According to the Federal Trade Commission (FTC), Americans lost $10 billion to scams and fraud in 2023. The median loss was $500 per victim. However, more than 100,000 people reported losing over $10,000. Financial scams no longer target just the elderly. Anyone can fall victim. And the tactics used are getting trickier every year, so staying informed is essential. Keep reading to learn more about the most common types of financial scams and fraud, tips for protecting yourself, and what to do if you’ve been victimized.
7 Most Common Types of Financial Scams & Financial Fraud
New types of scams are always popping up. However, fraudsters tend to stick to what they know works. They find a tactic, and they repeat it.
Here are the most common financial scams out there today:
1. Money Mules
A scammer will use someone as a “money mule” to accept and transfer fraudulent or stolen money. So, the fraudster might ask you to open a bank account under your name and promise to give you some cash if they can use the account.
Be wary of anyone asking to use your name for any financial activities you’re not associated with. Unfortunately, you can be held responsible if you willingly participate in these activities and the money is found to be stolen.
2. Online Dating
Online dating scams are a popular way for fraudsters to target lonely people. They’ll pretend to be a desirable candidate, spend lots of time online forming a relationship with you, and then trick you into sending them money. Usually, once they’ve gained your trust, they’ll make up some emergency that requires immediate financial support. Once they have tricked you out of all your funds, they’ll stop all contact.
3. AI Voice Imposters
With the popularization of voice recognition technology, a new scam has arisen. A scam artist will get ahold of a person’s voice recordings. Then, they’ll manipulate the voice recordings using AI technology to say whatever they want. They’ll often call as an unsuspecting loved one—such as a grandparent—pretending to be a troubled relative who needs an immediate bank transfer. So, you think you’re helping your brother or wife because it sounds like them, but it’s actually a scam artist.
4. Property Fraud
If you own property, you need to be careful of potential property-related scams. Some popular examples are:
- Property Title Fraud: When a criminal illegally transfers the title to your paid-off home to themselves.
- Mortgage Payment Assistance: A scam artist may offer a “too good to be true” offer to help you pay off your home quickly. Usually, they require you to send them money so they can help it “grow.”
- Foreclosure Scams: Individuals at risk of foreclosure may fall prey to foreclosure scams. In this scam, the individual will pretend to be helping you get out of foreclosure, but in reality, they’re illegally accessing the equity in your home.
5. Cyber Scams
Cybercriminals can attempt to access your digital files on a computer or smartphone. They might use this access to:
- Gain access to your bank passwords and drain your accounts.
- Encrypt all your data and demand payment to have it decrypted. This type of attack usually targets businesses rather than individuals.
- Gain access to private information and threaten to post that data online unless you make a ransom payment.
Cybercriminals usually gain access to your phone or laptop through a malicious link. However, QR codes can also be used for cyber scams.
6. E-Transfer Scams
A popular scam that many people fall for is the e-transfer scam. You receive an e-transfer from someone you don’t know very well. They ask you to send the money back, so you do. The problem is the first e-transfer was fraudulent funds. It takes the bank a few business days to realize the fraud, and when they do, they reverse the transfer. But, by then, you’ve already sent the criminal your funds.
7. Imposters
Someone may call you and say they’re from your bank, the IRS, your mortgage company, or another government agency. Then, they use their false identity to trick you into paying funds or sharing your sensitive financial data.
In these scenarios, because you gave your information willingly, it’s often difficult to recover the lost funds!
7 Tips for Protecting Yourself From Financial Scams
The seven above scams are just some of the most common examples. There are even more financial scams you need to watch out for. And new ones are being invented every day!
Here’s how you can protect yourself and reduce the chances of being a fraud statistic:
- Be suspicious of urgent demands. Any time you’re pressured to send money immediately or share your financial information urgently, there’s a high chance it’s a scam. The criminal is trying to fluster you into making a mistake before you can confirm anything or think things through.
- Confirm identities. If someone is calling you and asking for money or your financial information, take a moment to confirm their identity. If it’s the bank, hang up and call your bank back on their customer support line. Do the same with IRS or government agents—hang up and call the public number to confirm the situation.
- Store passwords safely. Your cyber safety is on you. Always have strong passwords, never write them down, and enable two-factor authentication when you can.
- Be cautious of links and QR codes. Never click on links in suspicious emails or scan unknown QR codes.
- Protect your personal information. Avoid sharing your personal information as much as possible. Consider removing your birthdate, full legal name, and address from social media profiles, as they could be used for identity fraud.
- Purchase antivirus software. This one-time purchase can help protect you from cyber scams.
- Review your finances regularly. Ultimately, financial scams and fraud result in your money or identity being stolen. Make it a habit to check your accounts frequently to spot unusual transactions. Also, review your credit report annually to spot signs of identity fraud.
What to Do If You Think You’re a Victim
You must act quickly if you’ve already fallen victim to a financial scam or fraud. Here are some of the steps you may need to take:
- Contact your bank and report the scam. Ensure they lock your accounts and report fraudulent transactions.
- If your credit card has been compromised, immediately contact the credit card company.
- If you’ve been in direct communication with the con artist, stop further contact immediately.
- Change the passwords on all your accounts.
- Report the scam to the police and ensure you get a case number for future follow-up.
- If the fraud involves online activity, you can report it to the FTC at ReportFraud.ftc.gov.
- You may want to lock your credit profile so no one can open a new account under your name.
- Consider signing up for credit monitoring services, which will immediately alert you if your credit profile changes.
Far too often, victims don’t report fraud or scams because they feel ashamed. But these are professional criminals who know how to manipulate and trick people. There is no reason to be embarrassed. Reporting scams can help police make arrests, resulting in fewer future victims.
The best thing you can do is report the scam and learn how to better protect yourself in the future.
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