Impersonation Scams on the Rise Ahead of Holidays Prompting Response From Watchdogs

‘Tis the season to be … wary.

The holiday weeks mean fewer days in the office — online or onsite. Staffers embark on their usual round-robins of vacation. We’re all browsing sites and stores in search of the best deals on, well … everything.

In short, our guards are down, on the job and off, opening the door for fraudsters.

The bad actors are, increasingly, using “official” channels to ply their schemes and scams.

The Federal Trade Commission reported this month that impersonation fraud — where fraudsters pose as executives or government agencies — has siphoned $6 billion from victims since 2018. The FTC has proposed a Trade Regulation Rule on the impersonation scams; the commentary period runs through the middle of next month.

The FTC has noted that while “in the past has brought many cases relating to impersonation under different authorities, it is currently limited in its remedial authority,” and added that a rule could perhaps “more comprehensively outlaw government and business impersonation.”

Separately, and as detailed in the “State of Fraud and Financial Crime in the U.S.,” a PYMNTS and Featurespace collaboration, we see that impersonation fraud hits hard at financial institutions.

Overall, 62% of the financial institutions (FIs) we surveyed — with input from 200 executives — saw an increase in financial crime this year. Smaller FIs — those with $5 billion to $25 billion in assets — saw an increase in the dollar value of fraudulent transactions.

The conduits of getting away with the money remain the traditional ones: Smaller FIs also had the highest rates of increased fraud attacks in credit cards, with 66% reporting increased attacks on that payment method, and prepaid or debit cards, with 61% reporting increases.

As to the considerable damage done by impersonation: The data show that account takeovers where fraudsters impersonated authorized parties accounted for more than 10% of transactions, and nearly 12% of the total dollar value stolen.

The FTC has also noted that there are demographics especially at risk. Its October report, “Protecting Older Consumers, 2021-2022,” showed business impersonations wound up costing older consumers the most money the most, at $151 million in 2021, up 134% from 2020.

Separately, PYMNTS and TreviPay joint research found that 68% of marketplaces and organizations in the retail and manufacturing sectors are not very satisfied with their fraud detection systems.

The best defense may lie with advanced technologies. The Featurespace/PYMNT research found FIs that employ machine learning (ML), artificial intelligence (AI) or cloud-based platforms to mitigate fraud risk had the smallest shares of transactions that would up being tied to fraud losses among respondents to the survey.

In news reported Tuesday, Featurespace said it had received funding from the U.K. and U.S. governments to complete the buildout of an artificial intelligence system to help banks and payments service providers detect financial crime.