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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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March 13, 2017


Phone Scams and Phishing

According to a recent report from the Anti-Phishing Working Group (APWG), more phishing attacks were recorded in 2016 than in any prior year since the group began monitoring in 2004. The APWG defines phishing as a criminal mechanism employing both social engineering, often through the use of email, and technical subterfuge to steal consumers' personal identity data and financial account credentials.

While phishing attempts through electronic channels are undoubtedly up, the telephone call remains a valuable tool for fraudsters. The Federal Trade Commission (FTC) just released its 2016 Consumer Sentinel Network Data Book and revealed that of the fraud-related complaints it received in 2016 with the method of initial contact reported, 77 percent of the respondents claimed that initial contact was made via telephone. Only 8 percent reported email as the method of initial contact. Thinking broadly about these reported trends by the APWG and the FTC, I have two observations:

  • No doubt phishing emails are a growing concern based on the data from the APWG. The FTC data just might reveal what I have been hearing for the last few years: the sophistication of phishing schemes is increasing each day. About 45 percent of the fraud complaints filed with the FTC did not report the method of initial contact. Maybe these individuals did not want to report that information. Or with the increasing sophistication of phishing emails, perhaps many of these individuals still do not realize that email was in fact the entrée for fraudsters to obtain payment, personal, or financial information. Educating the public and our employees to recognize phishing emails is vitally important.
  • Phone scams are likely to increase as chip-enabled EMV cards and their acceptance become more widely adopted, making it more difficult for fraudsters to conduct counterfeit card fraud. Look no further than the United Kingdom, where the Financial Fraud ActionUK's Fraud The Facts 2016 report notes that overall financial fraud increased by 26 percent from 2014 to 2015, due in large part to the growth of impersonation and deception scams. It further notes that these scams typically involve a phone call, text message, or email. With the FTC reporting a 40 percent increase in the number of fraud complaints from 2014 to 2016, with the telephone being the initial method of contact, it is imperative for individuals to carefully handle calls before providing sensitive information.

The Retail Payments Risk Forum often stresses the importance of consumer education, as fraudsters often see the consumer as a weak link. Education is critical to preventing individuals from falling for phishing emails or phone scams. We strongly encourage individuals to exercise caution before opening attachments within emails or sharing personal or financial information over the phone. And before making good on an unexpected payment request from an email or phone call, it's a great practice to directly reach out to the payee through a known legitimate email address or phone number. For more information about recognizing and handling telephone scams, visit this FTC web page.

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

March 13, 2017 in consumer fraud , consumer protection , phone fraud | Permalink

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