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Each year, the Federal Trade Commission (FTC) releases its Consumer Sentinel Data Book. When people fall victim to or encounter a scam, they are encouraged to report it to the FTC. The resulting data set is a comprehensive account of what types of fraud are occurring more often and what scams consumers should be aware of. While it isn’t a complete picture, we can analyze patterns and take action to stop increasingly dangerous forms of fraud.

1. Government benefits fraud went up 82% YoY

The COVID-19 pandemic relief programs unfortunately came alongside a huge increase in government benefits fraud. 2022 saw a brief respite, but the FTC is once again seeing an uptick in government benefits fraud. The FTC report wasn’t specific on the types of government benefits fraud that they saw, but given that medical fraud is in a separate category, we can guess that this refers to unemployment, food stamps, pensions, and small business grants. There was also a 14% increase in reports for forged driver’s licenses and a 33% increase in reports on the number of “other government documents”.

Public sector agencies have been trying to address this problem in a variety of ways, but it’s clear that robust digital identity that still allows for maximum access for the population would be a key first step to reducing these types of fraud.

2. Imposter scams continued to wreak havoc

2023 saw yet another increase in imposter scams, which have become the dominant form of fraud over the last decade. There are so many imposter scams it’s hard to keep track, but overall, the FTC saw increased monetary losses in 2023 and more volume. Whether it’s a romance scam or a scammer pretending to be a family member in distress, Americans are struggling to protect themselves from scammers. It doesn’t help that scammers are increasingly using social media and email to defraud victims; email jumped to the No. 1 form of imposter scam by volume in 2023.

3. Overall identity theft declined, especially in new account opening fraud

It’s not all bad news; overall identity theft reports actually saw a slight decline in 2023. This was partly due to a 7% decrease in the largest fraud category: new credit card accounts. Combined with a 24% decrease in new bank account fraud, it appears financial institutions have made improvements in their customer onboarding and improved Customer Identification Program (CIP) and Know Your Customer (KYC) best practices. Hopefully this continues in 2024.

Fraud reports for existing bank accounts saw a 7% increase. The industry should take note and shift its focus to protecting consumers from account takeover and synthetic identity fraud. In our own research, we have seen synthetic identity fraud growing over the past year. In other areas, medical services fraud saw a 51% drop, and federal student loan fraud dropped by 43%. This suggests that fraudsters have run into issues and are moving back to more lucrative targets like unemployment benefits.

4. Payments are a key weak point

The U.S. payments system continues to have significant exposure to risk from scammers. Investment scams have skyrocketed, costing consumers $4.6 billion in fraud, compared to $1.7 billion in 2021. By method of payment, cryptocurrency rose to $1.4 billion in reported fraud losses, coming close to the $1.8 billion lost in bank transfers.

Any type of real-time payment system, whether it be Venmo, PayPal, ACH, or cryptocurrency, is vulnerable to P2P fraud scams. Companies need to take extra identity verification and CIP/KYC measures to prevent people from sending payments to a scammer. When making payments, companies need to examine counterparties and whether they are using the same rigor of KYC requirements. Whether that’s by shutting down fraudulent accounts or increasing identity verification requirements, Americans are paying the price of inaction.

While the Consumer Financial Protection Bureau (CFPB) considers regulation around the liability for APP fraud, the industry has been working to self-regulate and ideally avoid such regulation. Across the Atlantic, the United Kingdom has now passed legislation that will take effect in October 2024 and will split liability between the sending and receiving institutions.

These reimbursements are a relief for consumers, but they will be costly for the payments industry. That means increasing security and educating consumers on P2P fraud scams will be even more important.

Taking Action on the Latest FTC Insights

The FTC’s Consumer Sentinel Data Book for 2023 highlights the ongoing challenges in combating fraud and protecting consumers. While certain types of fraud, such as digital identity theft and some financial fraud, have seen declines; other areas like government benefits fraud, imposter scams, and payment-related scams continue to rise at an alarming pace.

This underscores the need for robust digital identity verification, improved CIP/KYC practices, and enhanced security measures in the payments industry. Furthermore, educating consumers about the prevalence of scams and promoting vigilance is crucial. Collaborative efforts between government agencies and the financial sector are essential to address these evolving fraud threats and safeguard consumer interests effectively.

Socure’s AI-powered identity verification solutions leverage machine learning and data insights to accurately verify identities, detect fraud patterns, and enable safe, equitable, and efficient onboarding processes. Unlike traditional solutions that often fail to verify certain populations or adapt to changing circumstances we all experience throughout our lives, Socure’s approach uses advanced analytics to analyze a comprehensive range of identity attributes and behaviors, ensuring a holistic view of an individual’s identity and enabling businesses to reduce fraud while minimizing rejected application and lost opportunities.

Debra Geister

With more than two decades of experience in the banking compliance and anti-money laundering industries, Geister is a recognized leader in the financial crime detection field. She has worked with many of the largest financial institutions as well as technology and data companies, both global and domestic, to help eliminate and reduce money-laundering, fraud, and related financial risks.