New Warnings About Fraudulent Payment Scams
The Government Accountability Office (GAO) is sounding the alarm on fraudulent payment scams, which are growing at a rapid rate.
A fraudulent payment scam is when a victim is tricked into a paying for something they don’t owe money for often by a scammer impersonating the government or pretending to be a romantic interest. Or it happens when victims get duped by fake investment scams.
While there are “are no complete measures or estimates of how widespread fraudulently induced payment scams are or the financial losses they have caused” GAO says fake investment scams alone rose 40 percent from 2022 to 2023, with the scammers making away with more than $4.5 billion.
On top of that, GAO is warning that the use of generative artificial intelligence (AI) to alter voices and images is making scams harder for victims to detect.
One area of concern is romance scams. In a romance scam, a scammer uses a dating website or app to build trust with a victim, and then asks for money once the relationship is established. Once the money is transferred, communication often stops.
In another scam, scammers pretend to be a government agency and threaten victims with prosecution if they don’t pay up.
Reimbursement Warning
What GAO wants Americans to know is that financial institutions are not necessarily on the hook if you get duped by a fraudulent payment scam. The reason: a customer authorized the transaction, which makes it harder to get reimbursed than if someone stole your credit card and started charging.
Financial institutions told GAO they’re working to help customers avoid being victims of such scams. That includes increasing staff training on the issue, promoting consumer education on such scams, posting warnings about scams on apps and websites, and putting in additional security measures to verify the legitimacy of payments.
GAO also notes that it’s up to consumers to pay attention to scam alerts and that “if it seems too good to be true, it likely is.” Victims should also notify their financial institution and law enforcement immediately.
FraudNet Update
The scam report comes after GAO recently published its annual FraudNet report, which facilitates the “reporting of allegations of fraud, waste, abuse, or mismanagement of federal funds.”
Over 4,00 fraud allegations were submitted to FraudNet in fiscal year (FY) 2023. That was substantially lower than the 10,000 submissions submitted in FY 2022. However, more allegations were referred to investigation in FY 2023, as many of the FY 2022 reports were duplicate complaints over social media campaigns.
Government subsidy fraud, ethics/conflict of interest/misconduct, and employee fraud were some of the most common fraud types reported in FY 2023.