tag:theconversation.com,2011:/id/topics/fraud-1782/articlesFraud – The Conversation2024-03-25T16:37:51Ztag:theconversation.com,2011:article/2258372024-03-25T16:37:51Z2024-03-25T16:37:51ZDating apps: Lack of regulation, oversight and competition affects quality, and millions stand to lose<figure><img src="https://images.theconversation.com/files/583280/original/file-20240320-24-xk2kwq.jpg?ixlib=rb-1.1.0&rect=0%2C19%2C6498%2C4299&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dating apps have helped people make millions of connections.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>When Aleksandr Zhadan <a href="https://gizmodo.com/guy-used-chatgpt-talk-5-000-women-tinder-met-his-wife-1851228179">used ChatGPT</a> to talk to over 5,000 women on Tinder, it was a sign of things to come. </p>
<p>As artificial intelligence becomes more sophisticated and easily available, online dating is facing an onslaught of AI-powered fraud. The industry, which is dominated by a small number of incumbents, has already proven slow to respond to long-standing problems on its apps. AI will be its moment of reckoning — there are even apps that can <a href="https://www.cbc.ca/news/canada/artificial-intelligence-relationships-1.7148866">help people write their messages</a>.</p>
<p>Opponents of dating apps <a href="https://www.nytimes.com/2024/03/16/opinion/dating-apps-hinge-tinder-bumble.html">may be happy</a> to see the industry crash and burn. The rest of us should worry. Online dating plays an important, and I believe positive, role in our lives. It has made it easier for people to find relationships, and easier to find people with whom we are truly compatible.</p>
<p>As the industry careens towards disaster, regulators should be prepared to intervene.</p>
<p><div data-react-class="InstagramEmbed" data-react-props="{"url":"https://www.instagram.com/p/C3EHlNMt65J","accessToken":"127105130696839|b4b75090c9688d81dfd245afe6052f20"}"></div></p>
<h2>Real versus fake connections</h2>
<p>Zhadan’s case shows one of the challenges AI poses for online dating. Now, when we chat with someone on one of the apps, we cannot know if their answers are written by a chatbot, nor can we know how many other people they are talking to simultaneously. We also can’t know if someone’s photos have been <a href="https://mashable.com/article/using-ai-photo-generator-apps-for-dating-profile">produced with the help of an AI image generator</a> </p>
<p>But at least Zhadan was actually looking for love. Since the launch of ChatGPT in late 2022, the amount of outright fraud on dating apps, much of it powered by AI, has skyrocketed. According to cybersecurity company Arkose Labs, there was, between January 2023 and January 2024, <a href="https://www.arkoselabs.com/latest-news/how-criminals-are-manipulating-ai-to-target-dating-apps/">a staggering 2,000 per cent increase</a> in bot attacks on dating sites. </p>
<p>And this is just the beginning. AI is getting more powerful, and more convincingly human, all the time.</p>
<p>Even before AI appeared on the scene, fraud on dating apps was already a serious problem. Sign up for one of them and you’ll instantly find your feed clogged with an endless number of fake profiles. Most of them have been created for a specific purpose, which is to steal your money. Unfortunately, it works. </p>
<p>In 2023, 64,000 people in the United States admitted to being the victims of romance scams, most of which happen through dating apps — we can assume this is only a small portion of the actual cases. </p>
<p>The Federal Trade Commission <a href="https://www.ftc.gov/business-guidance/blog/2024/02/love-stinks-when-scammer-involved">measures the losses</a> for the year at US$1.14 billion. This has been going on for years, and the app companies have done little to stop it.</p>
<h2>Online connections, offline threats</h2>
<p>Fraud is not the only challenge faced by dating app users. <a href="https://www.kaspersky.com/about/press-releases/2024_nearly-a-quarter-of-online-daters-experience-digital-stalking">A quarter of them</a>, mostly women, have been stalked by someone they met online. Even more tragic are the cases of people being <a href="https://co.usembassy.gov/security-alert-risks-of-using-online-dating-applications/">assaulted or murdered</a>.</p>
<p>There are other issues: prices on the apps <a href="https://www.ft.com/content/83cd07a3-134c-4df7-ab6a-08752c724bbe">have gone up steadily</a> and innovation has come to a grinding halt. Ever since Tinder introduced <a href="https://techcrunch.com/2016/09/21/tinders-newest-app-tinder-stacks-lets-you-swipe-on-anything/">the card stack in 2016</a>, the design of the apps has hardly changed. </p>
<p>You swipe, match, message and hope for the best. It should perhaps be no surprise that customers are <a href="https://www.cnn.com/2024/02/14/business/dating-apps-2024-hinge-tinder-dg/index.html">getting fed up</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Man using dating app on mobile phone" src="https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/583458/original/file-20240321-30-md695s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Online dating plays an important and positive role in people’s lives.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<h2>Benefits to society</h2>
<p>While online dating certainly has its share of <a href="https://www.hachettebookgroup.com/titles/nancy-jo-sales/nothing-personal/9780316492799/">long-standing critics</a>, I have argued that, on balance, the apps are a <a href="https://www.taylorfrancis.com/chapters/mono/10.4324/9781315448848-7/sex-technology-neil-mcarthur">benefit to users and to society</a>. They are an efficient way to find partners, get us out of our social bubbles and encourage connections across class and race. </p>
<p>Precisely because of the important role the technology plays in our lives, we should pay attention to how the industry operates. The dating app companies are <a href="https://www.cnet.com/tech/services-and-software/what-you-need-to-know-about-tinders-new-verification-process/">finally starting</a> to do something to protect users. </p>
<p>But given how long fraud has plagued these apps, their response has been slow and pretty underwhelming. They need, at a minimum, better tools to detect fake accounts and remove them quickly. There is a lot more they could do as well. </p>
<p>They could require background checks for users, which <a href="https://www.pewresearch.org/short-reads/2023/02/02/key-findings-about-online-dating-in-the-u-s/">polls show</a> a majority of people support. They could put AI to use themselves, to flag signs of fraud during people’s private chats. And dating app companies could implement safety features to protect users when they meet in person, for instance making it easier to share with your friends or family the profiles of people you are meeting up with.</p>
