By Serpil Hall, Head of Fraud Prevention at D4t4 Solutions
Scams have plagued human society since the dawn of man.
The first scam ever recorded dates to 300 B.C., when two Greek sea merchants plotted to sink their boat and pocket a loan for a voyage they never intended to complete. Sadly, the practice has only increased in the years since. Countless scams have risen and fallen in popularity, yet the goal is always the same: to unfairly cheat another out of goods or property.
Today, scams and fraud are everywhere. Scams know no geography, and anyone can become a victim. No one is immune.
Even worse, if a scammer is caught, prosecuted, and convicted, there’s no guarantee those affected will get their property back. Financial institutions are left to bear the brunt of fraud and scams – costs which are eventually passed back to consumers.
Defending against scams requires constant vigilance and education.
Let’s take a closer look at some of the most common scams today, what financial institutions have done to stop scams, and how behavioral biometrics are helping organizations improve efforts to detect and stop scams – before they can do serious financial damage.
Common types of fraud and scams today
Romance scams, investment scams, online purchase scams, CEO scams – these are just a few of the most common scams around the world today. They’re worth calling out for precisely that reason.
The Federal Trade Commission (FTC), which tracks scams and fraudulent activity in the United States, estimates the number of romance scam reports nearly tripled from 2016 to 2020. While many report these scams started on dating apps, even more say they were targeted on social media. Meanwhile, reported dollar losses multiplied more than fourfold over the same period. The internet has made it easier than ever to impersonate or generate fictional romantic partners, and in the age of COVID when meeting in person can be challenging, it’s no wonder why romance scams are on the rise.
In a similar vein, the internet has lowered the barrier of entry to conduct investment scams, as digital tools have made it easier than ever to conceal one’s identity, quickly stand up a website or other digital property, and defraud investors. These scams tend to take the form of get-rich-quick schemes offering would-be investors a guaranteed payday with limited risk, utilizing high-pressure tactics designed to get victims to act quickly or “lose out.” And they’re not just limited to traditional investments like stocks and bonds, but also precious metals, art and crypto. NFTs have recently emerged as an avenue for scammers, who despite the blockchain’s public ledger, will pull the rug out behind them once they’ve received payment only to leave investors empty handed. Likewise, fake crypto coins are another investment scam to watch out for — as investors in the popular Squid Game coin based on the Netflix phenomenon found out recently.
CEO scams rank among the most common impersonation scams perpetrated today. They can take several forms but generally rely on a scammer impersonating the head of a company and directing employees to fraudulently transfer money or property. The scams often start with phishing emails designed to steal email account credentials via the impersonation of popular cloud-based email services. According to current Federal Bureau of Investigation figures, this type of business email compromise is increasing, having cost U.S. companies at least $2 billion from 2014 to 2019 alone.
Because of the huge financial cost posed by the aforementioned scams, along with others like online purchase scams, holiday scams, pension scams, and ticket scams, anti-fraud and scam prevention is a huge source of investment globally. Like an arms race between scammers, financial institutions and the authorities tasked with stopping them, the result demands new technology like behavioral biometrics to capture scammer’s own online patterns, to use against them to finally give consumers a leg up in the ongoing battle.
Behavioral biometrics and the scam technology arms race
Over the years, financial institutions have developed ingenious ways to root out fraud and scams.
Banks and card issuers have spent millions implementing algorithms to analyze transaction activity for anomalies that uncover compromised accounts or credentials for fraud analytics teams to investigate. Their data models look at any number of global patterns, such as time spent on specific web pages or device location, to verify the credibility of transactions or transaction amounts. However, these rules-based systems are easily infiltrated by enterprising fraudsters, typically too late to catch fraudsters in the act.
Thankfully, behavioral biometrics technologies have emerged to help detect behavioral anomalies to better protect against fraud. In a world where no one is immune from scams — and new scams emerge daily — behavioral biometrics uses multiple data points, such as how someone holds, touches, or taps their devices, to guard against known and unknown attack types.
The data collected can be used to follow the activity of scam victims across devices and systems to find associated identities coerced by scammers, and set alerts based on those activities. Especially when combined with traditional anti-fraud prevention systems, behavioral biometrics enable organizations like financial institutions to detect and prevent a range of scams in real-time, at scale, in an automated way and with a very high degree of accuracy. They give fraud teams an extra layer of data to connect fraudulent activities to uncover scam networks and revolutionize fraud prevention.
Although scams have become an accepted societal nuisance, digital technology has made it too easy for scammers to begin and expand quickly, only to disappear behind technology buffers. The pendulum is shifting in the opposite direction, however. By turning criminals’ own digital “fingerprints” against themselves, behavioral biometrics are finally giving organizations and their partners in law enforcement the advantage.
About the author
Serpil Hall is a proven financial crime and fraud management professional with more than 20 years of experience across many industries and sectors. She has deep expertise in managing fraud operations, fraud prevention systems, fraud biometrics, and internal fraud controls, and she has worked with some of the world’s largest global banks, airlines and merchants. At D4t4 Solutions, Serpil drives the development of the Celebrus Fraud Data Platform, drawing on her expertise from her time spent with EY, BAE Systems, FICO, Visa EU and American Express.
DISCLAIMER: Biometric Update’s Industry Insights are submitted content. The views expressed in this post are that of the author, and don’t necessarily reflect the views of Biometric Update.
behavioral analysis | behavioral biometrics | biometrics | cybersecurity | D4t4 | financial services | fraud prevention | secure transactions