FTC warns that scammers are in business claiming to help people with student loans
Australia forms new joint law enforcement effort to tackle online investment fraud
Full report here
Fraud Report 7/6/23
categories: Uncategorized
Fraud Report June 29, 2023
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Fraud Report June 22, 2023
categories: Uncategorized
New AARP study concludes that those over 60 lose $28.3 billion to fraud every year
- Estimate $8.1 billion lost to strangers; $20.3 billion to caregivers; family members
- But assume that 2/3 of fraud victims report to enforcers, which is unlikely to be the case
Fraud Report June 15, 2023
categories: Uncategorized
FTC releases spotlight on the top ten text message scams
- Fake bank security texts top the list
- Fraud complaints doubled in 2022
FBI IC3 gives updated report on Business Email Compromise (BEC) fraud
- For December 2021 and December 2022 losses increased 17%
- 277,918 incidents reported
- Losses of $50,871,501
- 27% increase in reports of BEC involving real estate; losses up 72%
- Also seeing increase where funds sent directly to a crypto exchange
Listen to Steve on the OneRep podcast talking fraud
Diplomat charges that North Korea gets 50% of foreign currency from cyber attacks
Fraud Report June 8, 2023
categories: Uncategorized
Top Stories
Spain and Greece lead European effort against counterfeit clothes, shoes, and accessories
- 378 people arrested
- Nearly 2 million items seized
- 278 brands infringed
- €87 million seized
SEC sues Binance and its founder for selling unregistered securities, other violations; separately moves for injunction and to freeze company assets
FCC taking additional steps to require phone companies to identify and cut off illegal robocalls
Myth #8: Consumer education can do little to prevent fraud. By Anthony Pratkanis
At the beginning of this century, I devised a methodology for testing the effectiveness of fraud prevention interventions. In this “sting” approach, the potential target of a fraud is randomly assigned to either an intervention or a control and then, a few days later, receives a fraudulent pitch.
Doug Shadel and I used this sting methodology to test various interventions (the results published by AARP). We found the following: Reverse boiler room call centers (which warn victims) are an effective intervention tool. A forewarning message (your phone number is on a list used by fraudulent telemarketers plus information about how to respond to fraud) reduced investment fraud victimization by 50%. A forewarning message with the addition of questions to ask and think about, in this case asking for a charity’s registration number and how much goes to charity, reduced charity fraud victimization by over two-thirds. In contrast, a message that increased fear and defensiveness (imagine the con as a stranger with a ski mask coming to your door; would you let them in?) actually increased victimization.
In addition, Shadel and I developed an investment seminar which taught about the nature of investment fraud, at-risk behaviors, how con criminals persuade, and best practices for preventing victimization. This was also shown to reduce victimization by 50%.
This research provides a guide to developing effective interventions: (a) do not raise fear and defensiveness, (b) warn about the crime, (c) provide information about fraud schemes and tools to respond to fraud, and (d) encourage a critical and questioning approach to potential fraud pitches. Please let the Fraud Report know if you are aware of any additional research on the value of consumer education.
Fraud Report June 1, 2023
categories: Uncategorized
Top Stories
BBB updates study on employment/job scams; complaints increased 250% over last year
49 State AG’s sue Avid Telecom, allege it is responsible for billions of illegal robocalls
Consumer Federation of America list of top ten fraud in 2022; complaints to State and local consumer agencies; auto repair tops the list
Myth #7: One of the best ways to prevent fraud crimes is to teach financial literacy. By Anthony Pratkanis
Financial literacy refers to fundamental concepts of finance and is typically measured with quizzes about compound interest, asset diversification, bond pricing, etc. An oft-heard claim is that financial literacy is a protective factor in fraud victimization and thus an important intervention tactic. There is no scientifically-valid evidence for this claim.
Knowing that bond prices fall as interest rates go up is of little relevance in recognizing and responding to romance fraud, lottery scams, government impostors, grandparent schemes, and the like.
However, what about investment fraud? In a 2006 study, my colleagues and I found that verified investment fraud victims had significantly higher financial literacy than non-victim investors. This finding was replicated in 2014 by Graham of UK’s FCA and again in 2017 by Kieffer and Mottola of FINRA. Some of the most sophisticated investors have been fraud victims: Jay Gould, CalPERS, JPMorgan Chase, Sequoia Capital, Rupert Murdoch, Blackrock, Y Combinator, Andreessen Horowitz, and Wells Fargo former CEO Richard Kovacevich, to name a few.
Why this finding? Knowing the value of a diversified portfolio is of little use in recognizing pump and dumps, Ponzi schemes, and entrepreneurial fraud. It is like knowing the rank of poker hands without knowledge of coolers, seconds, mucks, and other forms of cheating. Active investors will gain financial literacy through their activities and will also be more likely to encounter con grifters who infiltrate the financial system. And, as always, a con criminal will use the target’s knowledge (and lack of knowledge) to tailor the pitch for best effect.
The good news: While financial literacy is of little value in fraud prevention, teaching about fraud schemes, as my colleagues and I first showed, effectively reduces victimization.
