An ongoing hot topic surrounding the internet…Online fraud… and how to avoid it. While we’d like to think we take as many safety measures as possible when doing online banking, but it is reported as the second largest fraud loss in the United States. Read the article below to learn how online fraud could affect you.
You’d never blindly send money to a stranger who emailed you asking for it, would you?
Don’t be so sure. In 2017 the Justice department announced that Google and Facebook had lost $100 million to one scammer who sent them fake invoices. The scammer, who posed as an Asian manufacturing, sent the company elaborately forged invoices the companies paid. If Google and Facebook could lose $100 million through this ploy known as “business email compromise,” perhaps your company is susceptible as well?
Given the growing prominence of electronic fraud, we decided to analyze just how much money is lost each year due to Internet fraud, which kinds of frauds are growing the fastest, and who is getting targeted.
Fraud, in general, is a deliberate deception with the intent for financial gain. It’s a very general term that could mean anything from stealing money from your employer to telling someone they have an unpaid bill and having them send the money to you.
Online fraud (also called Internet fraud or electronic fraud), is a version of fraud that uses the Internet to perpetrate either the deception or the money transfer aspect of a fraud. While online fraud is still considered its own category, to a certain extent, all fraud is becoming online fraud because the Internet is so pervasive.
It’s also worth noting the difference between fraud targeted at consumers versus fraud targeted at businesses. Consumer fraud typically receives a lot of media attention, but fraud targeting businesses is also quite pervasive.
So, just how much money is lost to fraud in the United States per year and how much of that fraud is online? One estimate puts the total fraud loss at approximately $180 billion per year, with online being the second largest category.
Online fraud is estimated at around $32 billion per year, however fraud loss is notoriously difficult to estimate. One reason is that many people never realize they were defrauded, hence it doesn’t get reported. This makes fraud an attractive proposition for criminals and also means sizing losses is challenging. What’s more, isolating the component of fraud that is online is challenging because the Internet touches so many of the above categories, from mortgage payments to wire transfers to online banking.
The FBI does, however, publish annual reports of online fraud losses reported to its Internet Crimes Complaint Center. While reported losses are only a small fraction of actual losses due to Internet fraud, the trends and classifications of crimes provide useful insights for what kinds of crimes are growing and where they are most prevalent.
In 2017, $1.4 billion dollars in electronic fraud was reported to the FBI, nearly twice as much as in 2013.
This $1.4 billion in losses was over 300,000 reported incidents with an average loss per incident of almost five thousand dollars.
Within the online fraud universe, the FBI categorizes crimes into various categories. This chart below shows the fraud losses by category and highlights the major source of vulnerability—your email inbox.
Forty percent of online fraud losses are the result of Email Compromise, sometimes referred to as Business Email Compromise (BEC) or Email Account Compromise (EAC). This fraud targets mostly businesses that regularly perform wire transfers. This type of fraud involves sending fake invoices to companies with the hope they are erroneously paid.
If you work in the accounting department of a company or regularly pay bills, be aware your inbox may not be what it seems. Hackers can very easily pose as trusted vendors or even spoof email addresses of your co-workers with relative ease.
Email compromise is the largest source of online fraud, but which electronic categories are growing the fastest and which are shrinking? The chart below shows the change in fraud loss by category from 2016 to 2017.