<h2>Dominant players</h2>
<p>One explanation for the companies’ sluggish response will be familiar to any observer of big tech: the concentration of ownership. The dominant player, Match Group, owns <a href="https://faq.lert.matchgroup.com/en/brands">over 40 different apps</a>, including most of the well-known: Tinder, Match.com, OkCupid, Hinge and Plenty of Fish. Its only serious competitor for market share is <a href="https://ir.bumble.com/news/news-details/2022/Bumble-Inc.-acquires-popular-Gen-Z-dating-app-Fruitz/default.aspx">Bumble, which also owns Badoo and Fruitz</a>. </p>
<p>In the United States, Match Group and Bumble control <a href="https://www.start.io/blog/these-6-apps-own-85-of-the-mobile-dating-market-on-valentines-day-2024/">over three-quarters</a> of the <a href="https://www.businessofapps.com/data/dating-app-market/">market</a>. </p>
<p>Anti-trust authorities have never given the industry any serious scrutiny. Presumably, they do not think online dating is important enough to deserve it. But these companies have a lot of control over one of the most intimate aspects of our lives.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a woman's hand holding a phone displaying a yellow background with the word BUMBLE" src="https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/583457/original/file-20240321-28-aq0kfb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In the United States, Match Group and Bumble control over three-quarters of the dating apps market.</span>
<span class="attribution"><span class="source">(Good Faces Agency/Unsplash)</span></span>
</figcaption>
</figure>
<p>Thirty per cent of all adults in the U.S., and over half of people under 30, have <a href="https://www.pewresearch.org/short-reads/2023/02/02/key-findings-about-online-dating-in-the-u-s/">used a dating app at some point</a>. One in 10 Americans is currently in a relationship with someone they met online. </p>
<p>The costs of fraud and abuse, in both human and financial terms, are huge. And the anti-competitive pressures in the industry are strong, given the network effect built into online dating: we want to be on the apps that everyone else is on.</p>
<p>Regulators should finally get involved. They should hold the companies accountable for fraud and abuse on their apps in order to force them to innovate to protect users. They should look closely at the prices they charge customers for premium features. The ultimate solution may be to break up the sector’s dominant players, Match Group and Bumble, in order to create real competition.</p>
<p>The inventors of dating apps deserve credit for enabling millions of connections that would never have happened otherwise. But if things don’t change, the companies could be in trouble and millions of people could be lonelier as a result.</p><img src="https://counter.theconversation.com/content/225837/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neil McArthur does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Dating apps provide a valuable social service. The industry should be regulated to protect consumers, increase competition and address fraud.Neil McArthur, Director, Centre for Professional and Applied Ethics, University of ManitobaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2261872024-03-20T00:01:16Z2024-03-20T00:01:16ZTrump judgments: What’s an appeal bond? What happens if he can’t get a $454 million loan?<figure><img src="https://images.theconversation.com/files/582922/original/file-20240319-20-w1pwmn.jpg?ixlib=rb-1.1.0&rect=62%2C40%2C2932%2C1953&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Donald Trump's identity has always been closely tied to his wealth – and was also a means to roast him, such as by Comedy Central in 2011.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ComedyCentralRoastofDonaldTrump/1eea992d88b54cb588cb650e31054148/photo?Query=trump%20money&mediaType=photo&sortBy=&dateRange=Anytime&totalCount=1023&digitizationType=Digitized&currentItemNo=12&vs=true&vs=true">AP Photo/Charles Sykes</a></span></figcaption></figure><p><em>Lawyers for Donald Trump on March 18, 2024, told a New York court that the former president <a href="https://www.nytimes.com/2024/03/19/nyregion/trump-bond-ny-fraud-case.html">has been unable to secure</a> a US$454 million bond as he appeals a New York civil fraud ruling against him.</em></p>
<p><em>Their “diligent efforts” reportedly involved approaching about 30 bond companies, which all said “no.”</em></p>
<p><em>Time is running out for Trump, who has until March 25 to either secure the bond, known as an appeal bond, or pay that amount himself in cash.</em> </p>
<p><em>The Conversation asked <a href="https://michiganross.umich.edu/faculty-research/faculty/will-thomas">Will Thomas</a>, a business law professor at the University of Michigan, to explain why Trump needs an appeal bond and what happens if he doesn’t get it by the deadline.</em></p>
<h2>What’s an appeal bond?</h2>
<p><a href="https://www.americanbar.org/groups/judicial/publications/appellate_issues/2019/summer/staying-judgment-with-appeal-bonds/">An appeal bond</a>, sometimes referred to by the Latin supersedeas, meaning “you shall desist,” is a guarantee that the party appealing a ruling against them can and will pay the judgment if their appeal is ultimately unsuccessful. The person appealing the ruling is known as the appellant.</p>
<p>Appeal bonds are offered by licensed providers such as insurance companies and bondsmen who specialize in offering these kinds of guarantees. It’s common in civil cases for the appellant to get an appeal bond. </p>
<p>In order to convince a bondsman to give you an appeal bond, you need to offer them collateral, such as real estate or other assets, in exchange. That way, in case they end up on the hook for the appellant’s judgment, they can sell the collateral to pay it.</p>
<p>The size of the appeal bond is larger than the actual judgment – in Trump’s case, the judgment is $355 million – because the appellant will be expected to pay interest on the original judgment should they lose their appeal. The bond is meant to cover whatever those estimated costs will be. So, for example, Trump recently appealed an $83 million judgment in a separate defamation case brought by columnist E. Jean Carroll. To do so, <a href="https://abcnews.go.com/US/judge-approves-trumps-bond-e-jean-carroll-defamation-case/story?id=108062778">he secured an appeal bond worth $91.6 million</a>.</p>
<figure class="align-center ">
<img alt="several men and a woman sit at a wooden table in a courtroom with observers behind them" src="https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582925/original/file-20240319-24-9ffojk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Donald Trump sits in a New York courtroom with his legal team during his civil trial.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/TrumpFraudLawsuit/26e84c9365de4786b28ceedffac4f330/photo?Query=donald%20trump%20call%20fraud&mediaType=photo&sortBy=creationdatetime:desc&dateRange=Anytime&totalCount=25&currentItemNo=4">AP Photo/Seth Wenig</a></span>
</figcaption>
</figure>
<h2>Why do courts ask for them?</h2>
<p>The point of an appeal bond is to protect the rights of the party who won at trial. The appeals process can be slow, <a href="https://www.nycourts.gov/courts/ad2/PJ_Scheinkman_Initiatives.shtml">taking months or even years</a>, and a lot can happen during that period. </p>
<p>An appellant might suffer some unexpected financial hardship – or, more cynically, they might use the delay as an opportunity to sell, hide or otherwise get rid of assets that they otherwise would have to hand over to the trial winner. Securing a bond guarantees that, whatever happens to the appellant, there is someone standing ready to pay the trial judgment when the appeals process is over.</p>
<p>Of course, courts could accomplish the same protection by requiring the appellant to pay the entire judgment upfront before appealing. And, in fact, that’s allowed as well. In Trump’s case, New York law allows him to pay the $454 million to the state of New York today. But that approach can be hugely expensive: A bond will have the same effect at a fraction of the cost – all you have to do is put up collateral and make regular payments on the bond, much like someone would pay premiums on an insurance policy.</p>
<p>So really, the appeals bond is something of a compromise: It preserves the trial winner’s ability to collect a judgment down the road, and it allows the appellant to appeal without having to surrender all their assets up front. </p>
<h2>Trump is reportedly very rich. Why is he struggling to secure a bond?</h2>
<p>Trump’s problem is <a href="https://news.bloomberglaw.com/business-and-practice/trump-says-full-ny-appeal-bond-impossible-without-fire-sale-1">none of the major insurers or licensed bond providers</a> apparently has been willing to issue a bond of this size without collateral that is liquid – think cash or investments like stocks that can be easily sold, as opposed to real estate that can be hard to dispose of. </p>
<p>And neither Trump nor the Trump Organization, both of whom are defendants in the case, has that much cash available. Trump testified earlier at trial that the organization had <a href="https://www.washingtonpost.com/politics/2024/02/28/trump-said-he-had-400-million-cash-now-his-lawyers-say-bond-is-struggle/">$400 million in liquid assets</a>, while a New York Times analysis <a href="https://www.nytimes.com/2024/03/01/nyregion/donald-trump-money.html">put the number closer to $350 million</a>. Either way, that’s not enough to cover the bond, which would need to be $454 million to cover both the judgment and any interest that accrued during the appeal. </p>
<p>And let’s not forget that around $100 million of Trump’s liquid assets were already pledged to secure a different appeal bond in his other New York civil case involving Carroll. </p>
<p>So while it’s true that Trump and the Trump Organization <a href="https://www.bloomberg.com/news/articles/2023-11-07/donald-trump-net-worth-reaches-3-1-billion-amid-trial">have billions in assets</a>, those assets mostly come in the form of commercial real estate like Trump Tower.</p>
<p>And it’s maybe not surprising that an insurer wouldn’t want to accept real estate as collateral. Yes, <a href="https://ag.ny.gov/sites/default/files/tto_release_properties_addendum_-_final.pdf">Trump Tower</a>, in New York City’s Manhattan borough, is valuable, but owning and managing or even just trying to sell commercial real estate can be a huge, expensive hassle. For an insurance company not already in the real estate business, it may want to avoid a possibility where Trump ultimately doesn’t make good on his judgment payments and the insurer is forced instead to own – and then try to sell – an asset like Trump Tower. </p>
<p>Add onto this fact that companies might understandably be wary to do business with the Trump Organization. After all, the conclusion reached at trial was that the Trump Organization <a href="https://apnews.com/article/trump-civil-fraud-verdict-engoron-244024861f0df886543c157c9fc5b3e4#:%7E:text=Judge%20orders%20Trump%20to%20pay,in%20staggering%20civil%20fraud%20ruling&text=A%20New%20York%20judge%20ordered,statements%20that%20inflated%20his%20wealth.">routinely lied to financial institutions</a> about the value of Trump’s assets in order to secure favorable business loans. It’s a bit ironic, then, that Trump is now struggling to convince financial institutions to take seriously his representations about his ability to pay his debts.</p>
<h2>What happens if he can’t get the bond?</h2>
<p>Assuming Trump and the Trump Organization cannot secure a bond, there are a few possible paths forward – most of them ranging from bad to disastrous for Trump. </p>
<p>The best scenario for Trump is that the New York appellate court might decide on its own to grant Trump’s request to stop New York from collecting its judgment. Securing a bond would automatically prevent New York from collecting its judgment while the appeal process is ongoing, but the appellate court likely has the inherent power to grant that same temporary legal protection without a bond or, as the Trump team <a href="https://www.reuters.com/legal/trump-has-failed-get-appeal-bond-454-mln-civil-fraud-judgment-lawyers-say-2024-03-18/">has suggested in this case</a>, with a partial bond worth about $100 million. </p>
<p>If I had to guess, I suspect that something like this is the most likely outcome, if only because the other outcomes are so bad.</p>
<p>What are the other possibilities? First, Trump could sell assets to generate the cash he needs to secure a bond. This would be an especially expensive outcome from Trump and his businesses because, when it comes to real estate, the worst time to sell is when you are being forced to do so. </p>
<p>Second, either Trump or his businesses could declare bankruptcy. Bankruptcy, after all, is meant to protect people who can’t pay the debts they currently owe, which would be Trump in this situation.</p>
<p>We actually saw a version of this scenario playing out a few years ago when <a href="https://www.wsj.com/articles/gawker-begins-appeal-of-140-million-hulk-hogan-verdict-1459889289">Gawker Media was unable to afford an appeal bond</a> after losing its invasion of privacy trial to Hulk Hogan. </p>
