As of June 2023, there are approximately 4,500 new online scam victims a day that are using the banking system to perform wire transfers to criminals.
If, as reported by the FBI that the average loss to a relationship scam victim is approximately $14,000 then this is a staggering $63,000,000 PER DAY or $22,995,000,000 per year!
In the United Kingdom, the government has forced banking to assume responsibility for voluntary fraudulent transactions (authorized push payments) that result in a refund to the bank’s customer – the victim of financial fraud. We are seeing similar pressure in many other countries, especially the United States.
We are not talking about involuntary fraud in which the victims are protected, but where the victim was firmly under the manipulation & control of the criminals and performed the transfer (app) believing that they were helping a real person.
Every one of these victims, in effect, tells the bank that they know the person they (the victim) are sending the money to, either in person or via online mechanisms. In effect committing unwitting bank fraud themselves. Additionally, they may be violating other laws and regulations in the process. But because the victim is being manipulated and controlled to believe that what they are doing is for a real person, and psychologically coerced to perform the transfer, a strong argument can be made that it was not voluntary after all.
Additionally, every bank in the United States is obligated to report every suspicious transaction to the U.S. government under the BAS (Banking Security Act). Yet, it is believed that a significant percentage of these fraud-based transactions are never reported even though they are either of significant size or frequency to require it.
BSA (Banking Security Act) Provisions
The U.S. Bank Security Act (BSA) requires banks to report unusual banking activity.
The BSA is a federal law that was enacted in 1970 to combat money laundering and other financial crimes. The BSA requires banks to file reports called Suspicious Activity Reports (SARs) if they know, suspect, or have reason to suspect that a transaction is related to money laundering or another financial crime.
The BSA defines “unusual” activity as any transaction that:
- Is inconsistent with the customer’s known business or personal activities;
- Involves a large amount of cash;
- Is conducted by a shell company or other entity that does not have a legitimate business purpose;
- Is conducted in a foreign country that is known to be a hotbed of money laundering; or
- Is otherwise suspicious.
Banks are required to file SARs with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. SARs are confidential and are not made public. However, FinCEN can share SARs with law enforcement agencies if they believe that the information is necessary to investigate or prosecute a financial crime.
The BSA’s SAR reporting requirements are designed to help law enforcement identify and investigate money laundering and other financial crimes. By filing SARs, banks can help to keep the financial system safe from criminals.
Here are some examples of unusual banking activity that may require a SAR to be filed:
- A customer deposits a large amount of cash into their account and then withdraws it all in a short period of time.
- A customer makes a series of wire transfers to countries that are known to be hotbeds of money laundering.
- A customer’s account activity suddenly changes, such as the customer starts making large, unusual purchases.
- A customer’s account is used to receive funds from a known terrorist organization.
But the problem is that it has been suggested that banks are poor in compliance with this regulation, and also that the reporting is so delayed that it is useless in stopping these transactions. So it comes back to reliance on the customer to know and stop these transactions, but that always fails.
Why Has Education & Even Interventions Failed Thus Far?
The industry generally has reviewed and considered various forms of educational materials for its customers. Many have pages on their websites that advise customers to be cautious about the various types of scams that can affect them.
In the United Kingdom, they enable bank employees to call the local police who respond quickly and discuss the issues with the customers. This works extraordinarily well in the U.K. where customers and bank employees respond well to the local police intervention, and it has reduced fraud money transfers by as much as 95%. However, this would not work in the United States.
Our organization (SCARS) believes that the vast majority of this scam avoidance information fails to affect the bank customer (victims) in any meaningful way. No one believes it will happen to them, and they do not fully understand the impact or consequences.
This is what we are trying to change!
- Generally, people do not believe that scams (financial fraud) can happen to them as a result of cognitive biases and denial.
- Once someone has become a Relationship Scam Victim, they are completely under the psychological control of their scammers (criminals).
- As a result of the manipulation scam victims firmly believe that the transactions are justified and being sent to someone they actually know.
- Victims are generally incapable of stopping by trying to intellectualize with them, just as an addict is incapable of stopping by reasoning with them, because victims are controlled by hormones & neurotransmitters manipulated and controlled by the criminals.
- In addition, some bank employees (without any real policy) have tried to coach victims about scams – but this also fails.
What Would It Take To Stop These Transactions & Victimization Of Bank Customers?
SCARS interacts with more than a million scam victims per year. As a result of that close interaction with so many victims of financial fraud, we have developed a deeper understanding of the mindset of victims (the psychology of scams – from a psychological, anthropological, and sociological perspective) and the levels of manipulation they are subjected to. In addition, we have reviewed hundreds of academic studies that identify key psychological facts that both drive victimization and open up a possibility for effective intervention.
In December 2022, SCARS conducted interviews and surveyed over one thousand scam victims who had sent money to their criminals via their bank. During the survey, victims were asked the following questions:
- “Would you have stopped if the bank staff told you you were being scammed?”
- “Would you have stopped if the bank refused to send the wire – would you have sent the money by another means?”
- “Would you have stopped if the bank called a family member to explain you might be the victim of a scam?”
- “Would you have stopped if the bank made it clear that there could be financial and potentially criminal consequences from performing the transfer?”
The result was very interesting: 97% of actual scam victims who had sent money via an authorized push payment said that they would have paused and rethought their actions, leading over 70% to say they would have not made a transfer and would have realized it was probably a scam or fraud.
SCARS believes this creates a unique opportunity to craft an intervention process that can save victims. And in so doing, by its nature can actually help these financial institutions appear to be more active in trying to stop these crimes, possibly reducing their potential liability in the future.
The SCARS Suggested Intervention Process
Scenario: a bank customer asks to perform a transfer that meets the criteria of unusual banking activity or where the bank’s staff (in branch, customer service, or fraud department) believes that it is unusual.
The bank requires an employee to speak with the customer – in person if possible, or by phone. They explain the concern and REQUIRE that the customer sign an “unusual banking activity form.”
The purpose of the Unusual Bank Activity Form is to cause an emotional reaction with the customer (victim) – because this would/could help the victim realize they are being scammed and change their intent to send the wire by understanding the potential consequences of their action.
These victims are almost always firmly under the control of the scammers/criminals throughout the duration of the relationship scam. These victims would (nominally) do anything for the person they are connected to – including sending their life savings, and going so far as to make themselves homeless and penniless, This control is based upon an extended process of exploiting their vulnerability, grooming them, activating their own hormones and neurotransmitters essentially making them dependent on them, manipulating and isolating them, and controlling them to act against their own best interests by sending the money.
However, there is a technique that can be used to counter this control – namely fear!
This is where the intervention process comes in, by creating a pause, injecting fear into the mind of the victims, and hopefully helping them realize that this is not only the wrong thing to do but that it may come with serious consequences. This is where we saw strong responses in the surveyed victims when asked about it.