Why categorization is a key component of scam prevention

Industry leaders are tracking fraud typologies on a more granular level, which has enabled greater insight into areas of exposure, and a better understanding of what is driving losses for themselves and their customers. Benefits to categorizing scams include the ability to bolster preventative controls, customer education, and employee education related to the institution’s unique exposure, which will aid in identifying scams before financial loss occurs.

Investment scams promote false success stories to lure investors into transferring funds to fraudulent opportunities. Similarly, pig butchering scammers, a commonly used industry term, build nonfinancial relationships with their victims before introducing a fraudulent investment plan for them to invest in. In these instances, it is generally the authorized user of an existing account sending funds willingly to the fraudster while still maintaining control of their accounts. Neither of these is an ATO or NAF situation, as they more closely resemble a confidence scam.

Categorizing the scam as either an ATO or NAF may not provide the institution with sufficient information to effectively identify the vulnerability. A key component of categorizing scam typologies is to determine whether the fraud was a result of coercion, and an authorized user was the one making funds transfers, or a breakdown of the control framework occurred, and a fraudster gained unlawful access to the funds. Industry leaders have taken the process a step further by categorizing scams into specific typologies once they have determined the scam does not fall within the ATO or NAF category.

Key typologies industry leaders are tracking include: