Finance 101 Scams Are on the Rise in 2021, Here’s What to Watch Out For

by Ellen Sheng | April 29, 2021

Chances are, you’ve been on the receiving end of scam attempts over the past year.

Maybe you received calls about your car’s warranty expiring or, perhaps, an email claiming your digital payment account was suspended and you need to log in to verify information. What about those out-of-the-blue text messages notifying you of unclaimed money or school loans that need to be repaid? Yep, all those should raise suspicions about their authenticity.

Scammers have been exceptionally busy in the past year. According to the 2020 Internet Crime Report by the FBI’s Internet Crime Complaint Center (IC3), there were nearly 800,000 complaints of suspected internet crime reported to IC3 in 2020, with losses exceeding $4.2 billion. For perspective, that’s 300,000 more complaints than in 2019.

The tactics of cyber criminals are constantly changing, therefore it is important to stay on top of the most current common financial scams, how they have evolved, and some tips on how to spot and report them.

1. Romance scams

How they work: A scammer — perhaps pretending to be someone living overseas or working in a remote location — strikes up a relationship with you online. This can happen via email or through a dating or social media app or site. They may try to legitimize the relationship by sending you flowers or other gifts (likely paid for with a stolen credit card). Usually, scammers take their time to build up a relationship. Only after gaining your trust will they ask you to send them a gift card or to wire cash, claiming that it’s to pay for a plane ticket, surgery or customs fees.

There has been a significant uptick in romance scams in the past year, in part because people are more isolated during the pandemic and spending more time online. The Federal Trade Commission (FTC) reports that victims of online dating scams lost $304 million in 2020, up 400% from 2016. “Romance scams are really serious, because they’re preying on people who are almost willing to do anything in certain circumstances,” says Stacie Purcell, Senior Vice President of Retail Consumer and Commercial Fraud Policy at Citi.

Quote
Usually, scammers take their time to build up a relationship.
End Quote

Even if a financial institution is able to flag a transaction to a customer as suspicious and calls the customer to verify, scammers can be so persuasive that victims – even when alerted to the crime – can still be insistent that a transaction is legitimate.

“We try to educate our customers on how not to be scammed. It just seems to be more prevalent now than it’s been in the past,” says Adam Wood, Director of Cards Fraud Prevention and Policy at Citi.

What you can do: It doesn’t matter how good of a story it is; if a new acquaintance asks for money, be aware that it’s likely a scam. Stop communicating immediately and don’t send money to people you haven’t met in-person, even if they’ve sent you gifts. Report these scams to the dating or social networking site, if that’s where you met. Also, you can report the incident to the FTC.

2. Social engineering scams

How they work: While this type of fraud is not new, the techniques evolve. Scammers impersonate a trusted party, such as your bank or credit card company, to attempt to trick you into divulging personal information (like a Social Security number) or sharing a one-time password, allowing them to log in to your account. Ploys may come via text, email or other methods.

Social engineering scams prey on human psychology — whether greed, fear, curiosity, a desire to help others — and exploit it to their advantage. Plus, scammers leverage knowledge of their victims, like where they bank, to help make their communications appear legitimate.

“It’s really just an old-school way for them to circumvent the more effective controls. The bad guys are resorting to old-school social engineering, and tricking people into doing things by impersonating financial institutions,” says Brian Kennedy, Director of Online/Mobile Fraud Prevention and Strategy at Citi.

What you can do: Do not freely provide your personal information. Banks and merchants do not ask their customers for their credentials or personal information they already know, such as a username, password or one-time password. If you are unsure about a request made by phone, hang up and call the number on the back of your credit card or on the bank site, or contact a merchant directly through a phone number you know to be valid. If the suspicious message came by text or email, don’t reply or click any links; instead, reach out to the purported sender by phone via a valid phone number to inquire about the message’s authenticity.

A woman looks at her phone with a puzzled face

3. Money mules

How they work: You might receive an unsolicited message on social media or an email promising easy or quick money. You’re asked to accept a payment or deposit a check on behalf of someone, and then wire the funds, perhaps to a “client” or “supplier.” In return, you are paid a small fee. These schemes are rampant on social media at the moment, often advertised as work-from-home schemes or quality control for an “investment company.” The funds the victims accept are illicit, and money they send to other parties isn’t recoverable. According to a December 2020 announcement by the Department of Justice, U.S. law enforcement agencies took action against 2,300 money mules, just in the prior two months — a marked increase from the 600 total actions in all of 2019.

What you can do: If it seems to be too good to be true, it probably is. If someone is asking for your account number, be alert and don’t engage. It’s important to understand the origin of the funds that are coming into your account.

Be aware that you might be pulled into something beyond petty theft. The FBI warns that money trafficked through money mule accounts has been linked to criminal enterprises including human trafficking, drug sales and other illegal activity.

If you participate, you may inadvertently become ensnared in a money-laundering scheme that has criminal culpability, warns Tim Webb, Director of Retail Bank Fraud Prevention and Policy at Citi.

4. Tax and government scams

How they work: Someone poses as working for the IRS and insists that you need to pay back taxes for some kind of error on your tax filing. Other times, scammers will impersonate the Social Security Office or some foreign government agency and claim you owe tens of thousands of dollars and need to wire the money to clear your government record. The phone number they call from appears by the caller ID to be from the IRS or Social Security Office, but that doesn’t mean it is. Scammers are typically very demanding and use scare tactics, like threatening that you’ll be arrested if you don’t pay immediately.

What you can do: The IRS doesn’t initiate contact with people through email, text messages or social media to request personal or financial information. The IRS also does not call to demand immediate payment through a prepaid debit card, gift card or wire transfer. Taxpayers who aren’t sure if they owe money can check IRS.gov to see the actual amount owed or call the IRS directly. To report fraud, taxpayers should report the call to the Treasury Inspector General for Tax Administration.

A man ponders the information on a piece of paper

5. Unemployment benefit scams

How they work: You receive a letter from the state unemployment benefits office or from an employer about your application for unemployment benefits that you did not apply for. What likely happened was a scammer used your personal information, including your birth date and Social Security number, and falsely applied for unemployment benefits, which were then sent to the scammer’s bank account.

What you can do: Report the fraud to your employer and state unemployment benefits agency right away. Keep records of who you spoke to and when. Also, hold on to any confirmation or case number you get from the unemployment agency.

“If you get a letter in the mail that you don’t understand about unemployment insurance or something that you have no knowledge of, call your state agency immediately and tell them that you think there might be fraud,” says Webb. “Because if you don’t, it could just get worse and continue.” Also report identity theft fraud to the FTC, which can help you get a free extended fraud alert, close fraudulent accounts that were opened in your name and freeze your credit.

3 ways you can protect yourself

Fraudsters may be more active than ever, but with some extra vigilance, you may be able to protect your personal information and financial accounts from fraudsters.

1. Download your bank’s mobile app

It’s more difficult for scammers to impersonate an in-app notification than to send phony text messages and emails or make fake phone calls. For that reason, banks and credit card companies often prefer to communicate with customers through a mobile app. When you download the app, enable push notifications so you can get updates on any unusual activity, whether it’s transactions over a certain dollar amount, international transactions, or anything else that's outside your normal spending patterns.

2. Hang up and call back using a valid phone number

If you get a call regarding one of your accounts, but you aren’t confident of the source, hang up and call the bank, credit card company or retailer directly. “Your bank is never going to call to ask [over the phone] for the one-time password or [for] log-in information, nor would any other trusted company. If you get those calls, something’s wrong. That right off the bat is your first clue that it’s a scam,” says Citi’s Adam Wood.

3. Set up two-step verification for your wireless account

Contact your mobile provider to set up two-step verification. This requires users to pass an additional verification step when signing into their wireless account. Some scammers try to bypass one-time passwords – which are usually texted to your mobile device – by gaining control of your phone number.

Ellen Sheng

likes to learn about managing her finances by interviewing experts. Her stories have appeared in The Wall Street Journal, Forbes, Fast Company and Marie Claire.