<p>Third, the state of New York has the right to seize Trump properties in order to cover the judgment. Attorney General Letitia James has <a href="https://abcnews.go.com/US/letitia-james-shes-prepared-seize-trumps-assets-pay/story?id=107381482">already stated</a> that she is willing to do this if Trump doesn’t provide a bond. From there, the state could sell the properties it seized or, more likely, it would hold onto the properties until after the appeals process ends, in case the state loses or has its judgment amount reduced.</p><img src="https://counter.theconversation.com/content/226187/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Will Thomas does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump has apparently been unable to secure the appeal bond he needs to avoid paying the civil fraud judgment against him.Will Thomas, Assistant Professor of Business Law, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2232992024-02-25T19:05:30Z2024-02-25T19:05:30ZSo, you’ve been scammed by a deepfake. What can you do?<figure><img src="https://images.theconversation.com/files/576658/original/file-20240220-24-qi0t3y.jpg?ixlib=rb-1.1.0&rect=92%2C115%2C3731%2C2283&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/deep-fake-ai-face-swap-video-2376208005">Tero Vesalainen/Shutterstock</a></span></figcaption></figure><p>Earlier this month, a Hong Kong company <a href="https://www.theguardian.com/world/2024/feb/05/hong-kong-company-deepfake-video-conference-call-scam">lost HK$200 million (A$40 million)</a> in a <a href="https://www.esafety.gov.au/industry/tech-trends-and-challenges/deepfakes">deepfake</a> scam. An employee transferred funds following a video conference call with scammers who looked and sounded like senior company officials.</p>
<p>Generative AI tools can create image, video and voice replicas of real people saying and doing things they never would have done. And these tools are becoming increasingly easy to access and use.</p>
<p>This can perpetuate <a href="https://theconversation.com/taylor-swift-deepfakes-new-technologies-have-long-been-weaponised-against-women-the-solution-involves-us-all-222268">intimate image abuse</a> (including things like “revenge porn”) and disrupt <a href="https://www.unswlawjournal.unsw.edu.au/article/disinformation-deepfakes-and-democracies-the-need-for-legislative-reform">democratic processes</a>. Currently, many jurisdictions are grappling with how to <a href="https://pursuit.unimelb.edu.au/articles/picture-to-burn-the-law-probably-won-t-protect-taylor-or-other-women-from-deepfakes">regulate AI deepfakes</a>.</p>
<p>But if you’ve been a victim of a deepfake scam, can you obtain compensation or redress for your losses? The legislation hasn’t caught up yet.</p>
<h2>Who is responsible?</h2>
<p>In most cases of deepfake fraud, scammers will avoid trying to fool banks and security systems, instead opting for so-called “push payment” frauds where victims are tricked into directing their bank to pay the fraudster.</p>
<p>So, if you’re seeking a remedy, there are at least four possible targets:</p>
<ol>
<li><p>the fraudster (who will often have disappeared) </p></li>
<li><p>the social media platform that hosted the fake</p></li>
<li><p>any bank that paid out the money on the instructions of the victim of the fraud </p></li>
<li><p>the provider of the AI tool that created the fake.</p></li>
</ol>
<p>The quick answer is that once the fraudster vanishes, it is currently unclear whether you have a right to a remedy from any of these other parties (though that may change in the future). </p>
<p>Let’s see why.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/voice-deepfakes-are-calling-heres-what-they-are-and-how-to-avoid-getting-scammed-201449">Voice deepfakes are calling – here's what they are and how to avoid getting scammed</a>
</strong>
</em>
</p>
<hr>
<h2>The social media platform</h2>
<p>In principle, you could seek damages from a social media platform if it hosted a deepfake used to defraud you. But there are hurdles to overcome.</p>
<p>Platforms typically frame themselves as mere conduits of content – which means they are not legally responsible for the content. In the United States, platforms are explicitly <a href="https://www.law.cornell.edu/uscode/text/47/230">shielded from this kind of liability</a>. However, no such protection exists in most other common law countries, including Australia. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/this-is-why-australia-may-be-powerless-to-force-tech-giants-to-regulate-harmful-content-169826">This is why Australia may be powerless to force tech giants to regulate harmful content</a>
</strong>
</em>
</p>
<hr>
<p>The Australian Competition and Consumer Commission (ACCC) <a href="https://www.theguardian.com/technology/2022/mar/18/accc-takes-meta-to-court-over-facebook-scam-ads-depicting-australian-identities">is taking Meta</a> (Facebook’s parent company) to court. They are testing the possibility of making digital platforms directly liable for deepfake crypto scams if they actively target the ads to possible victims.</p>
<p>The ACCC is also arguing Meta should be liable as an accessory to the scam – for failing to remove the misleading ads promptly once notified of the problem.</p>
<p>At the very least, platforms should be responsible for promptly removing deepfake content used for fraudulent purposes. They may already claim to be doing this, but it might soon become a legal obligation. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-accc-is-suing-meta-for-celebrity-crypto-scam-ads-on-facebook-heres-why-the-tech-giant-could-be-found-liable-179655">The ACCC is suing Meta for celebrity crypto scam ads on Facebook. Here's why the tech giant could be found liable</a>
</strong>
</em>
</p>
<hr>
<h2>The bank</h2>
<p>In Australia, the legal obligations of whether a bank has to reimburse you in the case of a deepfake scam aren’t settled.</p>
<p>This was recently considered <a href="https://www.supremecourt.uk/cases/uksc-2022-0075.html">by the United Kingdom’s Supreme Court</a>, in a case likely to be influential in Australia. It suggests banks don’t have a duty to refuse a customer’s payment instructions where the recipient is suspected to be a (deepfake) fraudster, even if they have a general duty to act promptly once the scam is discovered. </p>
<p>That said, the UK is introducing a <a href="https://www.psr.org.uk/news-and-updates/latest-news/news/psr-continues-to-take-bold-action-on-app-fraud-as-it-publishes-final-reimbursement-details-ahead-of-2024-implementation/">mandatory scheme</a> that requires banks to reimburse victims of <a href="https://www.latrobe.edu.au/news/articles/2023/opinion/making-banks-pay-for-scam-losses">push payment fraud</a>, at least in certain circumstances. </p>
<p>In Australia, the <a href="https://www.theguardian.com/money/2023/feb/01/australian-banks-should-reimburse-scam-victims-accc-and-consumer-advocates-say">ACCC</a> and others have presented proposals for a similar scheme, though none exists at this stage. </p>