Fraud Report May 25, 2023
categories: Uncategorized
Australia reports that the majority of fraud complaints involve money mules
UK: Scotland Yard takes down iSpoof, company that faked caller ID’s to help scammers pretending to be banks; owner gets more than 13 years prison BBC story here
Myth #6: Last year Americans only lost $8.8 billion in fraud crimes, by Anthony Pratkanis
According to the FTC, “consumers reported losing nearly $8.8 billion to fraud in 2022.” The key word is “reported,” as the amount of stolen money comes from reports to the FTC’s Consumer Sentinel Network. However, given that it is based on self-reports, it vastly underestimates the damages.
In research I conducted with my colleagues, we asked known fraud victims if they had been the victim of a scam. Less than half (43%) reported the fraud – a typical result as Deevy and colleagues found in their review. This makes sense as victims may not yet recognize that they have been defrauded, have forgotten the incident, or the victim is reluctant to discuss it.
The use of complaints further contributes to underestimating harm from fraud. Research finds that relatively few consumers file complaints with the government, and, when they do, they tend to complain about the product and not about deceptive practices.
The FTC figure is based on financial losses to the victim and overlooks several important but real secondary effects, including (but not limited to): psychological harm to victims and their family and friends, hours wasted using 2FA, repairing credit and identity, or trying to determine if something is a scam, unfunded needs of charities, taxpayer dollars spent on fraud prevention and damage mitigation, opportunity costs to entrepreneurs as funding goes to fraudulent entities, lost economic growth as resources are wasted, threats to national security as fraud crimes fund adversaries, cost to businesses for training and prevention, and the deterioration of trust needed, not only for commerce, but for everyday social life.
The FTC Sentinel provides important information, just so we realize that the $8.8 billion is the tip of the iceberg of harms and damages caused by fraud criminals. The reality is that the iceberg is huge.
Fraud Report May 16, 2023
categories: Uncategorized
Top Stories
Australia gets funding for National Fraud Centre
Myth #5: If the victim wasn’t greedy they wouldn’t have fallen for the scam. By Anthony Pratkanis
This myth gained prominence in a 1956 interview of con criminal “Yellow Kid” Weil, who bragged: “They wanted something for nothing. I gave them nothing for something.” The greed myth is one way for fraud criminals to deflect blame onto the “greedy” victim.
If the myth was true, there would be no charity fraud, phishing, grandparent scams, government impostors, identity theft, or any of the other fraudulent schemes which promise no financial rewards.
But what about frauds that pitch financial gain, such as investment fraud? Taking inspiration from the cons’ old saw of “greedy victims,” DiLiema, Shadel, and Pak found a small, but significant 0.12 correlation between victimization and materialism (their measure of greed), profiling investment fraud victims as having a greedy mindset.
In contrast, Boyd found that 70% of Eron victims “invested” to secure basic retirement and needs, compared to 19% who sought a materialistic goal of enhanced lifestyle. Moreover, a 2006 UK study found victims were more likely to report desperation and not greed as their motive. In teaching undercover FBI agents how they commit fraud, financial fraud criminals Phil Kitzer and Mel Weinberg both state that they are looking for DMs – desperate men (and women) in need of money. As AARP states: “Even though no single personality trait has been discovered that explains all fraud victimization, faulty generalizations abound. For example: . . . ‘all scam victims are either greedy or stupid…or both.’ Such labels are not only offensive and demeaning to those who have lost money to this crime, but they are simply untrue and belie previous research that has repudiated such simplistic explanations
Fraud Report May 11, 2023
categories: Uncategorized
New study released on romance scams
- State by state breakdown of victims/losses
- Crypto most common payment method
- Surveys most common reasons scammers claim to need money
- 75% of victims have college educations
- 100 most common photos used
Myth #4: Unlike other crime victims, the victims of fraud crimes do not experience much of the pain and trauma typically associated with crime victimization, by Anthony Pratkanis
Hollywood movies and the mass media in general often romanticize the cunning cleverness of the con grifter and fail to show the consequences to victims, as if fraud was a victimless crime.
Research reveals a much different reality, one in which fraud victims experience much pain and trauma, in addition to their financial losses. Ganzini and her colleagues found that among the victims of a Ponzi scheme, 45% experienced generalized anxiety, 29% were clinically depressed, and over 6% had suicidal thoughts (all rates greater than a matched control). Boyd and his colleagues investigated the victim impact of the Eron securities fraud and observed that among those losing more than $50,00, 54% stated it harmed their emotional well-being, 29% their physical health, and over 20% noted that it had damaged friendships and family and marital relationships. In a UK survey looking at the victims of frauds such as bogus investments, fake lottery, advanced fee fraud, and identity theft, Button and his colleagues showed that victims reported feeling anger and stress, with 39% reporting psychological and emotional issues, 17% damage to family and partner relationships, 11% physical health problems, and just under 2% reporting an attempted suicide.
Sadly, these research findings are often observed by those who work with fraud victims. As victim advocate Debbie Deem describes, fraud victimization often results in a loss of trust in others, in society and its institutions, in family and friends, and even in one’s own ability to make decisions.
Full Report here
Fraud Report May 4, 2023
categories: Uncategorized
UK approves major anti-fraud push; allocates £400 million; 400 new investigators; new fraud center
