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Fraud detection

Why 'romance fraud' became big money in 2020

By Michael Moeser
March 11, 2021 11:07 AM

As the global pandemic sent office workers home, forced businesses to close and imposed a general lockdown on practically everyone, it looked like romance was gone in 2020.

Given that people were no longer eating at restaurants, watching baseball games in-person or going out on the town to meet people, the only avenue left to find someone special was online. It’s also where fraudsters quickly congregated to take advantage of lovelorn consumers.

Further, in this online-only dating environment, fraudsters had an opportunity to hone their skills. Since romance frauds generate more than 10 times the money for scammers per event than other types of fraud, it’s no wonder 2020 saw a boost in the use of this tactic.

“The pandemic forced everyone into going online for everything and anything they wanted to do or buy,” said Neil Gilbert, vice president of risk at Netspend, a unit of Global Payments. ”This changed the dynamic in how we discern fraud in this new heavy digital environment. Also moving money from your bank account to your friend's bank account has gotten easier. It’s great for consumers, but it’s also made it more convenient for fraudsters.”

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Perhaps it’s the loneliness of self-quarantine or the lack of intimacy on Zoom calls, but for whatever reason, romance scam losses grew by over 50% in 2020.

Based on data from the Federal Trade Commission, romance scams in 2020 led to record monetary losses of $304 million, up about 50% from 2019’s level of $202 million. This record-busting level is also up more than fourfold since 2016, when losses reported reached $75 million.

The FTC reported that there are a few different factors at play as to why the losses are seeing such a dramatic jump. The most obvious is that the limited ability for people to meet in-person due to pandemic restrictions is forcing more people to use online dating sites. The FTC also pointed to the rising popularity of dating websites in general that are making more people visible to fraudsters.

Finally, fraudsters are evolving their ruses to adapt to the current situation, according to the FTC. For example, fraudsters regularly ask for money once a victim has expressed a willingness to meet, but then cancel at the last minute, keeping the money that has been sent. Fraudsters' excuses included needing to get an emergency COVID-19 test, new travel restrictions and just having tested positive for COVID-19.
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While many, if not most, consumers believe that they can spot a scammer trying to swindle them out of their money, given all of the advances in researching people online, the reality is that many fail to heed the warning of a potential scammer.

Software protection and identity security services firm NortonLifeLock Inc. listed some of the top red flags consumers should look out for in its Romance Scams in 2021 report.

Many of the signs appear to be straightforward, however, there is a very obvious tip-off that many people miss when it comes to payout. Since the fraudster is more than likely working multiple victims at once, he or she wants to be able to go to a tried-and-true way of receiving funds.

For example, the fraudster may request a Western Union transfer, admonishing the victim if they want to use MoneyGram or Venmo to send funds. Or the scammer may request a stored-value card, but refuse an electronic transfer that can be traced back to them.
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Reloadable and single-use prepaid cards are not a fan favorite among romance scammers, based on data from the FTC Consumer Sentinel Network. Only 25% of romance fraud loss reports in 2020 involved single-use gift cards and reloadable prepaid cards. The wire transfer is the most common payment method used by romance fraudsters.

The likely reasons leading to lower use of prepaid cards in romance scams is that the requests tend to be high-dollar value, and wire transfers involve fewer parties than payment cards. In contrast, prepaid cards tend to be used more in tech support (33%) and government imposter (48%) scams.

Since the romance scam typically involves the victim paying for travel, a medical operation or other major emergency, the amounts tend to be larger than those in other scams.

The second driver behind prepaid fraud mitigation is that typically multiple players are involved, ranging from a card network such as Visa or Mastercard, a bank issuing the card and a prepaid card manager, all on the lookout for suspicious activity.

“We use a real-time risk engine to evaluate each transaction,” noted Gilbert. “We ingest financial and non-financial data such as biometrics or an address to better monitor the account and identify fraud.”
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Last year, the average fraud loss, excluding romance scams, cost a victim about $240 per incident, according to the FTC’s 2020 data. While some consumers may endure multiple frauds in one year, such as a tech support fraud followed by a government fraud attempt, the average loss amount is rather low.

In contrast, romance fraud costs consumers on average 10 times the average fraud amount. As FTC data shows, in 2020, romance fraud cost on average $2,500 per loss incident across all consumers and for consumers 70 years and older it was $9,475.

One major driver behind such high losses is the inability for a victim to easily meet their new love interest due to the prospective partner (fraudster) being far away. NortonLifeLock reports common “distance lies” include working on an oil rig, being in the military, being a doctor in an international organization or working in construction overseas. This premise can lead to expensive requests for funds to travel to the victim’s home.

“We try to educate the customer on what to watch for when it comes to scams,” Gilbert said. “We want to help our cardholders take care of themselves and look for warning signs when it comes to potential fraud, such as a person you’ve never met before asking for money.”
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The full extent of seniors' vulnerability to romance scams is best illustrated by the fraud losses experienced in 2020 using FTC Sentinel data.

In terms of total dollar losses, the group that suffered the most were ages 60-69, followed by 50-59, then 70-79, with the 40-49 age group following closely behind in fourth.

However, when it comes to romance fraud, the older a victim gets, the more costly the losses.

Consumers 80 and older that suffered a romance scam lost a median of $10,000 per incident compared to just $600 for consumers between the ages of 20-29. While the losses quickly accelerate into four-figure sums starting with 30-39 year old victims, the money starts to flow the most at age 60.

Limited mobility, impaired health and inexperience with dating, among other factors, render the senior population particularly vulnerable to skilled fraudsters.
Michael Moeser
Senior Content Strategist, Arizent
Fraud detection Digital payments
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