Scams are not a new threat; they have coexisted with the financial market since its beginnings. The earliest scam is estimated to have been in Ancient Greece and since then they have evolved to become so highly sophisticated that stopping them has become a Sisyphean task.
However, while there are still challenges facing the fight against scams, new technology is helping financial institutions improve their odds. A new whitepaper from fraud and AML platform Unit21 has delved into the world of scams and how firms can fight back.
The threat of scams
Despite attempts to increase awareness around scams, they continue to be a major threat. As to why this is the case, Alex Faivusovich, head of fraud risk at Unit21, simply said, “Scams are happening because it’s so easy to scam people.”
Supporting that view is a report from the Global Anti-Scam Alliance, which recently claimed scammers stole over $1trn globally in the past year.
What makes the current scam environment so worrying is that the financial market is the perfect breeding ground for scams. Faivusovich added, “I think we are in the midst of a perfect storm. We have massive digital acceleration happening everywhere, and we also see a very increased, let’s call it, reliance on mobile and faster payments. Those factors combined, create the perfect ecosystem for scammers to operate and scam people out of their money.”
Making the fight against scams harder is the fact they come in a variety of different forms. One of the most well-known types are email-based scams that try to trick a victim into thinking they are speaking to someone else, whether it is an unknown prince willing to share a fortune, a boss asking for bank details or a friend in need. But scams can come through a variety of communication channels and take various forms. For instance, there are scams involving investment, romance, bank transfers, payments, fake job posts and many more.
A report from the Federal Trade Commission claimed that the biggest scam losses in 2024 happened through bank transfers or payments, with around $2bn lost in total by victims. These payment scams often involve a criminal persuading a victim to authorise a payment directly to their account, after building a level of trust through communication.
Faivusovich believes that the scams that involve exploiting trust and involve some type of grooming period will continue to be commonplace. However, he also noted one type of scam he believes will rise in the coming years. “I think one major element we need to look into is what I would call synthetic employees. These are people who either don’t exist in the real world or misrepresent themselves, applying to companies as key roles in order to just get paid for work they’re not doing, but it can go even up higher to corporate espionage.”
Misconceptions about scams
There are a few misconceptions when it comes to scams, both from the consumer and financial institution perspectives.
Faivusovich noted, “I think the most common misconception, and I believe we are all at fault, is that we think, ‘scams will never happen to me, I’m so tech savvy and I’m alert to everything. There’s no way someone can scam me.’ This is not true.” Scammers are using all the latest tools to ensure they can be successful in fooling people.
“If you can use Gen AI for your work or for your hobbies or for any research you do, the scammers can do the same. So, if they put a target on your back, and they learn everything they need to learn about you before they attack you, the attack can be so sophisticated you can actually fool the most tech savvy person.”
As for financial institutions, Faivusovich believes the biggest misconception is that they still perceive their customers as victims when they try to detect the scam. He added, “I believe that the first step when it comes to scam detection is to look at your customers from the same perspective as the scammer, as an asset.” Firms need to start looking at their customers and see what their typical behaviour is, what the intent of the current transactions are and generating insights into whether that asset is being compromised and drained of their funds, he said.
To help address the threat of scams, there needs to be a shift in how customers are educated about scam threats. Faivusovich explained that while the financial services industry is making good progress in boosting scam awareness, it is reactive when it needs to be in real-time. Scam awareness needs to be integrated seamlessly into the user experience, so that when they are logging into an app, making a payment or calling the bank, there are tools that alert them to risks before they make a mistake and fall prey to a scammer.
How technology has changed the game
Technology has not only improved the capabilities of fraud teams but also improved the powers of criminals. These new capabilities have even helped breathe new life into old scams that people had once grown confident in spotting. For instance, telltale signs of a email scam were grammatical errors or a strange tone of writing, but generative AI can now create perfect emails that look extremally authentic.
Elsewhere, deepfake technology can allow a criminal to replicate someone’s voice and alter their likeness in photos or videos. This can help fool unsuspecting victims that they really are talking to a potential lover or their grandchild. This dramatically increases the trust and makes them more likely to make an investment or send over funds to help pay bills.