<figure class="align-center ">
<img alt="Customers stand outside Australian bank ATMs" src="https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/576676/original/file-20240220-22-6n09mj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Australian banks are unlikely to be liable for customer losses due to scams, but new schemes could force them to reimburse victims.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/melbourne-australia-july-2-2017-unidentified-676982497">TK Kurikawa/Shutterstock</a></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-can-learn-from-the-uks-experience-by-making-banks-pay-for-scam-losses-209585">Australia can learn from the UK's experience by making banks pay for scam losses</a>
</strong>
</em>
</p>
<hr>
<h2>The AI tool provider</h2>
<p>The providers of generative AI tools are currently not legally obliged to make their tools unusable for fraud or deception. In law, there is no duty of care to the world at large to prevent someone else’s fraud.</p>
<p>However, providers of generative AI do have an opportunity to use technology to reduce the likelihood of deepfakes. Like banks and social media platforms, they may soon be required to do this, at least in some jurisdictions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/who-will-write-the-rules-for-ai-how-nations-are-racing-to-regulate-artificial-intelligence-216900">Who will write the rules for AI? How nations are racing to regulate artificial intelligence</a>
</strong>
</em>
</p>
<hr>
<p>The recently proposed <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6473">EU AI Act</a> obligates the providers of generative AI tools to design these tools in a way that allows the synthetic/fake content to be detected. </p>
<p>Currently, it’s proposed this could work through <a href="https://www.theverge.com/2024/2/13/24067991/watermark-generative-ai-deepfake-copyright">digital watermarking</a>, although its effectiveness is still being <a href="https://venturebeat.com/ai/invisible-ai-watermarks-wont-stop-bad-actors-but-they-are-a-really-big-deal-for-good-ones/">debated</a>. Other measures include prompt limits, digital ID to verify a person’s identity, and further education about the signs of deepfakes.</p>
<h2>Can we stop deepfake fraud altogether?</h2>
<p>None of these legal or technical guardrails are likely to be entirely effective in stemming the tide of deepfake fraud, scams or deception – especially as generative AI technology keeps advancing.</p>
<p>However, the response doesn’t need to be perfect: slowing down AI generated fakes and frauds can still reduce harm. We also need to pressure platforms, banks and tech providers to stay on top of the risks. </p>
<p>So while you might never be able to completely prevent yourself from being the victim of a deepfake scam, with all these new legal and technical developments, you might soon be able to seek compensation if things go wrong. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/tmFFd8fMqxk?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">With audio, video and image deepfakes only growing more realistic, we need multi-layered strategies of prevention, education and compensation.</span></figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australians-are-concerned-about-ai-is-the-federal-government-doing-enough-to-mitigate-risks-221300">Australians are concerned about AI. Is the federal government doing enough to mitigate risks?</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/223299/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeannie Marie Paterson receives funding from the Australian Research Council and the Department of Foreign Affairs and Trade.</span></em></p>Deepfake scams are on the rise – but can their victims claim compensation? The legal landscape is still developing.Jeannie Marie Paterson, Professor of Law, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2237882024-02-20T21:44:04Z2024-02-20T21:44:04ZThe ArriveCan scandal: How can we avoid similar problems in the future?<p>The release of the recent report on the ArriveCan app by Auditor General of Canada Karen Hogan hit Canadians like a bombshell: the app was supposed to cost Canadians $80,000, <a href="https://www.cbc.ca/player/play/2308469827667#:%7E:text=Andrew%20Chang%20breaks%20down%20the,cost%20Canadians%20nearly%20%2460%20million.">but was updated 177 times and racked up a bill of at least $59.5 million, instead</a>. The company behind the scandal, GC Strategies, <a href="https://www.ctvnews.ca/politics/arrivecan-investigation-gc-strategies-had-dozens-of-government-contracts-now-it-s-not-eligible-for-any-1.6771612">received millions of dollars in federal contracts in less than 10 years</a>. </p>
<p>Hogan mentioned that while it was understandable that the government had to relax certain standards to be able to respond quickly to the pandemic, waiving the requirement to provide documentation for the awarding of contracts related to the creation of the app raises questions. ArriveCan collected health and contact information for people travelling outside the country during the COVID-19 pandemic. </p>
<p>Hogan’s report reveals shameless mismanagement of public funds by the Canada Border Services Agency.</p>
<p>How could this happen? As a specialist in public sector audit, I took a close look at how different factors combined to create this extreme situation. Here is what I found. </p>
<h2>Exceptional measures for an unprecedented situation</h2>
<p>The pandemic, which was exceptional and unprecedented, profoundly disrupted our daily lives and redefined our perception of what is normal on a global scale. </p>
<p>It led governments to take equally exceptional and often unprecedented measures.</p>
<p>For example, between 2020 and 2023, <a href="https://www.canada.ca/en/public-health/corporate/mandate/about-agency/acts-regulations/list-acts-regulations.html">Emergency Orders in Council were issued under the Quarantine Act</a> to protect public health in Canada. </p>
<p>Among other things, Orders in Council issued as part of Canada’s response to the pandemic <a href="https://www.canada.ca/en/health-canada/services/drugs-health-products/compliance-enforcement/covid19-interim-order-drugs-medical-devices-special-foods/note.html">facilitated the rapid acquisition of personal protective equipment</a>, making this an appropriate government response to the health emergency. However, these measures also led to abuses, particularly concerning the creation of the ArriveCan app.</p>
<h2>Conflicts of interest</h2>
<p>In the case of ArriveCan, the Auditor General noted several situations that seemed to show what appears to be a conflict of interest. </p>
