She loves me not: How banks can fight romance scams

Ahead of Valentine’s Day, the FBI and the Federal Trade Commission are warning banks and consumers to be on the lookout for romance scams. Victims reported greater financial losses last year than any other on record, and the fraud category is growing rapidly — and gaining cultural significance.

Consumer surveys predict that on average, Americans will spend $175 to $210 celebrating Valentine's Day this year. This might seem like a lot, but it’s paltry compared with the median amount each romance scam victim lost last year: $2,400, according to the FTC.

Here are some of the keys to understanding the financial cost of romance scams, the trauma victims face, why so many cases go unreported, and what banks can do about it.

Romance scams are the most expensive form of fraud. According to the FTC, romance scams have been more expensive for victims over the past five years than any other category of fraud. The known cost to U.S. victims of romance scams exceeded $500 million for the first time on record last year.

In 2020, victims of fraud other than romance scams typically lost $240. The median loss for reported romance scams was more than 10 times that large.

The actual numbers may be far higher than reported. A research paper released in 2021 from the FTC suggests roughly 19 in 20 victims of fraud of any type do not report the incident to the FTC or a Better Business Bureau, and eight in nine never report it to their bank, leaving the total economic toll of romance scams and other fraud unknown.

Not only are romance scams the most costly economically; they also cause a great deal of grief.

One report found that most victims of romance scams who responded to a survey “had not found ways to cope given the lack of understanding from family and friends.”

The authors of the 2016 study, led by Monica Whitty of the University of Leicester in the U.K., found that the loss of the relationship in the romance scam was more upsetting than the financial loss, and many victims “described the loss of the relationship as a ‘death.’ ”

For this reason, Marni Feuerman, a psychotherapist in Boca Raton, Florida, said, banks need to show victims of romance scams “kindness and compassion” in the aftermath of a loss.

“Grief can be unbearable,” Feuerman said. “Understand that you may not be able to get through with logic as the denial may be very powerful.”

Romance scams are increasing at an alarming rate. The total number of reported scams last year (56,000) was more than three times the 2017 figure (17,000).

A quarter of the payments victims made to scammers in 2021 were in cryptocurrency. Bank wire transfers were the next most common means of payment.

Over one-third of romance scams start on social media. According to the FTC, many people who lost money to an online romance scam in 2021 said it began on Facebook (23%) or Instagram (13%). Romance fraudsters also used dating apps and email phishing to lure their victims.

Overall, reports of fraud originating on social media nearly doubled from 2020 to 2021 from 46,000 to 91,000, and the amount of money lost to such scams tripled from $770 million to $258 million.

Scammers tell a variety of lies. According to the FTC, potential victims of romance scams send money repeatedly in response to pleas for help while claiming one financial or health crisis after another. Sometimes the stories involve a sick child or the scammer’s alleged temporary inability to get to their money.

Scammers also ask victims to help them get their inheritance money or move funds for an important business deal, to pay fees in order to accept money or to deposit a check to send some of the money along. In these cases, the check is fake. They also lure victims into bogus investments, especially cryptocurrency and foreign exchange.

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Banks can offer protection to their customers. Julien Bonnay, the U.S. head of technology and cybersecurity for the financial services consultant Capco, said banks can help protect their customers from romance scams in a few ways — foremost by leveraging their relationships with customers and with transaction surveillance.

“The first thing is watching for unusual client behavior,” Bonnay said, noting that such behaviors could include wiring money overseas and using real-time payments with a new recipient. This surveillance could be paired with greater restrictions on sending to new recipients, he said.

Although government agencies like the FBI and FTC offer consumer education regarding fraud, including romance scams, Bonnay said the tips could be more effective coming from institutions closer to the consumer — such as banks.

“You have the FTC and FBI providing lots of examples and why and how these romance scams happen, but I think it needs to be relayed by the financial institutions themselves,” Bonnay said.

Feuerman said that some people who fall victim to romance scams are “more naive or easily manipulated,” while others are “more vulnerable because they are feeling lonely or disconnected.” But romance scams ultimately strike at a more universal human habit.

“In general, we all tend to idealize a new romantic partner and ignore red flags,” she said.