Online scams have become a growing concern for people around the world. In recent years, the number of online scams has increased, and the methods used by scammers have become more sophisticated. These scams can result in significant financial losses for victims and emotional distress, and other negative consequences.

A recent  study from Juniper Research, the foremost experts in payment markets, forecasts that merchant losses from online payment fraud will exceed $362 billion globally between 2023 to 2028. The statistics illustrate the scale of the issue.  

According to the Federal Trade Commission (FTC), Americans lost over $10 billion to fraud in 2023, of which almost half were investment scams. In addition, the Better Business Bureau (BBB) in the USA received over 50,000 scam reports in 2020, with a total reported loss of $117 million. The most commonly reported scams were related to online purchases, employment, and tech support.

In Europe, the GSM Association, a lobby group for mobile operators such as Orange and Telefonica, told the European Commission last October that, if they were made responsible for scams, their liability for could amount to €8 billion a year with a “severely disruptive” effect on European connectivity.

Malta not immune

Obviously, Malta is not immune to fraud in general and to internet scams in particular.  Our financial services arbiter has said there is a growing trend of bank account hacking by third parties. 

Scammers are employing sophisticated tactics, says the Office of the Arbiter for Financial Services (OAFS).  Its chief, Alfred Mifsud,  says that scammers are using  banks’ identities, including their standard customer care mobile number or website, to deceive account holders and elicit vital data that enables them to access the account and withdraw funds, sometimes repeatedly.

According to data provided by the police to the OAFS, over 1,000 individuals in Malta have fallen victim to such scams, resulting in a loss of €20.8 million over 2022 and 2023. 

Scammers are also increasingly targeting younger demographics, with social media platforms serving as a breeding ground for various types of fraud.  In one case, a victim received an SMS message, proceeded to click on a link in the message, and provided login credentials on a website mirroring a bank’s online domain. Two payments were made, defrauding the person of €19,150. 

Investment fraud, particularly those involving crypto-assets, has significantly risen in recent years, with scammers exploiting the hype surrounding these technologies to deceive investors. But the recovery of funds lost to scams remains a daunting task for victims, with the irreversible nature of certain transactions, such as crypto-assets, making it particularly difficult to retrieve stolen money.  

What can we do?

What can we do about it on a personal level?  Well, there are several solutions to prevent and combat online scams. One of the most effective ways to protect yourself is to be vigilant and cautious when online. This means being careful about clicking on links or downloading attachments from unknown sources and being sceptical of emails or websites that seem too good to be true.

Law enforcement agencies also have a role to play in combating online scams. This can involve investigating and prosecuting scammers, as well as working with international partners to coordinate a global response. In addition, governments can pass laws and regulations to strengthen cybersecurity and protect consumers from online scams.

The scams are very diverse, ranging from emails claiming to be from a trader’s clients through online purchases gone wrong to even emotional manipulation that leaves victims financially and psychologically distressed. The financial losses are often significant, ranging from a few hundred euros to several thousand.  Unfortunately, the banks’ efforts to retrieve the fraudulently withdrawn money rarely succeed, leaving victims in a difficult position.

Challenges

One of the biggest challenges of online scams is that they can be difficult to detect. Scammers often use sophisticated tactics to create convincing emails or websites, making it easy for people to be tricked. In addition, scammers frequently target vulnerable populations, such as the elderly or those who are less tech-savvy.

Another challenge is the global nature of online scams. Scammers can operate from anywhere in the world, making it difficult for law enforcement agencies to track them down and prosecute them. In addition, some countries may have different laws or regulations related to online scams, making it challenging to coordinate a global response.

The Malta Financial Services Authority (MFSA) has issued a number of warnings specifically related to fraudulent crypto-asset investments.  Some of the illicit websites might request personal details, which, when provided, were followed by a phone call from a friendly and supposedly expert salesperson whose aim was to convince victims to invest money in their scheme.

The most common types of cryptocurrency scams which investors need to be vigilant about include fake ICOs (Initial Coin Offerings), which can only be used on the platform provided, and whose platforms may eventually be closed and disappear along with the investor’s money; crowdfunding ventures promising higher gains which are availed of once the coin becomes active, and fake exchange platforms and fake e-wallet apps.

Warning signs

To establish whether a scheme is a scam, one can go through a checklist of the 11 most common warning signs, these being:

1. Unrealistically high rates of return which are usually higher than the market average;

2. Easy withdrawals which may be made at ‘anytime’;

3. Promises that any funds deposited are 100% guaranteed;

4. The business being unregulated;

5. Lack of documentation or the use of documentation which is copied from a legitimate business;

6. Aggressive selling techniques which put pressure and rush you to secure a sale;

7. The absence of physical local offices;

8. Contradiction between documents and spoken information;

9. Not answering and avoiding hard questions;

10. Lack of information being provided on the website, or within the whitepaper;

11. The use of buzz words such as ‘no risks’, ‘gains guaranteed’, ‘become a billionaire’, ‘free services, just register’.

The first step is to check whether the company is regulated and the veracity of claims through the Authority’s Financial Services Register online.  If still in doubt, consumers can also contact the MFSA via email or through www.mfsa.com.mt .

By the way, readers might wish to note that the OAFS has devised a model to apportion liability for the financial loss sustained between the bank and an account holder.  This model has been well-received and adopted by Malta’s largest banks.  Victims of bank scams can apply to the Arbiter and supply details of their cases, following which he will rule on whether the bank is liable and, if so, what percentages of the loss suffered should be borne by the bank and/or the account holder.

Main photo: Mikhail Nilov