The year 2020 was the best of times for a fraudster. The fraudsters are rejoicing at the rapid shift to digital banking and commerce, and consumers are getting swindled by purchase, impersonation, money mule schemes, and account takeover (ATO) scams. The Covid-19 pandemic has led to a swift adoption of digital transactions. But increased digitalisation in banking has also given a boost to cyberattacks. According to financial institutions and federal agencies, since COVID-19 began, fraud attempts have as much as tripled, with a wide variety of new scams emerging that prey on those who have been financially been hit hard by the pandemic and subsequent closures and shutdowns, people who have become isolated, as well as members of society who want to be helpful to those in crisis. The pandemic has provided a greenfield opportunity for cyber criminals, who are playing to bank customers’ concerns about job loss, financial health and community safety.
Between February and April 2020, attacks targeting the financial sector have grown by 238% globally. The Unisys Security Index 2020, released last year, found that one of the top concerns of respondents in India was bank card fraud—unauthorised access to credit and debit card details, and concerns around online banking and shopping. The growing popularity of real-time payment functions, combined with the expansion of online banking, makes the rapid rise in transfers fraud scams, particularly ATO scams, all the more painful.There is a 650% Increase in Account Takeover Scams in the 4th quarter of year 2020.Some other areas where fraud rates increased include-
- 178% Fraud Rate Increase for Digital Media
- CNP Transactions Drive 70% of Fraud Attacks
- 48% Drop in Card Present Fraud Attacks; Volume Only Drops 20%
A Tale of Two Pandemics: Consumer & Fraudster Behaviors by Industry
The comparsion between the consumer and fraudster behaviours in various industries and in different regions of the world:
- 15% Increase in Fast Food Volumes for NA and EU;48% Decrease in Fraud Rates
- 13% Drop in Grocery Transactions;51% Increase in Fraud Attack Rates
- 56% Increase in Electronics and Software Purchases in APAC; 16% Increase in Fraud Rates
Anti-Money Laundering (AML) Report
Economic uncertainty, a rapid shift to digitization, and high unemployment rates are the best of times for money launderers, particularly those who organize and recruit money mules. In 2020, the FBI took action against 2,300 money mules, an increase of 383% from 2019.
Fraud Schemes During Covid
1.Impersonation Scams: In impersonation scams, scammers contact consumers via email, phone, or text and claim to be from organizations such as government agencies or financial institutions (FIs). They ask the consumer to make a payment. It’s possible impersonation scams worked in 2020 because people were isolated and more inclined to engage with fraudsters, along with having more time to do so.
2.Purchase Scams: The pandemic uncovered supply chain deficiencies that created shortages of critical supplies such as N95 masks and medical equipment. Not miss the money-making opportunity, fraudsters built fake eCommerce sites selling anything and everything that was in short supply. Unsuspecting victims paid for goods that never arrived.
3. Account Takeover Scams: In an ATO attack, fraudsters obtain stolen credentials, account information, and passwords that belong to legitimate users. Once they access the account, they can transfer funds or buy goods with stolen credentials.
4.Investment Scams: Investment scams often prey on desperate people, which makes a pandemic a gold mine for fraudsters. Investment scams include employment scams, affinity fraud, pyramid schemes, and Ponzi schemes. Whatever the ruse, investment scams offer unrealistic opportunities at a cost that will never be worth the price paid.
5. Romance Scams: In a romance scam, a fraudster pretends to be romantically interested in an unsuspecting victim. The fraudster will often exploit their target’s emotions and manipulate them into giving the fraudster money or buying them valuable items.
Following are some specific cases and examples of the scams discussed above,
Fake Charity Scams
Other scammers are taking advantage of the situation by claiming to be affiliated with a reputable charitable organization or collecting charitable donations for coronavirus but not using the money for this purpose.
Vaccine Scams
As countries continue to distribute vaccines, there has been an rise in vaccine-related schemes to steal people’s information. According to the Federal Trade Commission (FTC) , scammers have been texting and emailing individuals across the United States asking them to fill out a “survey” on vaccines. The scammers give a “reward,” but require the individual to first pay for shipping fees, which ultimately gives the scammers access to personal financial information.
Work from Home Scams
Since many businesses, schools, public offices, and other workplaces are closed, many people are turning to work from their home to try to fill in the gap. However, scammers are waiting to capitalize on this industry, too.
Student Loan Relief Scams
With constant news about student loan relief laws, student loan borrowers can be more prone to fraud. Many borrowers may think that they are now eligible to receive new or different forms of relief as a result of the COVID-19 crisis. Fraudsters can capitalize on this by promising debt forgiveness after a one-time payment. When this occurs, the student loan borrower ends up in a worse position after this scam because he or she still owes student loans, and is now down the hundreds or thousands of dollars that were paid to the scammer.
Phishing Scams
Scammers are also pretending to be representatives of WHO or the American CDC by sending out emails that seek donations and sensitive information. They might also ask you to click on a link that then sends malware to your device.
Fake Lending Apps
The pandemic’s financial impact has affected people around the world, causing a greater need for financial assistance. Because of this, it has made it easier for scammers to take advantage of people. For example, loan app scams are on the rise in India, targeting those who have suffered the most from COVID 19’s impact on the Indian economy. These apps give out loans to people with high interest rates, but first require access to essentially all of the borrower’s personal information stored on their cell phone.
Fake Cures and Medical Supplies
Since the beginning of the pandemic, scammers have tried selling “cures” to vulnerable people who are simply wanting to protect their health. Some of these scams are specifically targeting people in countries where coronavirus is most rampant.
CONCLUSION
There were two pandemics in 2020 – one of covid and one of frauds.Along with ATO attacks, impersonation and purchase scams were the most popular attack types for transfer fraud. Banks would have to educate their customers and fortify their systems to combat these schemes, particularly in light of the 250% increase in online banking fraud attacks, by far the most utilized form of banking today. Reference & Credit: 1. 2. 3. Fighting fraud and financial crime in a post-pandemic world is complex work. It’s critical to develop technology partnerships that grow customer satisfaction while frustrating fraudsters at every turn.
Reference & Credit:
- https://feedzai.com/wp-content/uploads/2021/03/Feedzai-Quarterly-Report-Q12021.pdf
- Images- https://feedzai.com/wp-content/uploads/2021/03/Feedzai-Quarterly-Report-Q12021.pdf
- https://www.igrad.com/articles/financial-fraud-during-the-covid-19-pandemic
About the Summary writer-
Viswa Teja Bapireddy is an intern with Crossbar Financial Crime Academy. A young, enthusiastic student of Birla Institute of Technology & Science, Pilani, Viswa Teja is specially passionate about the Financial Crime Compliance Domain and likes reading, researching writing and sharing blogs / stories in this domain.