<p>In her report, she points to shortcomings in the contract award process. She points out that Public Health Agency employees attended dinners and other events organized by suppliers. However, there is no documentation proving that these employees informed their supervisor of these interactions, as required by the Agency’s code of conduct.</p>
<p>It is important to underline that government entities must adhere to high standards of integrity and fairness in their procurement processes. As a result, even if the legislation does not explicitly state that a government entity which establishes criteria for a call for tenders is prohibited from bidding, it is likely that such actions would be considered a conflict of interest and contrary to the principles of fairness and transparency. </p>
<p>In fact, any supplier wishing to do business with an entity linked to the government, and in particular to the Government of Canada, must comply with the <a href="https://www.tbs-sct.canada.ca/pol/doc-eng.aspx?id=32627">Directive on Conflict of Interest</a> at all times and adhere to <a href="https://www.tbs-sct.canada.ca/pol/doc-eng.aspx?id=25049">the Values and Ethics Code for the Public Sector</a>.</p>
<h2>Preparation of the call for tenders and submission of bids</h2>
<p>The Auditor General found that the company that received the contract, GC Strategies, was also involved in defining the criteria used to evaluate and select the supplier. This represents a violation of the principles of fairness and transparency put forward by Public Services and Procurement Canada, while placing the company in a position of conflict of interest.</p>
<p>Calls for tenders related to government bodies must comply with certain rules and laws <a href="https://www.mccarthy.ca/en/insights/articles/deep-dive-canadas-public-procurement-law-2-part-series">requiring transparency and non-discrimination</a>. The fundamental principles of the legal framework for calls for tenders in Canada emphasize openness, fairness and transparency in the procurement processes. This means that <a href="https://buyandsell.gc.ca/for-government/buying-for-the-government-of-canada/the-procurement-rules-and-process">any tendering process must be open</a> (anyone can bid), fair (bidders and potential bidders are treated equally) and transparent (the rules are known to everyone).</p>
<p>This was clearly not the case for ArriveCan.</p>
<h2>Lack of accountability</h2>
<p>Another key issue was project management, where everyone’s responsibilities must be clearly established. The Auditor General noted major shortcomings in this area, noting that no formal agreement had been established to specify the roles and responsibilities of each party in the creation and management of the ArriveCan project. </p>
<p>Yet the <a href="https://www.tbs-sct.canada.ca/pol/doc-eng.aspx?id=32594&section=html">Government of Canada Directive on the Management of Projects and Programmes</a> clearly stipulates the need to assign the various responsibilities of a project in order to ensure accountability. This notion is also part of the <a href="https://www.pmi.org/-/media/pmi/documents/public/pdf/ethics/pmi-code-of-ethics.pdf">Code of Ethics and Professional Conduct of the Project Management Institute</a>, the body that governs project managers. </p>
<p>These shortcomings in terms of accountability and responsibility led to ineffective reporting, as the Auditor General points out in her report.</p>
<h2>An exceptional incident, but not an isolated one</h2>
<p>Although the case of the ArriveCan app is surprising for Canadian taxpayers, with costs skyrocketing from $80,000 to nearly $59.5 million, it is not an isolated incident in the history of Canadian government projects. </p>
<p>The <a href="https://www.thecanadianencyclopedia.ca/en/article/sponsorship-scandal-adscam">Sponsorship scandal</a> is a good example. Between 1997 and 2003, public funds were used to finance public relations campaigns aimed at countering the pro-sovereignty efforts of a provincial political party (the Parti Québécois), without adequate oversight of the spending or effectiveness of these campaigns.</p>
<p>There is also the example of Montréal’s Formula E pilot project in July 2017, which involved electric vehicle races held on its streets. <a href="https://toronto.citynews.ca/2018/05/28/montreals-inspector-general-blasts-ex-mayor-denis-coderre-over-formula-e-race/">In her report on the event</a>, the Auditor General of the City of Montréal claimed that the project suffered from ineffective management, unclear allocation of roles and responsibilities, and lack of accountability. At the time, many commentators felt that the affair was partly responsible for then Mayor Denis Coderre losing his re-election. </p>
<h2>Solutions to avoid such scandals</h2>
<p>The ArriveCan affair is just the most recent example of scandals involving an outrageous use of public funds. This underlines the crucial importance of transparent governance and rigorous management of public funds in maintaining the trust of citizens and preserving the integrity of institutions. </p>
<p>As a result, governmental and paragovernmental entities should implement controls to ensure compliance with the various government policies and directives to which they are subject. </p>
<p>In addition, committees made up of members from outside the organization should be set up to evaluate different projects while ensuring proper management and effective and timely reporting on them. This would ensure that the organization’s decisions and actions are subject to impartial and thorough scrutiny, thereby promoting greater transparency and accountability among the players involved. </p>
<p>Although basic, these measures would nevertheless help reinforce accountability among various stakeholders.</p><img src="https://counter.theconversation.com/content/223788/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annie Lecompte ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The cost overruns of the ArriveCan app are exceptional, but the scandal is not unique in history. There are solutions available to prevent the excessive use of public funds.Annie Lecompte, Associate professor, Université du Québec à Montréal (UQAM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2230862024-02-09T00:56:45Z2024-02-09T00:56:45ZDesperate for Taylor Swift tickets? Here are cybersecurity tips to stay safe from scams<p>The global superstar Taylor Swift is bringing her Eras tour to Australia later this month, with sold-out shows in Sydney and Melbourne. With Swifties numbering in the thousands, fans who didn’t initially secure tickets are understandably desperate to find some. </p>
<p>Enter the many fraudsters seizing this opportunity. Sadly, the Australian Competition and Consumer Commission (ACCC) <a href="https://www.accc.gov.au/media-release/swifties-beware-scammers-are-in-their-cruel-summer-era">has reported over A$135,000</a> already lost to ticket fraud for the Swift concerts. The actual losses are likely to be much higher. </p>
