• Andy Renshaw, Senior Vice President, Product Management at Feedzai


• 15.12.2022 06:00 am
#fraud #scam

If you’re thinking fraudsters will turn over a new leaf and resolve to behave themselves in 2023, it’s time for a wake-up call, because fraudsters never change their stripes, just their tactics.

1.     Economic uncertainty combined with faster payments systems will result in more scams

As old and reliable fraud tactics like account takeover (ATO) attacks have become harder to pull off, fraudsters are increasingly turning to scams, and they currently have two distinct advantages working in their favour - economic uncertainty and the rise of faster payment systems.

When people are uncertain or desperate about their financial lives, they are more likely to fall for scams. This includes fake job offers, unemployment fraud, or even romance scams. In other words, scams evolve quickly to reflect the current environment. Scammers are also becoming more sophisticated and know how to adjust their tactics (e.g., phishing, vishing, etc.) to be as effective as possible. Combine this with the ability – through the rise of faster payment schemes in new global markets (the US, Canada) - to move money with a few taps of the screen, and you have a perfect storm.

2.     Desperate times will push people to commit fraud

Every economic downturn, we see a rise in first-party fraud e.g., buying goods, claiming the purchase never arrived and demanding a refund. And while we expect this trend to continue if a recession hits again, we also expect cases of second-party fraud to accelerate. With liability shifting to banks, some people may volunteer their information to others to get a refund for a scam that didn’t really happen, while others may participate in money mule schemes and allow their bank accounts to be used by money launderers.

And, as economic uncertainty rises, we also expect to see a rise in ‘friendly’ fraud - this can range from family members exploiting a relative’s trust to access their cash, to one family member allowing another to use their personal information to access a loan or get a new credit card.

3.     Advances in technology will enable ever more convincing and scalable ‘deepfakes’

Over the past year there has been a huge rise in the use of deepfakes for fraud, and 2023 is likely to see the next evolution of this trend. While deepfake technology can be used to create convincing visuals of real-life people, it relies completely on visual deception. Over the next 12 months,  we expect this type of social engineering to be enhanced with the help of generative AI technology that can replicate a person’s conversational and typing styles.

Fraudsters will be able to mimic the way a person “speaks” via text or SMS and even use their preferred emojis enabling them to push convincing scams like CEO fraud or invoice fraud to victims.

4.     Social media platforms will turn into “fraud-as-a-service” tools

In the past few weeks, it’s been almost impossible to look away from Elon Musk’s Twitter takeover and the changes being implemented – one of the most controversial that the verified blue check marks can now be bought, meaning the platform has become a breeding ground for multiple scams.

But it is not just Twitter that is vulnerable to scams - we’ve seen numerous social media platforms become unwitting accomplices to fraud in recent years. Fraudsters use social media platforms to push scams and do so at scale. At least one major UK bank warned that 77% of scams originate on social media, eCommerce, or dating sites. Left unchecked, social media platforms will essentially turn into “fraud-as-a-service” platforms, giving fraudsters automated tools to push their scams.

5.     Crypto scandals will mean fewer crypto investment scams…but fraudsters will find another way

Following the downfall of FTX, it’s fair to say the crypto winter is here, and if there’s a silver lining for the year ahead, it is a drop in cryptocurrency scams as investors move away from FOMO-driven decisions to take a harder look at the market. But, while crypto’s risk has been fully exposed, it’s still likely to attract potential investors and consumers should exercise caution and ask hard questions when making these types of investments.

Furthermore, while the shine might be falling from crypto, there are plenty of other investment scams to push. Using their familiar high-pressure tactics, fraudsters will likely try to lure investors into fake stock, gold, or other commodity-related scams.

For banks, the advances in fraud techniques we have seen already, and the fact fraudsters are constantly changing their tactics to stay ahead of anti-fraud and AML measures, should serve as a wake-up call that identity solutions alone aren’t enough to stop scams. By pressuring or manipulating their targets, scammers have found a way to bypass safeguards like two-factor authentication (2FA) and even biometrics. But the heightened threat of scams also presents opportunities for banks. Liability is shifting for financial institutions to cover losses to scams. If banks proactively offer to protect their customers, they can offer an attractive market differentiator.