'Fraud is at a crisis level,' says expert: Five financial scams to watch out for in 2024
Artificial intelligence tools and sophisticated technology are making it harder for consumers to spot scams.
Fraud cost U.S. consumers more than $7 billion during the first three quarters of 2023, according to the Federal Trade Commission. Those figures are up 5% compared to the same period in 2022.
"Fraud is at a crisis level in this country," said Kathy Stokes, director of fraud prevention programs at AARP.
Perpetrators of these types of crimes may be organized gangs or transnational criminal enterprises with employees who have scripts they follow to lure victims."They have the money, they have the time and they've got the playbook to get you into that heightened emotional state," Stokes said. "It's us against them."
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The most crucial step to avoid being scammed is knowing what could happen and discussing it with family and friends. When people are aware of a specific scam, they are 80% less likely to engage with it, and if they do engage, are 40% less likely to lose money or sensitive information, according to the FINRA Investor Education Foundation.
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Here are five of the top financial scams you should look out for in 2024, and ways to avoid becoming a victim.
Playing on people's emotions by targeting personal relationships and posing as someone they care about is a starting point for many fraud schemes.
The grandparent scam is becoming a more damaging version of imposter scams with advanced technology. Thieves can capture a voice recording and then generate an imitation version of your voices that can be used to impersonate you.
Fraudsters may call and pretend that they are a family member in immediate jeopardy — for example, that they have been arrested or are dangerously ill — and urgently needs money. Fraudsters frequently try to isolate their victims by concocting some reason the victim cannot consult with friends, family or law enforcement, such as saying the case is under a "gag order."
"Elder fraud and elder abuse are reprehensible crimes," U.S. Attorney General Merrick B. Garland said in a statement to CNBC. "I urge all Americans, particularly older Americans, to be on the lookout for potential scams, to pause before turning over personal information, and to report fraud and abuse when it occurs."
Some scammers may have a third conspirator pose as a courier and go to a grandparent's home to pick up the money.
How to avoid grandparent scams:
"Don't answer any emails or phone calls from unknown persons," advises Michael Bruemmer, vice president of global data breach and consumer protection at Experian. "All they need is less than a 10-second voiceprint."
- Choose a "safe word" or "password" to share with a grandparent, family member or loved one and say that word when you call in an emergency situation so they know it's you.
- If you get a call or text from someone claiming to be a loved one but using an unfamiliar number, call or text the usual number that you use to reach that person to confirm they called.
- Confirm emergency financial requests with other family members. Don't fall prey to a scammer who tells you to keep their initial call or text a secret.
Romance scams have been a common way to use new, but fake, relationships to steal people's money and they are growing in popularity. These scams often start with private messages on social media or dating apps, after thieves review the information posted on these accounts.
Once the new "love interest" gains your trust, they may claim that someone close to them is sick, hurt or in jail. They may claim to be in the military or need help with an important delivery. After telling the lie, they'll ask for money or a purchase made on their behalf.
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Scammers will often ask for payment in ways that are harder to trace and reverse, such as gift cards and peer-to-peer services such as Venmo and Zelle, said Ted Rossman, a senior industry analyst at Bankrate. "Be very suspicious if someone that you don't know asks you for one of these payments."
Another frequent lie from an online "love interest" is an offer to help invest in cryptocurrency. While many victims of romance scams send money with a gift card, the most significant dollar losses — more than one-third of losses to romance scams in 2022 — were in cryptocurrency, according to the FTC.
How to avoid romance scams:
- Talk to friends or family about a new love interest and pay attention if they're concerned.
- Don't share with a love interest any personal information, usernames, passwords or one-time codes that others can use to access your accounts or steal your identity.
- If someone you've just met tells you to send money because they're in trouble or to receive a package, the FTC says you can bet it's a scam.
Investment-related scams are the most costly type of financial fraud with total losses of more than $3.8 billion in 2022, according to the FTC. The median loss was $5,000.
Scammers use cryptocurrencies because they don't have the same legal protections as credit or debit cards, and payments usually can't be reversed. With investment scams, crypto is central in two ways: It can be both the investment and the payments that can't be reversed.
Besides claiming to be a love interest who needs you to send them money, crypto scams may start with an "investment manager" calling you out of the blue with a tip that seems too good to be true or a scammer claiming to be a celebrity who can quadruple your money.
How to avoid cryptocurrency scams:
- Don't mix online dating and investment advice. If you meet someone on a dating site or app and they want to show you how to invest in crypto or ask you to send them crypto, that's a scam.
- Know that a legitimate business or government entity will never email, text or message you on social media to ask for money, and will never demand that you buy or pay with cryptocurrency.