<p>Hackers are also targeting the accounts of ticket holders in order to steal and resell legitimate tickets.</p>
<p>So how can you protect yourself if you are looking to buy or sell Eras tickets, or just want to keep your Ticketek account safe?</p>
<h2>The problem is ticket fraud</h2>
<p>In recent years, there has been a shift to electronic ticketing for events. This uses a unique barcode (or QR code) which can be dynamic. In the case of Ticketek, electronic tickets are linked to the purchaser’s phone number to reduce fraud.</p>
<p>Electronic ticketing aims to overcome a range of problems, such as counterfeit tickets, duplicate tickets and ticket scalping. Unsurprisingly, scammers have updated their techniques, too. </p>
<p>When purchasing tickets, it can be difficult to know if it is an authentic website, a genuine ticket and a legitimate transaction. </p>
<p>For example, scammers are selling <a href="https://www.scamwatch.gov.au/news-alerts/scam-alert-taylor-swift-tickets">non-existent tickets</a> across a range of social media platforms. They are also creating fake, legitimate-looking websites that lure in unsuspecting victims to hand over their personal details and money in return for heartache. </p>
<p>Many fraudsters are also tricking people with ticket sales on Facebook. Excited fans send the requested payment (usually a cash transfer), but will not receive their promised tickets and are not likely to recover the money.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="An example Facebook post advertising a " src="https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=486&fit=crop&dpr=1 600w, https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=486&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=486&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=610&fit=crop&dpr=1 754w, https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=610&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/574515/original/file-20240208-26-e030ed.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=610&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Facebook has many groups where Taylor Swift fans are on the lookout for tickets, making them vulnerable to scammers.</span>
<span class="attribution"><span class="source">Facebook</span></span>
</figcaption>
</figure>
<h2>Hacked accounts</h2>
<p>The prevalence of hacking drives a lot of the ticket fraud. This is particularly evident through the only official reseller of Eras tickets (and many other events) – Ticketek Marketplace. </p>
<p>Some people have had their Ticketek accounts <a href="https://au.news.yahoo.com/taylor-swift-fans-see-tickets-disappear-ticketek-works-to-curb-scammers-203020815.html">hacked</a>, and offenders have been able to make transactions without the owner’s consent. By the time they realise, it is too late – the owner may have lost their tickets with nothing in return. </p>
<p>There are also many <a href="https://www.9news.com.au/national/taylor-swift-ticket-scammers-hunt-victims-on-facebook-for-australia-eras-tour/d1776810-154e-4f52-aa40-6375eb4285d8">reports</a> of victims whose known contacts (family or friends) message them on social media offering the chance to buy tickets. This approach reduces red flags or suspicions, as it uses existing trust and relationships to get a payment.</p>
<p>However, victims soon find their family member or friend has had their account hacked. Again, there is no ticket and no chance of recovering funds. </p>
<p>Hacking genuine accounts to perpetrate fraud is common. Recently, <a href="https://www.abc.net.au/news/2024-01-31/booking-com-scams-surge-phishing-australians-thousands-dollars/103390292">hackers gained unauthorised access</a> to hotel provider accounts on the popular accommodation website Booking.com. They then communicated with guests to gain direct payments and financial details. </p>
<h2>If I’d only played it safe</h2>
<p>There are no foolproof guarantees when trying to buy resold tickets. But you can look out for warning signs and take steps to reduce the risk of fraud or being hacked.</p>
<p><strong>Only buy tickets through the authorised seller website.</strong> In the case of Swift, that’s Ticketek Marketplace. While customers are reporting <a href="https://www.smh.com.au/culture/music/look-what-you-made-me-do-desperate-swifties-abandon-ticketek-in-risky-hunt-for-tickets-20240118-p5ey6b.html">long wait times</a> and less than satisfactory user experiences right now, it is still the most likely place to have genuine tickets. </p>
<hr>
<hr>
<p><strong>Do not, under any circumstances, buy tickets on social media such as Facebook.</strong> This includes from known contacts. There is no guarantee that the ticket exists or the person is genuine. There is also no recourse for lost payment. </p>
<p><strong>Never provide or confirm your payment details outside of Ticketek.</strong> Do not transfer any cash via a bank transfer to a seller. There are no seller fees on Ticketek Marketplace, and no reason to pay outside of the regulated system. </p>
<p><strong>Ensure you have strong passwords on all your accounts.</strong> Do not use the same password on several accounts. This is vitally important to protect yourself against many types of harm, not just ticket fraud. </p>
<p><strong>Enable two-factor authentication on any accounts you can.</strong> This provides an additional layer of protection should your password be compromised.</p>
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<strong>
Read more:
<a href="https://theconversation.com/what-is-multi-factor-authentication-and-how-should-i-be-using-it-191591">What is multi-factor authentication, and how should I be using it?</a>
</strong>
</em>
</p>
<hr>
<p><strong>Use a credit card where possible</strong> rather than debit card or cash transfers. You may be able to dispute a transaction or charge if you have used your credit card and may be able to recover any lost funds.</p>
<p><strong>Take screenshots of any communications and transactions</strong> when purchasing tickets online. While this will not prevent fraud, it does make it easier to report an incident or figure out what happened. </p>
<p><strong>Always confirm in person or over the phone with any known contacts</strong> who have messaged an offer or requested funds. With the prevalence of hacking into accounts, you may not be communicating with the person you think you are. </p>
<h2>No one teaches you what to do</h2>
<p>If you think you have been a victim of ticket fraud, contact your bank or financial institution immediately. The quicker you can do this, the better. </p>
