The Consequences of Being a Fraud Victim
Episode ID S2E07
July 21, 2021
In this month’s episode of CoBank’s Fraud Wise, the monthly audio program focusing on the fraud and security risks faced by organizations and individuals, learn about the consequences of fraud and how to protect yourself and your business from becoming a victim.
2020 was a peak year for fraud. The Federal Trade Commission recently reported they received more than 2.1 million fraud reports from consumers in 2020. The consequence was a reported $3.3 billion during the year, an astronomical increase from just $1.8 billion in 2019. Fraud can also impact identity and brand reputation as well as create unnecessary stress.
Hello. This is CoBank’s Fraud Wise helping you avoid becoming a victim of fraud. I am Jamie Fiedor, senior financial crime specialist, and today I’ll be discussing the latest in fraud, how to avoid it, and the sometimes dire consequences it can have.
2020 was a peak year for fraud. The Federal Trade Commission recently reported they received more than 2.1 million fraud reports from consumers in 2020. The consequence was a reported $3.3 billion during the year, an astronomical increase from just $1.8 billion in 2019.
And, not surprisingly, imposter scams were the #1 most reported type of fraud. Online shopping fraud was the second most reported type as the pandemic resulted in a surge in online activity and shopping. Other key categories that caused the increase in fraud case reports are Internet services; prizes, sweepstakes and lotteries; as well as telephone and mobile services.
So, what does all this mean in terms of the consequences of fraud? We all understand what is at risk—money, identity, brand reputation, stress, you name it. In 2020, 34 percent of victims lost REAL money. And we all know how damaging a financial hit like that can be... whether it be to an individual or a business.
However, many people may not be able to wrap their heads around how to ensure their transactions are legitimate and authorized in order to avoid this kind of fraud. To help consumers and businesses alike, there are specific fraud protections designed to help people manage funds and ensure they don’t accidentally transact with fraudsters.
These protections include certain loan and cash management products that allow customers to make payments through legitimate means like ACH, wires and checks. Business that are making payments against loans from their bank should have further protections in place that will help protect their loan status and available funds.
For businesses, it is CRITICAL to know that commercial customers do NOT have the same fraud protections as consumers. Businesses are actually responsible for fraud unless it is identified and reported quickly, so it is imperative for corporate customers to assign someone in their organization to pay attention on a daily basis to any and ALL business transactions. And, if any foul play is even suspected, the business must return fraudulent items through the banking system within 24 hours, or even more immediately if fraud is committed via wire or originated ACH. Also, in situations where the customer is working with a line of credit, they are responsible for paying stolen funds back to the bank, so we recommend being especially vigilant in all of these cases.
In addition to all the other negative outcomes of fraud, once an account is compromised, it is potentially forever compromised, and very vulnerable to future attacks… This makes it even more important to get ahead of fraud.
One final point I want to make is that fraud cases can potentially take anywhere from ninety days or more to resolve and recovery is not guaranteed, so ultimately, a best practice for prevention is to reconcile your commercial accounts daily, and report unusual activity to your bank immediately.
This has been CoBank’s Fraud Wise. Helping YOU avoid becoming a victim of fraud. For more information about these and other types of fraud, visit cobank.com slash security.
[Author’s note: Source of data is official FTC news release: https://www.ftc.gov/news-events/press-releases/2021/02/new-data-shows-ftc-received-2-2-million-fraud-reports-consumers]