Scams have become increasingly prevalent (Off-site) in recent years, targeting both consumers and businesses. Though types of scams vary widely, the results may be severe. Fortunately, there is consensus that more can be done to address scams and help mitigate losses, with approaches commonly fitting in three categories: education, technology and information sharing.
Proactive awareness and education are crucial to scam prevention – organizations that expand customer and employee education have significantly reduced losses caused by scams. Additionally, knowledge about what victims should do after a scam can be helpful, when timely action is key to mitigating losses. Reporting scams on USA.gov (Off-site) may aid in protecting others from falling victim to the same scheme.
Different technologies can assist with scam prevention, and an increasing number of service providers offer programs that identify potential scam-related payments and fraudsters. Insights from current and emerging scams can improve the performance of fraud management models by training them to identify payments associated with scams.
The sharing of aggregate, anonymized fraud information between organizations is emerging as a key factor to help prevent fraud and avoid potentially devastating losses from scams. Information sharing between organizations can allow fraud management models to identify trends quicker, because fraud schemes generally are used across multiple organizations and industries. Beyond scam prevention, information sharing is especially valuable in preventing a variety of other types of financial fraud. Read this FedPayments Improvement article (Off-site) for more details on how the industry can put scams out of business.
As a next step in improving understanding of scams, the Federal Reserve is convening industry work groups (Off-site) to develop a common definition and taxonomy of scams and promote information sharing, with the goal to better help identify, accurately report and ultimately, address this type of fraud. Stay up to date on this and other collaborative efforts to improve payments security by becoming a member of the FedPayments Improvement Community (Off-site).