2023 Fraud trends: What banks and credit unions can expect

Businesses fall victim to fraud at an alarming rate, and 2023 will not bring a reprieve. The most common themes in business and investment fraud are not new but are still expected to lead to significant hard dollar losses:

• Cyber threats: Cybercrime involves any illegal activity conducted using a computer and earns criminals approximately $1.5 trillion annually. The most serious cyber threat to businesses and government entities is ransomware. Ransomware is a form of malware targeting both human and technical weaknesses to access critical data and extort money in exchange for not sharing proprietary information.
• Business email compromise (BEC): Business email compromise (BEC) is one of the most financially damaging online crimes. In a BEC scam, criminals send an email message that appears to come from a known source with a legitimate request. If the victim responds to the email or clicks on an embedded link, confidential account information could be leaked, or malware could infiltrate your company network.
• Digital assets (cryptocurrencies): Although digital asset scams are primarily consumer issues, customer accounts may start to intersect with business operations where digital assets are concerned. The same scams used to defraud businesses and consumers from traditional currency are now being used to lure victims into fraudulent cryptocurrency investments or to gain access to their cryptocurrency keys.
• Advance fee schemes: Advance fee fraud occurs when investors are asked to pay a fee upfront for an investment deal to go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later. After the fraudster receives the fee, the investment transaction is never executed.
• Nigerian Letter (419 fraud): 419 fraud is a scheme in which a sender requests help facilitating the illegal transfer of money. The letter may be sent by mail, fax, or email. The author is typically someone claiming to be a government or military official, bank officer, or business executive. The scammer claims they need access to a foreign account in order to transfer money out of Nigeria.
• Ponzi schemes: Ponzi schemes are still popular among fraudsters and use current investors' money to pay previous investors. Whether investors are tempted with real estate, cryptocurrency, or a new startup idea, the schemes inevitably collapse and end in a total investment loss.
• Pyramid schemes: Pyramid schemes ask the investor to bring in new investors to make a profit or recoup their investment. This method of investment is unsustainable and promises unrealistic investment gains.
• Paycheck Protection Program (PPP) and other government program fraud – Department of Justice prosecutors have called COVID relief fraud losses the largest fraud in U.S. history, with the theft of as much as $80 billion in taxpayer money by applicants who used the funds for personal gain rather than business relief. Financial institutions should continue to be mindful of government programs that may invite fraudulent activity within their customer base.