By Linda Nwoke

Many Americans are losing more money than ever to scammers, and recently, with the help of technology. In some cases, people have received fraudulent calls purportedly from reputable government institutions such as the Social Security Administration (SSA), the IRS, and utility companies.

These calls, executed by impostors, threaten individuals with repercussions like arrest and suspending vital assets. Alternatively, these victims are promised relief if they comply with demands to purchase retail gift cards, wire money, or deposit cash into cryptocurrency ATMs.

Impact of Impostor Scams and Emerging Trends in Fraudulent Activities

According to consumer reports on the tactics employed by SSA impostors, filed with the Consumer Sentinel, the imposters leverage principles of persuasion, such as scarcity, authority, liking, and reciprocity, to exert pressure on unsuspecting consumers, forcing them to agree to their demands. These eventually result in the victims experiencing a range of emotional responses, including fear, anger, anticipation, and misplaced trust in the impostor. Notably, the report shows that older adults are less likely to report victimization compared to younger demographics, and they suffer significantly higher financial losses in each incident. 

Furthermore, Black, Asian, and Hispanic consumers are more inclined to report victimization, while non-Hispanic white consumers tend to incur more significant average losses. In 2022, consumers lost over $8 billion to fraud linked to investment scams such as cryptocurrency schemes. The Federal Trade Commission (FTC) stated that younger adults aged 20–29 lost more money than older adults aged 70–79. However, when older adults lose money, it is more.

The Ethnic Media Services organized a briefing where FTC officials reported that nationwide fraud losses rose by over $10 billion in 2023, reflecting a 10% increase in losses compared to 2022. They also shared the most common scams of the year, including Investments, impersonation, business, job opportunities, and online shopping. The participants shared new trends in top scams and discussed the importance of learning about and reporting scams to protect consumers.

Trends in Consumer Fraud: Insights from FTC 

One of the FTC personnel, Maria Mayo, the Associate Director of Consumer Response and Operations in the FTC Bureau of Consumer Protection, spoke about the observed trend associated with the extra loss of money. Mayo stated, “One out of four consumers reports losing money, with an average loss of $500 per consumer,” she said.

Interestingly, findings reveal that fewer consumers, less than 6% of consumer fraud victims, reported their experiences. According to the report, the most common category of scams was imposters that pretended to be a trusted institution, such as a government agency, business, family member, or romantic interest.

Mayo gave an example of how it operates, “A consumer gets what appears to be a banking alert about the fraudulent activity with their account and supplied a number to call. A fake U.S. Marshal receives the call and tells the consumer their money is in danger because of a money laundering scheme. The consumer withdraws funds from their accounts and transfers them to a crypto wallet that the Marshal set up.”

Losses to government imposter fraud and scams increased significantly from an average loss of $3,000 in 2019 to $7,000 in 2023. The second highest form of scam was online shopping and negative reviews; thirdly, prizes and lotteries, followed by investments; and finally, business and job opportunities were also commonly reported, showing a loss of over $750 million of scam losses last year.

Meanwhile, investment-related fraud that involves transferring money to people promising to teach them how to trade stocks was number four overall. Many in this category reported the most average losses, of over $4.5 billion, and a record of over $7,000 

loss per consumer.

The Director stated that using email has become a significant source of fraud. For the first time, “email was the most reported contact method of scammers in 2023,” Mayo said. She further explained that in previous years, specifically in 2022, texts ranked number one, but before that, phone calls used to be number one.

In general, the victims contacted through social media lost the most money, more than $1.2 billion, while people contacted by phone reported the highest median losses of $1,480.

Another standard method of payment was bank transfers. Victims who used these payment methods reportedly lost over $1.5 billion, while those who used cryptocurrency as a mode of payment lost $1.3 billion.

Using AI Technology for Impersonation  

Lois Greisman, the Associate Director of Marketing Practices at FTC, explained that the institution is increasingly worried about scammers using artificial intelligence to perpetrate fraud through impersonation.