However, one of the biggest impacts technology has had on scams is scalability. Faivusovich explained, “There is usually a grooming period where the scammer works the victim for several days, weeks or months to build the trust before the next step of the scam. Now, with AI and being able to operate maybe several bots from the same device, you no longer have to interact with the victim one-on-one over a period of weeks, you can have an AI agent do it.”
This not only allows them to minimise their time engaging with one victim, but scammers can scam 1,000 people at once, increasing their odds of being successful. “The scalability is what frightens us because the volumes we’re seeing are getting higher month over month.”
Is the FI responsible for the victim
One of the areas the whitepaper delves into is the concept of responsibility. Governments around the world are trying to crack down on scams; however, there are still gaps in regulations and guidance on how financial institutions can better tackle scams. One of the biggest dividers is where the responsibility lies with a successful scam.
In the UK new rules implemented by the Payment Systems Regulator require firms to reimburse customers who have been victims of APP fraud. Meanwhile, in Australia, banks, social media platforms and telecom companies must take reasonable steps to detect, disrupt and report scams or face financial penalties. As for the US, there is no requirement that a bank reimburses a scam victim, allowing them to take a case-by-case basis. The whitepaper asks the question of who should foot the bill for a scam.
As for Faivusovich, he hopes to see more regulators coming forward and providing guidelines to financial institutions on how to act. However, he also believes financial institutions need to be better prepared. “Financial institutions need to design their payment systems in a way to assume that scams will happen.” Modern payment systems are designed with speed and convenience at the centre, allowing people to send money in near real-time. This is great for most payments but means scams can also be completed rapidly without any safety net.
“I think speed doesn’t mean we need to give blind approvals to transactions. What we are trying to implement with our customers is what we call pre-transaction intelligence. If there is a slight change in the pattern of behaviour and we think the intent is also different, what type of friction can we introduce before the transaction happens, to slow down the customer and make them second guess and spend another 2-3 seconds before they click the button and execute the real-time transaction.”
How Unit21 can help fight scams
As financial institutions look to improve their fight against scams, Faivusovich’s advice is to fight AI with AI.
Unit21 offers a scam solution that aims to view scams from new angles to improve a client’s ability to spot them. As part of this, Unit21 boasts AI Agents, which can be implemented as an assistant to staff members to streamline some of the tedious time-consuming tasks. The agent can be used to assess customer transactions to identify any anomalies in behaviours, unusual transaction locations or deviations from typical user habits. It can then flag these for the human agent who is then better prepared to assess the issue.
Faivusovich said, “At Unit21 we always say that our job as a vendor is to enable the human agent to make the best possible decision in the shortest amount of time.”
The team is looking at how to further improve the AI agent so it can become even more invaluable. One of these is by potentially incorporating it into banking apps. The idea would be to have the agent able to detect how a user interacts with the app and spot any weird behaviour. If it flags an anomaly, it can then implement safety measures before a payment attempt is even made.
The AI Agent is not the only way Unit21 can aid clients with combatting scams. One of these other tools is counterparty risk, which is powered by consortium data. The platform uses data that is shared by other financial institutions to better protect customers. This allows clients to see if a specific entity has already been flagged as suspicious or fraudulent by another member of the consortium.
Elsewhere, Unit21 leverages IP data enrichment to identify IP addresses linked to bots, TOR networks, proxies or VPNs. Through this a client can detect account takeover by uncovering masked login attempts. It can also mitigate synthetic identity fraud by flagging suspicious account creation.
One final tool worth mentioning is the Scams Out-of-the-Box Rules. These provide clients with a set of pre-built rules that can be easily integrated into an overall scam detection program. Designed as a powerful starting point, the rules help identify unusual transaction volumes, flagged accounts, and rapid login attempts. These rules can then be customised to meet specific needs and allow firms to instantly improve their fight against scams.
As to why financial institutions should use Unit21 to fight scammers, Faivusovich said “We are the best platform to create an orchestration of risk and compliance.”
For more information into how financial institutions can fight scams, Unit21’s whitepaper, titled The Scan-demic: How FIs & FinTechs can fight back against the latest scam threats’ can be read here.
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