Insight

Thumbs down: Fraud and social media

Written by Jon Prentice on Monday June 13, 2022


Social media, impressive though its evolution and growth has been, has proven a fertile space for criminal activity. Platforms set up for individuals to keep in touch with friends, reunite with former classmates or share snaps of their meals with strangers are all regularly abused by criminals taking advantage of vulnerable people. Fraud, in particular, is popular – but what is most interesting is its special relationship to social media, and how the two have combined to cause harm, distress and loss to an enormous number of people.

 

Evolving fraud and tech

To stay ahead, fraudsters adapt to change and no change has been bigger than the rise of social media. In 2021, more than one in four people who reported losing money to fraud claimed it began through an ad, post or message on social media.[1] Over the past 5 years, fraud originating from social media has risen dramatically, with around 5,000 people reporting $42 million in losses stemming from social media in 2017; in 2021, this was more than 95,000 people reporting around $770 million in losses.

Before social media took off, fraudsters used traditional methods like door-to-door, email or telephone scams. But social media’s arrival has provided high-reward, low-cost access to billions of potential victims. It was common, during the nascent years of social media, for criminals to scour platforms to find out when people were on holiday so as to rob their homes; but as social media has evolved, so have the techniques and tactics used by criminals, and today fraudsters can create a plausible but fake profile with just a few clicks – a considerable reduction in effort and costs.

 

Investment, romance and other scams

Social media provides fraudsters with a number of ways to defraud the public, with the two most common being investment and romance scams.

In 2021, more than half of those who reported losses through investment scams said that their misfortune began on social media.[2] Fraudsters will bombard social media users with bogus investment opportunities, often promoting cryptocurrency schemes guaranteeing large returns. Once a victim sends the fraudster money (again usually via cryptocurrency), the fraudster disappears never to be heard from again, leaving the ‘investor’ empty handed. Fraudsters will often go as far as impersonating friends of would-be victims in order to persuade them to depart with their money.

Federal Trade Commission (FTC) data, meanwhile, reveals romance scams to be the second-most lucrative form of social media fraud. Since 2015, the number of romance scams reported to the FTC has tripled,[3] with 2021 consumer losses a record $547 million.[4] Romance fraud via social media usually adheres to the following pattern.[5]

  • Generally, initial contact will be made by the fraudster on social media.
  • Fraudsters typically use other peoples’ photographs and pass them off as their own, usually using those of very attractive individuals.
  • The fraudster will take a keen interest very quickly, asking a lot of questions. This is because the more information they know about someone, the easier they become to manipulate. The fraudster will then start to create a story about themselves; this stage can last for some time.
  • After initial friendly discussions, the conversation turns romantic very quickly, with the scammer showering the victim with compliments and claiming that they are falling in love.
  • The story the fraudster has created about themselves will often change over time or have many discrepancies.
  • The fraudster will refuse to meet in person, or on a video call.
  • Eventually they will ask to borrow money, usually for emotional reasons, such as the need to pay for medical care, pay the rent, for a flight to visit the victim or for an investment opportunity that could benefit both parties.
  • Once they receive the money the fraudster either vanishes or continues to ask for more money, giving further elaborate reasons as to why they need it.

Phishing

Phishing is traditionally conducted via email, but SMS text messaging and social media are increasingly popular. With billions of active social media users, it is a quick and effective way of exploiting unsuspecting victims. Links that look innocent in posts, tweets or private messages can be used as bait to entice people into clicking, either infecting a user’s device with malware or directing victims to a fake website where they enter private personal details. From here, criminals will use the victim’s personal details for illicit activity.

 

Money mules

Money mules are those who transfer illegally acquired money on behalf of a criminal. The funds usually derive from online scams, frauds or crimes like drug and human trafficking. Criminals use money mules to add layers to the money-laundering process in order to distance themselves from the proceeds, making it harder for the police to trace the initial criminality.[6]

Criminals find victims (usually those under 30) through apps like Instagram and Snapchat, posting glamorous ads with the promise of quick and easy cash. Once onboarded, the money mule will be sent a certain amount of money and asked to either send it on to other bank accounts, send it abroad or withdraw it as cash, with a percentage of the money going to the money mule as a ‘handling fee’.

Often, the money mule is unaware that they are moving the proceeds of crime, and are oblivious to the fact that they are breaking the law. Individuals found to have knowingly used their accounts for money laundering can face up to 14 years in prison in the UK, in addition to being logged on the national fraud database which can prevent them from opening bank accounts, applying for loans or mortgages, or even taking out mobile phone contracts.

 

Loan sharking

With the cost of living rocketing, unlicensed lenders are targeting society’s poorest through social media, lending money with the intent of charging extortionate fees and interest rates. If payments aren’t met, the illegal lender will add on large fees and harass the victim either by bombarding them with messages on social media or turning up at their house to harass them in person.

Loan sharking is not new, having been a lucrative source of income for organised crime since at least the 1920s. What is new, however, is the use of social media to reach victims. With money available in a matter of minutes and loan sharks advertising their services in plain sight, it is easy for vulnerable or financially restricted individuals to get dragged into the murky world of illegal lending.

 

What you can do to avoid falling victim

As with most types of frauds, prevention is better than the cure.

  • Keep social media accounts as private as possible. Using the maximum privacy settings limits who can view your personal details and who can approach you on social media, ensuring the greatest security against criminals.
  • Limit the amount of personal details you share on social media. This includes your address, employment details, date of birth, names of family members or pets – anything that could be of use to a fraudster.
  • Be wary of who you connect with. Only accept friend requests from people that you know and be wary of impersonation accounts (accounts whereby criminals may impersonate somebody that you actually know).
  • Look out for dangerous links. Often disguised as contests, quizzes, giveaways or news articles, criminals will use these links to either gain access to your social media accounts, or entice you into entering personal details, both of which will be used for nefarious purposes.
  • Avoid oversharing. Sharing too much information via social media posts can supply scammers with enough information to take advantage of you or target you with a potential scam.
  • If it sounds too good to be true, it probably is. As with most things in life, if something you see or are offered via social media appears too good to be true, it more than likely is a scam of some form.
  • Keep an eye out for those around you. If you notice a change in a family member or friend’s behaviour, especially with regards to their finances, talk to them and make sure that they haven’t fallen victim.

To learn more about this topic, why not consider taking the ICA Advanced Certificate in Managing Fraud or one of our courses in Financial Crime Prevention?


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[1] Emma Fletcher, ‘Social media a gold mine for scammers in 2021’, Federal Trade Commission, 25 January 2022: https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/01/social-media-gold-mine-scammers-2021 – accessed May 2022

[2] Emma Fletcher, ‘Social media a gold mine for scammers in 2021’

[3] Clare Stouffer, ‘Romance scams in 2022: What you need to know + online dating scam statistics’, Norton, 4 February 2022: https://us.norton.com/internetsecurity-online-scams-romance-scams.html# – accessed May 2022

[4] Emma Fletcher, ‘Reports of romance scams hit record highs in 2021’, FTC, 10 February 2022: https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2022/02/reports-romance-scams-hit-record-highs-2021 – accessed May 2022

[5] Neighbourhood Watch, ‘Romance fraud’, https://www.ourwatch.org.uk/crime-prevention/crime-types/scams/protecting-against-scams/romance-fraud – accessed May 2022

[6] FBI, ‘Money mules’: https://www.fbi.gov/scams-and-safety/common-scams-and-crimes/money-mules – accessed May 2022


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