She reiterated the importance of reporting all scams to the FTC, as artificial intelligence (AI) is increasingly used to enhance fraudulent activities. She notes, “One of the things we worry about is the use of artificial intelligence AI to, as they say, quote turbo to turbocharge fraud.”

She explained that “AI can clone individuals’ voices with remarkable accuracy.” Initially, the technology was developed for medical purposes, especially for individuals who lost their voice due to accidents or illnesses, to communicate using their voice. However, scammers are exploiting advancement by mimicking the voices of loved ones to perpetrate fraudulent schemes.

An example of such manipulation is a scenario where scammers use cloned voices to fabricate emergencies, such as a loved one being in a car accident and needing immediate surgery. In such instances, the emotional resonance of hearing a familiar voice can intensify the urgency of the scam.

For instance, the scammer would get a voice clip of the victim’s aunt from social media and clone it to call the victim, saying that the aunt has “been in a terrible car accident, they’re in the hospital, there’s no insurance information, so they need you to wire thousands of dollars for life-saving surgery,” said Greisman.

Furthermore, AI is not limited to voice cloning scams but is also used in messaging, such as making compelling claims such as “My crypto investment method works because I’ve trained the AI to beat the stock market.”  

How to Identify a Scammer 

Although there are various ways of identifying a scammer, one significant way is taking note of the payment method they request. Greisman says a key indicator is if they demand payment through other means outside a financial institution’s platform, such as gift cards, wire transfers, payment apps, or cryptocurrency.

Their suggested methods often provide them anonymity, thereby causing difficulty for law enforcement to trace and recover funds. “If they’re insisting on payment by wire transfer, payment apps or crypto, that’s a huge bright red flag … because it gives scammers the greatest measure of anonymity, and the likelihood of law enforcement being able to trace and return the money is extremely difficult,” said Greisman.

Importance of Consumer Reporting Matters 

Additionally, she highlighted the importance of reporting to support law enforcement efforts and enable prevention outreach. She stated, “Reporting scams like these to the FTC matters because the data helps nearly 3,000 state, federal, and local law enforcement entities nationwide stop fraud and because it helps prevention outreach.”

Another official of the FTC, Larissa Bungo, Senior Attorney within the Consumer & Business Education Division, reiterated the importance of reporting scams to the FTC. She also bolstered the diverse resources available on the FTC website and their accessibility in multiple languages.

Individuals can anonymously report fraud and bad business practices in their preferred language by phone at 877-382-4357. Or online in English or Spanish at reportfraud.ftc.gov or by emailing fraud@ftc.gov. For identity theft issues, reports can be made in one’s preferred language at 877-438-4338 or in English or Spanish at identitytheft.gov.

Regarding outreach, Bungo stated, “When we see spikes in gift card scams, we reach out to the industry to see what they can do to curb card abuse. When text messaging becomes a frequent point of contact, we contact the telecommunications industry.”

The Senior Attorney also emphasized the FTC’s commitment to empowering individuals to spot and avoid scams and identity theft by providing information in various languages. She highlighted, “To help people spot and avoid scams and identity theft and talk about what they experience, we offer information at ftc.gov/languages” in languages including Arabic, Amharic, simplified and traditional Chinese, French, Mam, Korean, Russian, Somali, Spanish, Tagalog, Ukrainian, and Vietnamese.

Despite the perpetrator’s expertise, Bungo stressed the importance of sharing knowledge about identifying scams. She emphasized, “While scammers are good at what they do, knowledge is power, and the best thing we can do is try to share what we know about spotting scams. When people report fraud, they can share as much or as little as they want to. We’re interested in knowing what happened. We want to know the story.”

Thus, it is evident that to address the thriving scam business adequately, there is a need for a concerted effort involving consumer education and regulatory measures to target young people and minority communities with a comprehensive education to enhance awareness and resilience. Additionally, there might be a need to consider implementing stricter controls on retail gift card sales, which can serve as a barrier against financial exploitation.

  ai, fraud, ftc, scams