Payment Scams: Information on Financial Industry Efforts
| Report Type |
Reports and Testimonies |
| Report Date |
July 25, 2024 |
| Release Date |
July 25, 2024 |
| Report No. |
GAO-24-107107 |
Summary:
What GAO Found
Fraudulently induced payment scams can take many forms, but they generally involve scammers playing on victims' emotions to manipulate them into sending money. According to the U.S. Secret Service, financial regulators, and industry representatives, use of generative AI, which enables the creation of content and can be exploited to alter voices and images, is making these scams harder for victims to detect. While there is no complete measure or estimate of how widespread losses from fraudulently induced payments are, reported losses from one type of fraudulently induced payment scam—fake investment opportunities—rose from $3.31 billion in 2022 to $4.57 billion in 2023, according to the Federal Bureau of Investigation's (FBI) 2023 Internet Crime Report on reported complaints.
Financial institutions are generally not required under federal law to reimburse consumers for losses stemming from a fraudulently induced payment because such payments are authorized by a person with payment authority on the account (i.e., the owner of the account or other authorized person). To mitigate these types of scams, financial institutions and peer-to-peer payment companies provide consumer education and staff training to identify and avoid potential scams. Additionally, some institutions and payment apps have put in place additional measures to slow down payments to provide the consumer an opportunity to verify the legitimacy of the payment.
In addition to these efforts, financial industry representatives GAO spoke with stated that to help further reduce the risk to consumers, a multisector approach involving the telecommunications sector, social media companies, and law enforcement is necessary to address fraudulently induce payments.
GAO has continuing work examining federal agency efforts to address fraudulently induced payments, including efforts related to consumer education, and data collection and monitoring.
Why GAO Did This Study
Scams are a significant and growing problem for U.S. individuals and businesses. Some scams result in a fraudulently induced payment, which occurs when a person with payment authority is manipulated or deceived into making a payment for the benefit of the scammer. These scams succeed by playing on a victim's fears and exploiting vulnerabilities, often resulting in significant financial losses.
The federal government has not reported on total losses associated with fraudulently induced payments, in part due to underreporting by victims. Even when victims do report such scams, it can be challenging to recover the funds.
GAO was asked to review the characteristics of fraudulently induced payments and how financial institutions and peer-to-peer (P2P) payment companies mitigate the impacts of these scams. This report provides information on of fraudulently induced payment scams, including reported efforts by selected financial institutions to mitigate these scams.
For more information, contact Rebecca Shea at (202) 512-6722 or shear@gao.gov, or Michael E. Clements a (202) 512-8678 or clementsm@gao.gov.
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