Financial Fraud Scams: What Should Banks Do to Intervene?

Actimize Fraud Product Team, Fraud Detection & Prevention

The recent breaking news story that identified the FBI’s takedown of a fraud ring that was using romance scams and fake business emails to defraud their victims shines a light on the kind of schemes that have been growing exponentially over the past few years. Unfortunately, these romance scams are particularly targeting our elder populations and putting them in harm’s way. According to the Consumer Financial Protection Bureau (CFPB), these frauds have generated millions of dollars in losses for some elders, losses which can decimate an entire life savings, while putting independence and quality of life at risk for others.

Business email compromise (BEC), which was an additional scenario that targeted those in control of finances at reputable companies, tricked their targets into issuing wire transfers to accounts they thought were legitimate vendors.

Both schemes aim for multiple payments from their victims and targeted an estimated $46 million in losses to victims over three years, according to indictments filed by the FBI, according to CBS News. The numbers indicate that the group stole $6 million and attempted to take an additional $40 million from victims in the U.S. and other parts of the world.

Those numbers are likely the tip of the proverbial iceberg as the government digs further into these schemes and understanding there are a lot of these activities that go unreported due to the embarrassment of the defrauded individual. The charges issued against the perpetrators of these actions include conspiracy to commit fraud, conspiracy to commit money laundering and aggravated identity theft, just for starters.

According to ABC News reports, Federal authorities recently cited a Nigerian romance scheme with a single bank account and one victim as the starting point of their case investigation that ultimately led to charges against 80 people, the arrest of 14 defendants in the Los Angeles area and at least $46 million in attempted frauds of business and consumer victims. These just aren’t single individuals pulling in modest accounts – these are global operations with tons of experience parting often smart people from their hard-earned savings. 

In the case of this investigation, the victim lost hundreds of thousands of dollars in a romance scheme. The victim made 35 to 40 payments over the 10-month period of the case. Almost worse than the money loss, the fraudsters threatened her with arrest if she did not continue to pay, and she even traveled from Japan to Los Angeles because she was told a Russian bank manager had embezzled some of her funds. Through the entire 10-month scheme, the Nigerian fraudsters were sending 10-15 emails a day. The perpetrators were so clever, she never doubted them through the entire charade.

As the fraud unfolded, it is easy to imagine that the victim was sending funds in an escalating pattern. In this case, those funds were coming from abroad, most likely raising additional detection flags for the bank. The ruse behind the transfers was a fictional love interest that was a military officer stationed in Syria and who supposedly found a bag of diamonds. Over the course of the scheme, the “officer” introduced her to a network of his associates. The carefully crafted story and actors directed the victim to send funds to accounts in the U.S., Turkey and the United Kingdom through these associates.

The fact that the initial case created a three -year investigation and resulted in one of the largest internet fraud schemes seen to date by the FBI is no surprise to those who work on these cases daily. The heartbreaking reality of the victims has become an all too common theme in financial institutions and communities across the globe. But it also illustrates the impact that a reported case can have to allow law enforcement to begin to disrupt these fraud rings. Adequate information gathering and SAR prep by financial institutions can greatly assist in identification of these schemes.

Even though we don’t always see the results, continuing to identify and report these kinds of cases, educating customers and recognizing these scenarios are critical ingredients to allowing law enforcement to successfully disrupt these rings. The reality is that these stories are all too common.

Personally, I had a family member who was tricked into this kind of a romance scheme. It took a lot of persuasion to convince the victim that they were being conned. The huge investment that the scammers make in selling the con takes an immense emotional toll on the victim. To add insult to injury, they are sending their money reserved for their retirement to con artists, putting their own future in jeopardy. It is no surprise that these victims put someone else that they perceive as being in need and emotionally important ahead of their own security. These emotional cons are devastating.

How Can Banks Assist?

So, what should banks do to assist in these kinds of delicate situations? In many cases, the victim does not want interference from anyone, especially their bank. However, understanding the escalating pattern of unusual payments quickly can assist in preventing catastrophic losses to the client. Filing a SAR is only one of the actions that banks need to take in alerting the appropriate organizations to the incidents. Speaking to the victim with understanding and care, while involving anyone that can help get the message through may also help them see what is really happening.

In the case of my own loved one, I enlisted the help of a law enforcement officer to convince them that family members were correct in their assessment of the situation. The officer also explained that while this felt like an embarrassing situation, these fraudsters are experts at their craft, and it wasn’t their fault. Quick intervention is key to making a difference to the losses in these cases. Even though banks are not responsible for such frauds directly, they can be a lifeline to victims with guidance and direction.

Make sure your bank has some sort of response mechanism in place for victims of these types of frauds.

In the case of a BEC fraud, change in payment or account information to a trusted vendor is the first sign of the con. Reaching out to the vendor to confirm that payment change for the business is a necessary verification step to prevent these fraudulent payments, regardless of who the request comes from. Some of these schemes target lower level employees with “urgent” emails from the CEO or a high-ranking member of the company. This kind of change in payee information should raise a red flag on the account as well.

Whether it is an individual or a business that is victimized, these cons are designed to be long running revenue generation for the fraud rings. Understanding the new payees for both scenarios is a good first indicator of potential fraud to come. How well we identify the early indicators can make a real impact on our customers.

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