, it will likely become even more widely used in the financial industry.”
For obvious reasons, scammers are known to target high-income earners. Most people report feeling foolish, yet the sting of shame is reportedly extra sharp for well-heeled professionals, who think they are supposed to be clever enough to see through such ploys.
Fraudsters like to land a big fish, but they also know to target the accounts where people keep their largest cash reserves. For most people, that means targeting their pension funds, including 401(k) accounts.
Ultimately, no one is immune from the dangers of sophisticated, targeted scams. As technology evolves, scammers are finding new ways to exploit vulnerabilities. Fraud awareness must be front of mind for investors, financial advisors, and regular consumers. By being aware of the risks and talking about the issue openly, Americans can push back against this insidious threat.
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.