Fraud affects every part of society —from large businesses to individual consumers. Recent trends show significant changes in how fraudsters operate, with a 31% rise in romance scam payments last year and evolving patterns in investment fraud.
Scams are becoming more sophisticated, using technology and social engineering to target vulnerabilities. So, let's examine these current threats and learn how to protect against them.
What is a scam?
Scams involve deceptive schemes that manipulate individuals or businesses into revealing personal information, transferring money, or providing other valuable assets, often under false pretences. Scammers exploit vulnerabilities, such as lack of information, financial difficulties, urgency and emotional triggers, to deceive their targets.
Types of scams
Scammers have become increasingly sophisticated in devising new and ingenious methods to trick and defraud victims.
This blog covers some of the most common types of scams that currently exist, however, it is by no means an exhaustive list. Scammers are constantly evolving their tactics to trick individuals therefore, efforts to spot and counteract these threats must advance to keep up.
#1. Phishing
'Phishing' is a term used where fraudsters use scam emails, text messages, phone calls, QR codes or other similar methods to trick victims. Phishing emails are designed to target numerous individuals or businesses with deceptive links or requests for information. The goal is to gain valuable personal or financial information that the fraudster can exploit in a variety of way. For example, a phishing text might claim the recipient is eligible for a benefit from a government scheme, such as support for energy bills.
The text message usually contains a link that appears legitimate but leads to a fraudulent site that ask the recipient to enter personal and/or financial details. Once entered, this data becomes accessible to the scammer, who may use it for further fraud, such as identity theft or account takeovers.
#2. Spear phishing
‘Spear phishing’ is a more targeted approach to Phishing, where fraudsters look to gather information specific to the individual and directly contact them via email or telephone to manipulate them into providing personal or financial information.
A recent scam targeting Google account holders illustrates how fraudsters can use known information about an individual to manipulate genuine security features. In this example, fraudsters triggered a legitimate Google fraud alert on a user's account. Shortly afterwards, the fraudster contacted the user, claiming to be a representative from the Google Fraud Team, offering to help secure their account. The fraudster requested a one-time passcode (OTP) on the account which was sent by Google to the user for verification. Believing the call was authentic, the victim shared the OTP with the fraudster, which granted the fraudster access to their Google account.
#3. Romance scams
Romance scams are where fraudsters set up a fake online identity and connects with an individual online over months and even years. Once the fraudster has gained the trust and affections of the individual, they then dupe the individual into sending them money for items or bills such as emergency health care, or plane tickets to visit. These cases have been on the rise in recent year, especially with the rising popularity of dating apps.
The total number of romance scam payments increased 31 per cent in 2023 and are up 200 per cent from 2020[1]. However, this figure could be significantly underestimating the true prevalence of this crime, as victims of romance can feel shame at being duped and having their heart broken at the same time. Therefore, they are much less willing to discuss the fraud with friends or family let alone report the fraud.
#4. Investment scams
Investment scams trick individuals to invest their income, savings or pensions into fake investment opportunities.
Investment scams dropped in 2022 and 2023, and this drop reflects the cost-of-living challenges. However, with expectations of rising real incomes it is anticipated investment scam rates will also rise.
There has been an increase in targeted investment scams in the over 55 age group. Recent changes allowing a quarter of the pension amount to be withdrawn from the age of 55 contributes to an image of more disposable income within this age group. Coupled with low interest rates in recent years it makes investment scams with higher-than-normal rates of return particularly attractive.
Cloning firms is one of the methods fraudsters use to trick individual into investing where, the cloned firms pretend to be a genuine firm and may even copy their website. Fraudsters will use tactics such as time pressure, fear of missing out and advertise higher than normal interest rates to dupe the individual into making a decision without doing due research on the investment.
#5. Shopping purchase scams
Shopping purchase scams are when an individual makes a purchase online and the product never turns up. The fraudster may set up a fake website or a fake online profile on a seller’s website such as TikTok or GumTree to advertise the product.
Protecting against fraud
Becoming a victim of fraud can have serious financial and emotional impacts, but education is key to identify warning signs and stay informed about emerging fraud tactics to better prevent becoming a victim of fraud.
Individuals should be alert to:
- Anything that sounds too good to be true
- Requests for money upfront
- Cold Callers
- Being rushed into making a decision
- Any inbound communication channel that includes links, QR codes etc
- Being asked to provide financial or personal information
Its also worth stating explicitly, that
- Internet/phone providers will not contact you and ask you to install software on your device
- A bank will not contact you to move your money into a “safe” account
- Police are not going to phone you to help them with a covert operation to catch fraudsters
All of these are very common approaches fraudsters use.
There are levels of protection for individuals who are subject to fraud. The level of protection can depend on the channel and method of payment. For instance, the new new APP fraud reimbursement requirement came into force on 7 October 2024 which protects an individual up to 85,000 pounds for app-based fraud, such as romance scams and payment scams.
Credit Cards are covered under Section 75 of the Consumer Credit Act, when making a purchase between £100 and £30,000. However, although there is protection available It’s also important to act diligently when managing finances and responding to potential fraud. If an individual appears to have acted with gross negligence this can reduce the likelihood of reimbursement of a fraud related claim. Education plays an essential role in helping individuals avoid fraud and increase their chances of recovering funds should a scam occur.
There are a number of publicly available resources to help individuals protect themselves against fraud:
- The UK Finance promote a Take Five national campaign that offers straight forwards, impart advice to help raise awareness and try to protect individuals from Fraud.
- The FCA have tools such as ScamSmart[2] which allows individuals to check an investment or pension opportunity to avoid scams.
- The FCA produce a list, updated every evening, of authorised or registered firms by the FCA and its strongly advised to deal only with firms included on the list[3]. Additionally, there is a warning list[4] produced by the FCA which includes any unauthorised firms that the FCA are aware of that are not allowed to operate in the UK.
- Friends Against Scams[5] is a National Trading Standards Scams Team initiative which aims to protect and prevent people from becoming victims of scams by empowering people to take a stand against scams.
Reporting fraud
Individuals should contact their bank immediately to notify them that fraudulent activity is suspected. If money has been transferred to a different bank, it is always worth contacting that bank as well.
Any fraudulent activity should be reported Action Fraud. Action Fraud[6] is the national reporting centre for fraud and cybercrimes, and it collects reports bout fraud on behalf of the police in England, Wales and Northern Ireland. They can also offer help and advice to those impacted by fraud.
Protecting against fraud: taking action
Fraud prevention works best when everyone plays their part - individuals, businesses, and financial institutions. The key is staying informed and acting quickly if you spot suspicious activity.
Remember that protection is available, including the new APP fraud reimbursement requirement for losses up to £85,000. But prevention is always better than cure. Stay alert to warning signs, use available resources like the FCA's ScamSmart tool, and report any suspicious activity immediately.
If you suspect fraud, contact your bank straight away and report it to Action Fraud. The faster you act, the better chance you have of protecting your assets.
[1] UK Finance Annual Fraud report 2024.pdf)
[2] https://www.fca.org.uk/scamsmart
[3] https://register.fca.org.uk/s/
[4] https://www.fca.org.uk/consumers/warning-list-unauthorised-firms
[5] https://www.friendsagainstscams.org.uk/
[6] https://www.actionfraud.police.uk/