Dating apps and other social media uses have become more than just a method to meet people or to find love. They are increasing in popularity for scammers to take advantage of innocent individuals. The FTC reported that in 2021, $547 million was lost as a result of romance scams. To inform and alert online daters and social media users, five federal agencies recently launched a joint effort campaign, “Dating or Defrauding?”
A romance scam is a type of scam in which a criminal takes on a false identity by creating a fake online profile to gain the victim’s trust. The criminal then builds a relationship with the victim using the illusion of a romantic or emotional connection with the attempt to manipulate and steal from the victim. This type of scam doesn’t discriminate based on age and victims can be both men and women. The FTC stated in a recent article that there was an increase in reports regarding romance scams in every age group, but the increase in the age group 18 to 29 surged upward more than tenfold from 2017 to 2021. Therefore, any user of a dating app or social media should be aware of this type of scam. In addition, financial institutions should also be aware of romance scams. Preventing your customer or member from being the next victim can be beneficial for them and can reduce your institution’s risk. Here are some considerations when it comes to identifying and reporting potential romance scams.
Victims may be sending the scammer funds by withdrawing cash or via wire transfer. Therefore, be sure to monitor for unusual activity of unexplainable wire transfers or large cash withdraws. In addition, suspects of romance scams are known to request that the victim purchase several gift cards to be sent to the scammer. Financial institutions that sell gift cards and other prepaid cards should monitor for patterns or increases in purchases.
Keep in mind that wire activity or other transaction activity may not just be outgoing. Victims can also be persuaded into acting as a money mule. A money mule is an individual who transfers funds, on behalf of, or at the direction of another. They assist criminals with laundering funds that are obtained from other victims or illegal activity. For example, a victim may receive an incoming wire and then be instructed by their “friend” to purchase gift cards, conduct an outgoing wire, purchase cryptocurrency, or conduct other transactions in order to allow the scammer to utilize those funds. In that case, the victim is acting as a money mule by receiving the illicit funds through their account.
Another method that scammers utilize in romance scams includes requesting the victim to “invest” in cryptocurrency and other fraudulent investments. In these cases, the suspect creates the false identity of being a successful investor and persuades the victim to “invest” in their business opportunities. The investment opportunities presented to the victim are usually foreign exchange trading or cryptocurrency and the victim ends up losing their entire “investment”. The FTC reported that in 2021 $139 million was lost by victims “investing” in cryptocurrency as a result of a romance scam.
A financial institution that suspects a customer or member is a victim of a romance scam should consider their Suspicious Activity Reporting (SAR) procedures, conduct an investigation and file a SAR, if warranted. Keep in mind that the SAR is to report suspicious information on the suspect and not on the victim. In addition, the SAR should include as much information related to the scam as the institution has, even if it is not verified information. Even though a suspect is most likely is using false identification, the institution should still report that information on the SAR.
In addition, a financial institution may want to consider the role that the Rapid Response Program (RRP) can have in recovering funds stolen as the result of certain cyber-enabled financial crime schemes. To activate RRP, the victim or the financial institution must file a complaint with law enforcement. Keep in mind that initiating RRP by filing a complaint with law enforcement does not alleviate the financial institution from SAR filing requirements.
Along with reporting the scam to law enforcement, a report to the FBI should also be considered. A complaint can be filed with the FBI’s Internet Crime Complaint Center (www.ic3.gov) or the institution’s local FBI office. Other avenues of filing a complaint include the Commodity Futures Trading Commission by submitting a fraud complaint and suspected criminal activity can be reported to U.S. Immigration and Customers Enforcement (ICE) Homeland Security Investigations.
Financial institutions should ensure employees are trained and keep customers or members informed and alert as it relates to romance scams. The main webpage for the “Dating or Defrauding?” campaign includes several resources to stay informed and to report romance scam activity, which can be found on the Temenos Compliance Services Portal. The resources include several articles, videos, and brochures that may be provided to customers or members. In addition, the material may be utilized for training employees on red flags related to romance scams.
As dating apps and social media use continues to increase, the trend of romance scams may continue to increase as well. Keep your customers and members informed and alert to these types of scams and consider reporting any suspected romance scam activity. For BSA/AML compliance requirements and questions related to romance scams, submit a consultation request through the Temenos Compliance Advisory Service.