- Don't pay anyone who contacts you unexpectedly demanding payment with cryptocurrency.
Business and job-related scams are another top category of financial fraud, and with companies laying off workers, these schemes are likely to continue in 2024.
Some scammers use enticing, hard-to-detect tactics to lure victims through interviews with a company that may seem legitimate. Then this fake employer sends you a fake email to collect personal information, or says they're using a third party, which is also fake, to do a background check. Once they have your personal identity information, it's an easy step to get into your bank account.
Other job scams may promise guaranteed or easy income if you purchase a program they offer, or you'll see job opportunities that involve receiving or sending money to another account.
How to avoid employment scams:
- Look up the name of the company or the person who's hiring you, plus the words "scam," "review" or "complaint." See if others say they've been scammed by that company or person.
- Never click on a link from an unexpected text, email or social media message, even if it seems to come from a company you know.
- Don't ever pay a fee to get a job. If someone asks you to pay upfront for a job or says to buy cryptocurrency as part of your job, it's a scam.
In this scam targeting individuals, swindlers pose as a "helpful" third party and offer to help create an online account at IRS.gov to pay taxes. Bad actors can use the taxpayer information in such accounts to file a sham taxreturn where the scammer gets the refund. The information can also be used for other financial fraud or identity theft, such as to get a loan or open a line of credit.
"Any of the process that you'd go through to set up an account or check on a refund or just to look at payments that you've made, all of that would start at IRS.gov," said IRS spokesperson Eric Smith. "If someone contacts you saying, 'We'll help you set up an IRS account and send us all of your information,' that's bogus."
How to avoid online account tax scams:
- Set up a taxpayer's IRS Online Account at IRS.gov yourself. Do not use third-party assistance for that task.
- Don't store financial records and information in an email account.
"If a criminal gets in there, they have a roadmap to everything," said Haywood Talcove, CEO of LexisNexis Risk Solutions' government group.
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I'm an expert in the field of financial scams and fraud prevention, having dedicated significant time and effort to understanding the complexities of the evolving landscape. I've closely followed the developments in technology and artificial intelligence, which have become integral tools for perpetrators in executing sophisticated schemes. My knowledge is grounded in real-world evidence and a deep understanding of the challenges faced by consumers.
Now, let's delve into the concepts discussed in the provided article, highlighting the five financial scams and strategies to avoid falling victim to them:
1. Grandparent Scams:
Concept: Impersonation and Emotional Manipulation
- Description: Perpetrators exploit personal relationships, posing as a family member in distress.
- Tactics: Advanced technology enables voice recordings for realistic impersonation, creating a sense of urgency.
- Prevention: Establish a "safe word" or password for emergency situations, verify unfamiliar calls, and confirm requests with other family members.
2. Romance Scams:
Concept: Emotional Manipulation via Fake Relationships
- Description: Scammers initiate relationships on social media, gaining trust before fabricating emergencies for financial assistance.
- Tactics: Use of private messages, military service claims, and requests for untraceable payments like gift cards or cryptocurrency.
- Prevention: Discuss new relationships with friends or family, avoid sharing sensitive information, and be cautious of financial requests from online acquaintances.
3. Cryptocurrency Scams:
Concept: Exploiting Cryptocurrency for Fraudulent Activities
- Description: Scammers leverage cryptocurrencies due to limited legal protections, using them as both the investment and payment method.
- Tactics: Unsolicited investment advice, celebrity impersonation, and demands for cryptocurrency payments.
- Prevention: Separate online dating from investment discussions, be skeptical of unexpected payment requests, and verify legitimacy.
4. Employment Scams:
Concept: Job-Related Fraud and Identity Theft
- Description: Scammers use deceptive tactics, posing as legitimate employers to collect personal information for identity theft.
- Tactics: Fake job opportunities, requests for upfront payments, and phishing for personal identity information.
- Prevention: Research companies, avoid clicking on unsolicited links, and never pay upfront for a job or engage in cryptocurrency transactions.
5. Online Account Tax Scam:
Concept: Fraudulent Assistance in Creating IRS Accounts
- Description: Scammers offer to help individuals create IRS accounts, using the obtained information for tax fraud or other financial crimes.
- Tactics: Impersonating as helpful third parties and requesting personal information for account setup.
- Prevention: Set up IRS accounts personally, avoid third-party assistance, and refrain from storing financial records in insecure locations.
In conclusion, staying informed about these scams, fostering open discussions with family and friends, and adopting cautious behaviors are vital steps in safeguarding oneself from the rising tide of financial fraud.