Leylaynr | E+ | Getty Images
US and Canadian banks reported a tenfold increase in digital scams this year as criminals widely use techniques based on tricking customers into sending them money, according to cybersecurity firm Biocapture.
The sharp increase in reported scams since the first three quarters of 2023 comes as banks have put more controls in place to prevent account takeovers and other forms of fraud, according to BioCatch director of Global Fraud Intelligence Tom Peacock.
“Fraudsters have realized that people are the weakest link,” Peacock said. “It is easier to convince a human to do something through manipulation than by trying to circumvent a technological control.”
BioCatch, a Tel Aviv, Israel-based company that uses behaviorally data from mobile apps and websites to help banks distinguish between real users and criminals, provided its findings to CNBC ahead of a report that collected information from 170 U.S. and Canadian institutions. The company said American Express, Barclays and HSBC are among his customers.
Banks are under pressure to kick criminals off their platforms and compensate more victims as regulators and lawmakers focus on the damage caused by digital scams. JPMorgan Chase, Bank of America And Wells Fargo have said the Consumer Financial Protection Bureau could punish them for their role in the giant Zelle payment network. Customers of the three banks reported that a combined $166 million worth of Zelle transactions were fraudulent in 2023.
The rise of “social engineering scams,” in which criminals use persuasive tactics to convince victims to send them money, started about five years ago but “really started to take off” in the past 18 months, Peacock said.
Zelle is the preferred way criminals extract their money because it is faster than other transfer options, Peacock said.
“When social engineering scams really started pull out in the US it kind of coincided with Zelle because the two merged,” he said. “Platforms like Zelle allow fraudsters to be much faster and more successful.”
Zelle owner Early Warning Services has said that while transaction volumes increased in 2023, reports of scams and fraud with almost 50%, and that only a small portion of payment volumes are disputed as fraud.
The increase cited by BioCatch is also driven by greater identification of activities that banks previously did not label as scams due to increasing regulatory burdens, Peacock added. BioCatch declined to provide a specific number for reported scams, citing customer confidentiality.
Another sign of the cat-and-mouse dynamics of cybercrime is that BioCatch customers reported 59% fewer fraudulent account openings. Instead, criminals have focused on taking over existing bank accounts, leading to a threefold increase in fraud through that channel, the company said.