Iain Swaine, Director EMEA, Global Advisory at BioCatch

The threat of scams is widespread throughout the world, and there has been much research into trying to quantify the exact costs that are lost each year. UK Finance estimates that between £1.3 and 2.35 billion was lost to consumer Fraud last year, and it is in the forefront of measuring and reporting on the financial losses connected to Scam activities.

While measuring financial losses from scams is often difficult, or perhaps even inconsistent, due to the lack of common classification frameworks, it would be dishonest to overlook that a majority of scams are unreported or underreported. According to the UK’s National Crime Agency, nearly 90% of fraud and scams are underreported by consumers. Whether out of embarrassment or shame of being a victim or simply because consumers don’t know how or where to report an incident, the number is startling.

Scammers Do Not Discriminate Against Their Victims

While headlines emphasise financial losses, they conceal the true human cost of the scam. According to Action Fraud, it gets 300 calls a year from people who are deemed to be at risk of suicide by the call handlers. This is consistent with the rising number of reports from throughout the world describing how fraud Victims experience mental health problems or even consider suicide after being defrauded. They are motivated by a variety of emotions, such as the embarrassment of sextortion, the emotional betrayal of a romance fraud, or just the lack of want to live after being poor. This, in my opinion, might be considered to represent the true human cost of deception.

A surprising revelation is who the victims are. There is a misconception that a majority of victims are elderly, but scammers do not discriminate. A recent study by Javelin Strategy & Research found that scam victims are equally represented across all age groups: 30% Millennial, 25% Gen X, 23% Baby Boomer, 22% Gen Z.

Despite the prevalence of financial crimes, one of the reasons why law enforcement is perhaps so ill-equipped to deal with fraud is the perception that it does not constitute a direct threat to life. Policing globally rightly prioritises the threat of harm to the person as their main driver rather than financial loss, but do we now need to take a wider look at what prevention of harm now constitutes?

New regulatory proposals, such as the UK’s Payment Systems Regulator (PSR) and more recent EU Payment Services Directive III (PSD3), requiring mandatory reimbursement for fraud scams should help alleviate some of the human cost and is to be welcomed. Public/private sector partnerships and improved scam detection need to consider the human cost – not just the financial one. This does not only extend to the banks but also social media sites, telcos, and others in the wider scam chain.

The unseen vulnerability of scammers

Let’s look at the fraudsters now that we have a clearer concept of who the victims are. It is common to demonise scammers and social engineers as the worst types of human beings in discussions about how they carry out fraud and manipulate their victims. A scammer may be described as being wicked, ruthless, immoral, harsh, unpleasant, and selfish, to name just a few adjectives. Is this, however, actually the case? Another group that has been neglected up until lately when considering the beginning of the scam chain are the individuals who are placing the calls or sending the messages that entangle the victims who are defrauded. Both law enforcement and independent investigators have tracked many of the scam operators to call centres, mostly within Asia. Some of them seem to be run with employees who willingly work and acknowledge what they do is illegal and can rise up in the ranks with promotions depending on how much money they bring in for the ring leaders who fund these multi-million dollar enterprises. Many of these call centres operate in India, run as quasi-legal companies, and offer better pay compared to legitimate outsourced call centre work.

However, there is a dark underbelly of scam operations that has emerged in recent years with these scam call centres now being replaced by more insidious enterprises where the people making the calls and sending messages to potential victims are themselves victims of human trafficking. These victims, ensnared through fake job adverts offering travel and accommodation, find themselves at the mercy of gang leaders. They are saddled by debt bondage with punitive interest rates, trapped within fenced compounds, and working in modern slavery conditions. If they do not perform, they suffer physical abuse and even worse forms of exploitation.

Across Southeast Asia, it is estimated that tens of thousands of people have been dragged into operating these scams. The issue has become so large that Interpol issued an Orange Notice in June 2023 showing that scam call centres have been concentrated in Cambodia, Laos, Myanmar, and at least four other countries. They noted the operators are now recruiting wider with people being trafficked from further afield (South America, East Africa and Europe) bringing new languages and cultural awareness to broaden the scope of attacks. They have moved from Chinese victims to now focus on North America, Europe, and the rest of Asia. As a result, there has been a 200% increase in call scams this year.

There has also been a move from recruiting just call centre staff to increasing the technical capability of the attackers. IT professionals and digital marketing skills are in demand to create the websites and fake ads that lure the fraud victims.

Law enforcement efforts to shut down these call centres across the region has achieved some success, but the amount of money involved means they often reappear. Thailand and the Philippines have rescued human trafficking victims in some notable high-profile operations, but the centre operators remain at large.

Interpol has reported evidence of dedicated scam call centre hubs being replicated in West Africa and Central and South America, facilitating industrialisation of attacks from there. Criminal syndicates, such as Black Axe in Africa and Drug Cartels in Central and South American, are expanding, and corrupt officials allow it to happen. These crime groups now see financial crime equally as profitable as drug trafficking and at a lower risk of being caught or prosecuted.

Fraud’s Hidden Human Cost

The truth is that organised criminal groups, whose consideration for human life is frequently lacking, predominate in digital fraud and scams. The victims of the crime and those attempting to flee the crooks who have imprisoned them are the victims at both ends of the scam chain who are losing their lives. Eight young workers who attempted to leave a cartel phone centre defrauding Americans in Mexico were discovered slaughtered.

Criminal organisations are already using AI tools like ChatGPT to improve their capacities for conversational chatbots and language translation. In some ways, it is preferable to go up against AI attackers because there is no victim who could suffer physical injury as a result of the fraud failing, despite the fact that generative AI creates a new set of challenges for scam detection.

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