How scammers use romance scams to defraud victims of money

Valentine’s Day is around the corner which means the return of some familiar romantic tropes. Think red roses, heart-shaped chocolates, and another viewing of The Notebook. But there’s another trend that banks should watch for whenever love is in the air: romance scams.

What are Romance Scams?

In a romance scam, a fraudster pretends to be romantically interested in an unsuspecting victim. The fraudster will often exploit their target’s romantic interest and manipulate them into giving them money or buying them valuable items on their behalf.

How Romance Scams Work

Romance scams (sometimes known as “catfishing”) happen both in-person and online. In the case of online romance scams, a fraudster connects with a victim by creating a fake dating profile or social media account and pretends to want a romantic relationship. They message their target stories to build their trust.

Eventually, the scammer tries to exploit this trust and encourages the victim to move their exchange off the dating website. Next, they pressure or manipulate the victim into sending them money. They might claim that they would like to meet in person but do not have enough money to travel, or that they are based overseas for business, or are in the military, or that they just had an emergency and can’t afford a plane ticket.  

How Serious are Romance Scams?

According to the latest figures from the Federal Trade Commission (FTC), romance scams represent one of the fastest-growing forms of fraud in the United States. The FTC reports that $201 million was lost to romance scams in 2019, a 40% increase from the previous year. This figure is also considerably higher than the $33 million lost to romance scams in 2015. Meanwhile, the FBI’s Internet Crime Complaint Center (IC3), logged nearly 20,000 romance scam complaints as recently as last year.

Unfortunately, the COVID-19 pandemic presented an opportunity for fraudsters to push romance scams as millions of people stuck in lockdown turned to dating apps and websites to start online relationships. Data from the Better Business Scam Tracker — which tracks reports of these types of fraud — found romance scam activity increased by 20% between April 2020 and October 2020, compared to the same period in the previous year. 

Romance scams are by no means limited to the US market. Authorities in Hong Kong reported that roughly 681 citizens have been scammed by fraudsters between January and September last year. This reflects a 50% increase in this type of activity from the same time last year. In the U.K., a woman lost £320,000 ($438,000 USD) to a romance scam while another lost £10,000 ($13,600) to the same con artist. Interpol recently issued a warning to its 194 members that romance scammers are using dating apps to trick victims into various investment schemes.

Notable romance scam statistics from the FTC, FBI, BBB and other agencies

4 Ways Banks Can Protect Their Customers

Banks and other financial institutions (FIs) can play the role of both financial and romantic guardians in protecting their customers from romantic con artists. Romance scams are a form of authorized push payment (APP) fraud that depends on the victim willingly making a transfer to the fraudster (although under false pretenses). Ultimately, the fraudster’s endgame is to manipulate their target into transferring money from their bank account to another account that they control or possibly revealing their credit card information. Here are a few steps banks can take to help stop romance scams.

1. Watch for Unusual Customer Behaviors

One of the most effective ways banks can stop fraud is to understand how their customers typically behave. With this understanding, banks can more easily spot red flags if their customers transact in unusual ways. If they determine that a customer might be making an unusually risky transaction — such as making a wire transfer to an unknown recipient overseas or buying a plane ticket on behalf of someone else — the bank can stop the transaction before their customer’s money is lost. 

 

Demonstration of a romance scam as seen by Feedzai’s data visualization engine, Genome.

 

Banks should also take time to modify their existing policies and procedures related to operational processes in order to ensure that their fraud operations analysts are trained to spot unusual patterns. Analysts should be trained to ask customers if they understand the risks of scams when they validate their transaction activities.  

2. Set Transfer Limits and Rules

One of the ways that banks can help their customers avoid losing money to a romantic deception is to implement rules and limits designed to mitigate these kinds of losses. For example, banks can impose limits on the amount or frequency of transfers from a customer’s bank account. Additionally, these rules can stop a transaction from being completed if they far exceed the number of transfers made in the past few months. The availability of instant payment schemes in numerous global markets means that money can move in a matter of minutes or even seconds. Having these rules in place could help customers avoid losing their money before they realize they are being scammed.

3. Embrace Machine Learning

It can be extremely challenging for human beings to detect romance scam red flags amid troves of transaction data. Machine learning technology relieves banks of the heavy lifting by spotting patterns in large volumes of data. This includes how often a customer has previously made overseas transfers or if their financial patterns indicate that they might be under the influence of a bad actor. 

4. Consumer education and awareness campaigns 

At a time when many people are still in lockdown and pursuing online relationships, banks could play a role in helping their customers detect red flags. Banks can launch awareness campaigns aimed at educating consumers about how romance scams operate and warn them of signs that they might be engaging with someone with sinister intentions. These campaigns can point to publicly-available resources from consumer advocacy groups like the Better Business Bureau and law enforcement agencies like the FTC. The FTC has released a list of common romance scam warning signs including:

  • When the other person professes feelings of love too early in the relationship;
  • When the other person tries to quickly move the communication away from the dating site or app;
  • When the person asks for money for an emergency or for a plane ticket.

Romance scams are among the fastest-growing scams because fraudsters are able to prey on people’s emotions. There are numerous consumer-facing resources available that are aimed at raising awareness of these scams and helping customers determine if they are being manipulated or not. Some resources encourage victims to notify their bank immediately if they believe they have fallen for a romance scammer.

But the sad truth is, money lost to romance scammers is likely money lost for good. Prevention is the best way that banks can keep their customers safe from this kind of fraud. Machine learning solutions proactively detect suspicious activity and stop romance scammers, making it more likely that banks will feel the love from their customers. 

Payments can move from sender to receiver in a matter of seconds. How can banks be certain that the recipients are legitimate actors and not fraudsters attempting a scam? Download our infographic Rules to Stop the 8 Types of Transfer Fraud Losses to learn how Feedzai prevents some of the most common types of fraud.