A record $340 million lost to fraud in Australia, says latest ACCC report

More than A$340 million was reported lost by Australian victims of fraud schemes in 2017, up A$40 million on the previous year. So says the latest Targeting scams report released this week by the Australian Competition and Consumer Commission (ACCC).

It is difficult to know whether there are simply more people who have become victims of fraud, or whether there is an increased willingness of victims to report it. Given that fraud is known to have low reporting rates, any baseline is difficult to establish.

But this is the second year the ACCC’s report has included statistics from a range of bodies, including its own Scamwatch, the Australian Cybercrime Online Reporting Network, and the Australian Tax Office. Having more reporting mechanisms available is likely to increase the number of people who are able to report, particularly when using a self-reporting online tool.

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For example, the report says that Scamwatch received 161,528 scam reports in 2017, up 4% on 2016, with reported losses of A$90.9 million, up 8.8% on the previous year.

Trends in victimisation

Investment fraud has taken over as the category with the highest amount of financial losses, with victims reporting more than A$64 million in losses across all agencies. Reports of investment scams to the ACCC alone increased from A$23.6 million in 2016 to A$31.3 million in 2017, a 33% increase.

Of interest, there were no new methods or techniques associated with the increase in investment fraud. Offenders are using the same methods (such as cold calling) to successfully defraud their targets.

Romance fraud was the second-highest category of fraud victimisation, with losses estimated at A$42 million across all agencies, consistent with 2016 (although losses reported to the ACCC declined). They continue to devastate the lives of many, although for the first time, more contacts were initiated via social networking than through other contact methods (such as online dating websites).

Who are the victims?

The data provided in the report shows how all demographics can be targeted and vulnerable to different types of fraud. Investment scams cut across all ages, and this was the highest category of loss across young, middle-aged and older Australians.

It’s interesting to note (below) that young people were successfully targeted by approaches that used threats, dispelling the myth that such fraud only affects mainly older people.

The use of threats can target a person’s physical safety (in the case of kidnapping or assault); their freedom (in the case of arrest or deportation); or their reputation (in the case of extortion/blackmail of intimate images).

Both men and women were vulnerable to fraud, but men reported greater incidents of investment fraud victimisation (reporting A$22.8 million in losses to the ACCC) compared to a higher number of women succumbing to romance fraud (reporting A$12.7 million in losses to the ACCC).

The report also details that A$1.6 million was lost by Indigenous Australians, representing a 12% increase from 2016.

It is important to note that not all victims are individuals. Businesses were also targeted in scams, with A$22.1 million losses reported across all agencies. This occurs when offenders use malware, phishing or other social engineering techniques to intercept business communications and persuade an employee to pay an invoice to a criminal account.

This continues to prove lucrative for offenders, and highlights deficiencies in the governance processes of some organisations.

Targeting victims

While 42% of contacts were via email, social media, mobile apps or the internet, 40% of approaches were still made using the telephone. This reminds us that despite the increase in web enabled communication, more traditional methods are still successful.

The payment methods also change to reflect an evolution in society. The use of iTunes vouchers was still prevalent, despite a large amount of awareness to warn people against this. Clearly this is still an area that needs improvement.

Unsurprisingly, requests for victims to pay using cryptocurrencies were also noted. It is likely that this will continue into the future, as these payment methods gain more momentum and legitimacy with users. There were also a number of scams based on offerings of fake cryptocurrencies. In total, A$2.1 million in loss was associated with cryptocurrencies.

Prosecution and prevention

Prosecution of fraud offences, particularly those perpetrated online, is fraught with many difficulties for law enforcement globally. In the majority of instances, it is unlikely that victims will get a criminal justice outcome. Further, the money sent is almost always gone and unrecoverable.

The prevention of fraud requires a multifaceted approach. For example, there has been a large amount of media surrounding the use of iTunes vouchers by offenders, and warnings were added to the cards themselves. But this continues to derive success, with A$1.2 million lost by victims paying through iTunes vouchers.

The ACCC has detailed disruption efforts it has been involved in with some of the intermediaries, whose services and platforms are used by offenders to perpetrate fraud.

This included financial institutions, online classifieds and social media platforms. This is a positive step and one that has the potential to make a real difference to victimisation.

In contrast, the ACCC also detailed the end of its Scams Disruption Project, which was proactively targeting potential fraud victims to warn them of likely victimisation.

Over a three year period more than 10,000 warning letters were sent to potential scam victims. About 70% of those who received the letters stopped sending money overseas within six weeks.

While this project was arguably resource intensive, the available statistics demonstrated positive benefits to this approach, and it is disappointing to see that it is no longer in operation. There is merit in investigating alternative ways to implement this into the future.

Can we stop the fraud?

Sadly, there does not appear to be any reprieve on the horizon. The ACCC has already detailed fraud losses in 2018 so far of more than A$38 million.

This latest ACCC report reminds us of our vulnerability to fraud and while we think it will never happen to us, in all honesty, it could.

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Offenders are highly skilled and tech-savvy, and expert in what they do. They can easily identify a weakness and subsequently manipulate and exploit a person, resulting in often devastating financial and non-financial losses.

But there are steps that we can take to reduce the likelihood that we will become their next victim. We should not be afraid to walk away from a situation and seek advice from others if we have our suspicions. We should not be afraid to hang up the phone, or hit the delete key on an email, if we feel unsure of something.

It is time that we started to acknowledge the gravity of fraud and the true costs to individuals and society that result from its victimisation. This report shows us that there are more than 340 million reasons why we need do better in combating fraud.