Cybercrime is on the rise within financial institutions and other businesses and continues to be at the forefront of the minds of those in the fraud prevention field. Bad actors are staying one step ahead of detection creating serious hard dollar losses for financial institutions.
Cybercrime is defined as a criminal activity (such as fraud, theft, or distribution of child pornography) committed using a computer especially to illegally access, transmit, or manipulate data. According to 2018 numbers compiled by the Federal Bureau of Investigation’s Internet Crime Complaint Center (IC3), there were over 351,936 cybercrime complaints during the year with hard dollar losses of over $3.7 billion. Although not all of the following types of fraud are fully internet-based, the IC3 statistics represent the cybercrime side of these crimes.
The breakdown by hard dollar fraud losses is as follows:
By Monetary Loss
1) Business Email Compromise
2) Confidence Fraud/Romance Fraud
3) Investment Fraud
5) Real Estate/Rental
Here is a deeper look into the definitions of each of these popular means of fraud:
- Business Email Compromise (BEC) is a sophisticated scam targeting businesses working with foreign suppliers and/or businesses that regularly perform wire transfer payments. The scam is carried out by compromising legitimate business e-mail accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds. An example of BEC would be a receipt of an email from a company executive to transfer funds with high importance. By doing extensive research, criminals obtain information (often through phishing or social engineering) and build profiles of senior executives in an organization. The CFO is often a target and criminals study how the executive corresponds via email; they even observe nuances in those communications to ensure their fraudulent emails appear authentic. The BEC email often happens when the CFO is out of the office, making it difficult for employees to verify the email is credible.
- Confidence fraud/romance fraud is an attempt to defraud a person or group of persons after gaining their confidence and trust. An example of this type of fraud would be the “sweetheart scam” where an internet or in-person love interest convinces the victim to send funds as a loan or a means to be together, only to become the victim of a loss of money, embarrassment, and a broken heart.
- Investment fraud is one type of fraud that the financial crimes world has known for some time. Unscrupulous brokers and investment advisors prey on unsophisticated investors, many times the elderly, to invest their life savings on unsuitable or speculative high-risk investments. Popular scams such as pyramid schemes and Ponzi schemes, have promised sky-high returns in a short period of time, only to have the duped investors lose millions of dollars when the schemes collapse.
- Non-Payment/Non-Delivery is also a very commonly known form of fraud. Non-payment or delivery of goods or failure to ship merchandise has grown significantly with the increase in internet auctions, such as eBay. Users should remain cautious when buying/selling and do your homework and deal only with reputable parties.
- Real estate/rental fraud is real for a consumer looking for a new real estate purchase or rental property. Rental fraud occurs when someone claiming to be a property manager tried to rent a property that doesn’t exist or isn’t their rental property at all. Scammers collect an application fee, security deposit, or rent before the victim discovers it is a scam. With real estate fraud, a purchase transaction email from a scammer perpetrating to be the title company requesting payment for a property purchase can cause the victim to wire millions of dollars, only to find out later that it did not actually go to the title company.
In remarks at the New York University Law Program on Corporate Compliance and Enforcement in June 2019, Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco stated that FinCEN continues to strive toward its mission of safeguarding our financial system, protecting our national security, and keeping our communities and families safe from harm. Particularly relating to cybercrimes, FinCEN is working hard to combat the rise of large-scale cyber theft, and in particular, BEC scams.