Entrepreneurs: What You Need To Know About Scams

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Apr. 22 2022, Published 8:05 a.m. ET

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The number of reported scams increased from 139 in 2019 to 266 million in 2020. The massive growth is caused mainly due to the pandemic, and in part, more countries have started to report online fraud.

The number of reported scams grew by 22% in the U.S. 190% in Egypt, and 186% in Nigeria, which reported the most dramatic increase in the number of scams as the pandemic is pushing their populations to the Internet for the first time.

The amount lost in scams globally grew from $41.7 billion to $47.8 billion. The number of scams and money lost is likely to be only a tiny fraction of the actual size of online fraud. Less than 3% and up to 15% of consumers report a scam, depending on the country.

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Scams are hurting businesses and consumers alike.

The money lost per victim and the type of scams differ strongly by country. From less than $15 for fake shops, counterfeiters and subscription traps to several hundreds of thousands of dollars for ransomware, Business Email Compromise (BEC), and extortion scams.

While phishing continues to be the most common type of scam globally, the pandemic has introduced new twists on old scams. In 2020, scammers first focused on masks, respirators, and disinfectants. Moving forward, they introduced ‘COVID-19 charities’ and ‘government grants.’

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New scams popped up as well, targeting small businesses. One scam network focuses on small retailers offering several pallets of Coca-Cola bottles (10,000 usually) at meager prices on marketplaces such as eBay. After making the first payment, the bottles are never delivered and the wholesale website disappears.

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Too Little, Too Late?

In recent years, the attention of governments has mainly been on larger cybercrimes, hacks, DDOS attacks, BEC, and ransomware. However, this is rapidly changing, in some cases because a (prime) minister publicly fell for a phishing scam, as occurred in Pakistan and South Africa.

In terms of the money lost, scams now make up 5% of total cybercrime, estimated by McAfee to be $ 945 billion in 2020. Online scams are a more significant part of cybercrime. According to Group-IB, scams and phishing account for 73% of all cyberattacks.

How can we turn the tide?

In many countries, scams are now the most reported form of crime. In Sweden, fraud made up 5% of all criminal cases reported in 2000. Now, this value is 17%. In the UK and the USA, scams are, in 2021, the most experienced form of crime. Finally, Singapore states that 44% of all reported crimes are related to online scams.

The World Economic Forum estimates that only 0.05% of all cybercrimes are prosecuted. This makes scams, which are even more underreported than big cybercrimes, a very lucrative business.

While many developing countries are now focusing on building cybercrime awareness amongst their populations, more industrialized countries have learned that education alone is insufficient.

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The next step is increased national sharing of data. In the USA, the Federal Trade Commission is taking a leading role in gathering all scam-related data, collecting and sharing data with 3,000 federal, state, and local law enforcers across the country. Likewise, ScamWatch Australia is intensifying cooperation with Australian law enforcement, the Financial Regulation Commission, banks, telecom operators, and social media companies.

While the USA, Canada, and Australia have started sharing scam data, most other countries still linger. Yet, sharing online fraud data globally is the only real solution to turning the tide on the worldwide epidemic of scams as it allows faster identification, prevention, investigation, and prosecution.

What can you do if you get scammed?

Previous studies show that anybody can get scammed—people with little education, Ph.D. students, large corporates, and small family stores. If you get scammed you can report the scam directly to the FBI Internet Crime Complaint Center (IC3), the Federal Trade Commission, or other government entities.

This article was written by Jorij Abraham and originally appeared on Score.

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