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How to protect yourself from digital deception

Oct 05, 2021 | RBC Wealth Management


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Our top tips for protecting your wealth from digital deception.

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The antiquated archetype of the computer-illiterate senior struggling to navigate cyberspace as an easy target for internet financial scams is at odds with the reality. The truth is, fraudsters are increasingly sophisticated, finding bold new ways to take advantage of even the most internet savvy Americans.

A recent bulletin from the Federal Bureau of Investigation told the story of a Texas woman and an online romance that rapidly devolved into a multi-million dollar heartache. The woman, in her 50s, was active on email and Facebook when she developed an online friendship and later, a romance with a man named "Charlie" who claimed to work in construction. As her unraveling marriage pushed her closer to her new online friend, she placed her trust in him, wiring increasingly large sums of money to “help him finish" a construction job in California.

“I thought about it long and hard. I prayed about it. I've always been a very giving person, and I figured if I had money … I could send him some [money]. And he promised to have it back within 24 to 48 hours. I thought, 'I could do that.' It was kind of a statement of faith, too," she told the FBI.

But he didn't return the money and hiding behind the anonymity of his online personality and excuses that kept the pair from meeting in person, “Charlie" took $2 million from the woman.

“The Internet makes this type of crime easy because you can pretend to be anybody you want to be. You can be anywhere in the world and victimize people," Special Agent Christine Beining, a veteran financial fraud investigator in the FBI's Houston Division said in the article. “The perpetrators will reach out to a lot of people on various networking sites to find somebody who may be a good target. Then they use what the victims have on their profile pages and try to work those relationships and see which ones develop."

According to the FBI's Internet Crime Complaint Center (IC3), romance scams – also called confidence fraud – are responsible for the highest amount of financial losses compared to other online crime. IC3 received 15,000 reports of confidence fraud in 2016 (nearly 2,500 more than the previous year) accounting for more than $230 million in losses. Overall, the IC3 received 298,728 complaints resulting in a total victim loss of $1.33 billion, and the 30- to 39-year-old category had the highest number of victims next to the over 60 category.

Internet scams are a costly affair and can affect anyone, but there are ways to insulate yourself against digital deception.

Knowing when you don't know

The best way to combat scams is to make time to review bulletins and “top 10 scam" lists put out by groups like IC3, the NCOA, or your financial institution.

Recently, fraudsters have turned to tech support scams, where legitimate-looking pop-ups appear on your computer screen offering support or calls from scammers claiming they work for a reputable computer company asking for your banking information to “update your computer software." Con artists might also pose as members of the IRS, asking you to confirm your tax information via email or worse, masquerade as collectors looking for funds to settle tax disputes.

Email is also a mainline for fraudsters: free trip offers, sweepstakes, charities, discounted medicine, “official sounding" emails from your bank or utility provider – con artists treat email like a fishing line, casting out emails into cyberspace and waiting for bites. The key to navigating these types of scams is to know when you don't know for sure who is on the other end of the email. Don't open any links from unidentified sources; if the email seems like it's coming from an official source, call and confirm in person using the number you have in your own records, not the one supplied in the email.

Watch for red flags

Be fraud aware; situations that seem like they're “too good to be true" probably are. Investment fraud is a prime example. It can take many shapes including “pump and dump" investment ploys where e-newsletters, emails and bulletin boards are used to entice investors. There are also pyramid schemes promising to turn small investments into big paydays provided you recruit fellow investors or offers touting low-risk opportunities to invest in sophisticated-sounding products if you “act now".

These are the sorts of red flags to be weary of, all investments carry risk and anything or anyone claiming otherwise should raise some concerns. In addition to tools and advice offered by your financial institution, the Financial Industry Regulatory Authority's Investor Education Foundation has a series of resources for sussing out seedy investment opportunities.

Talk to your financial institution

Your wealth management team and financial institution is a key asset in navigating financial fraud. Thwarting financial losses as a result of fraud requires diligence, the sort of diligence that comes from knowing the scams and watching for red flags. But it's also up to you to take the time to sit down with your financial advisor, and broader team, to review your accounts for suspicious activity, discuss potential investments and identify financial requests from outside sources.

There's no question cyberspace is fertile ground for digital deception. And con artists are only getting more sophisticated. Keeping pace means talking about it and raising awareness.

Scammers rely on shame, they rely on the embarrassment that can come from being duped and the best way to combat that is to talk about it with your financial team, with your family and with your community.

That's what spurred the woman from Texas to come forward about her experience with “Charlie" and the online romance scam.

“I don't want this to happen to anybody else. I not only invested money in this man but there is a big, huge piece of my heart that I invested in him," she said. “It's not just the finances, it's the emotional part, too—being embarrassed, being ashamed, being humiliated."

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