<p>You should also contact the platform through which you made the transaction (such as Ticketek Marketplace). </p>
<p>You can report any financial losses to <a href="https://www.cyber.gov.au/report-and-recover/report">ReportCyber</a>, which is an online police reporting portal for cyber incidents, as well as <a href="https://www.scamwatch.gov.au/report-a-scam">Scamwatch</a>, to assist with education and awareness activities.</p>
<p>If you need support or assistance for any compromise of your identity, contact <a href="https://www.idcare.org/">iDcare</a>.</p><img src="https://counter.theconversation.com/content/223086/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cassandra Cross has previously received funding from the Australian Institute of Criminology and the Cybersecurity Cooperative Research Centre.</span></em></p>Australian fans who didn’t manage to snag Eras tickets are on the hunt – and scammers are capitalising on this. Here’s everything you need to know to protect yourself.Cassandra Cross, Associate Dean (Learning & Teaching) Faculty of Creative Industries, Education and Social Justice, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2190532023-12-19T16:53:48Z2023-12-19T16:53:48ZFraud is a problem so big we need to start teaching children how to spot it in schools<figure><img src="https://images.theconversation.com/files/565490/original/file-20231213-27-gu78dv.jpg?ixlib=rb-1.1.0&rect=0%2C67%2C4992%2C3255&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fraud can happen to anyone. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/dishonest-evil-salesman-business-suit-car-1059618683">Twinsterphoto/Shutterstock</a></span></figcaption></figure><p>Have you or someone you know been a victim of fraud? If so, that’s not unusual.</p>
<p>The UK’s Office for National Statistics (ONS) reported a <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/articles/natureoffraudandcomputermisuseinenglandandwales/yearendingmarch2022">rise of 25%</a> in the number of fraud offences in 2021 compared to 2020 in the UK. Representing over 40% of all crimes against individuals, fraud is <a href="https://ukparliament.shorthandstories.com/breaking-fraud-chain-committee-report/index.html">the most common</a> crime in the UK. </p>
<p>If these statistics are not alarming enough, there is some evidence <a href="https://www.forbes.com/sites/jeffkauflin/2023/09/18/how-ai-is-supercharging-financial-fraudand-making-it-harder-to-spot/">that AI is</a> making it <a href="https://www.mcafee.com/blogs/privacy-identity-protection/artificial-imposters-cybercriminals-turn-to-ai-voice-cloning-for-a-new-breed-of-scam/">harder to</a> detect scams.</p>
<p>People often <a href="https://commsrisk.com/some-victims-of-fraud-are-just-stupid/">blame fraud victims</a> for being foolish or trusting enough to fall for a scam. But it’s time to accept that it can happen to anyone. It’s a problem so large we need to revise our concept of fraud as something that only happens to gullible or vulnerable people. The human brain can’t keep up with all of the new technology-enabled types of fraud.</p>
<p>So we need a new approach that holds financial institutions and businesses responsible for identifying or facilitating fraud and that harnesses AI to spot suspicious transactions. It’s not reasonable to expect consumers to know when they’re being scammed if banks and social media platforms can’t.</p>
<h2>Who falls prey to fraud</h2>
<p>If you were asked who is the most likely to become a victim of fraud, what would be your answer? If you are like most people, you probably thought about <a href="https://financialpost.com/executive/executive-summary/most-likely-financial-scam-victims">older adults</a>. Investment bankers, IT experts or young adults might not have come to mind. </p>
<p>This misconception about who is vulnerable or susceptible to fraud is one of the core problems surrounding the topic of fraud. For example, <a href="https://www.experian.co.uk/assets/insight-reports/brochures/The-Insight-Report-Victims-of-fraud-survey-March-2010.pdf">a 2010 survey</a> by credit reporting company Experian examining identity fraud in the UK found that two age groups, 25-34 and 35-44, represented 54% of the victims, while those over 65 represented only 4% of the victims of that type of fraud. </p>
<p>With cryptocurrency, victims tend to be young, well-educated, professional, and <a href="https://academic.oup.com/rof/article/26/4/855/6478303%20">traders who have risky portfolios</a>. </p>
<p>It is enough to read the list of main investors (and victims) in the fraud-ridden <a href="https://markets.businessinsider.com/news/currencies/ftx-bankruptcy-top-investors-list-tom-brady-kevin-oleary-sbf-2023-1">cryptocurrency exchange FTX</a> and fraudulent medical technology company <a href="https://www.integrityline.com/expertise/blog/elizabeth-holmes-theranos/">Theranos</a> cases to realise that even the savviest investors and celebrities can become victims. Their supporters included media moguls, politicians and hedge fund managers. </p>
<figure class="align-center ">
<img alt="Frustrated and upset man outside office building looking at his smartphone and holding a bank card" src="https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/565493/original/file-20231213-21-98fg16.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Educated adults make up a large percentage of fraud victims.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/frustrated-upset-african-american-man-outside-2212767551">voronaman/Shutterstock</a></span>
</figcaption>
</figure>
<p>A 2023 report by <a href="https://www.ukfinance.org.uk/news-and-insight/press-release/gen-z-more-likely-be-tricked-criminals-and-fall-impersonation-scams">UK Finance</a> indicates that 18- to 24-year-olds are being increasingly targeted by fraudsters, and are far more likely to fall prey to an impersonation scam, compared to those aged 65 and over. Also, the rate of 13- to 17-year-olds falling prey to <a href="https://www.lloydsbankinggroup.com/assets/pdfs/who-we-are/our-purpose/fraud/lloyds-bank-game-fraud-report.pdf">scams via gaming</a> has seen a sharp rise. </p>
<h2>Developing educational and therapeutic programmes</h2>
<p>Many schools around the world have introduced <a href="https://educationhub.blog.gov.uk/2023/02/01/how-we-promote-and-teach-online-safety-in-schools/">online safety programmes</a>.</p>
<p>The programmes currently on offer, however, tend to be rather thin on how to protect yourself from fraud. Children’s charity <a href="https://www.nspcc.org.uk/keeping-children-safe/online-safety/?gclsrc=aw.ds&gad_source=1&gclid=CjwKCAiAg9urBhB_EiwAgw88mXcr3TpCRmIGbNM_A0C7uuvBV0uO6TrC4FpNSvyjP71aOIMRR4MM2hoCgPMQAvD_BwE&gclsrc=aw.ds">the NSPCC</a>, for example, has programmes for protecting children from online abuse, staying safe while using social media, and from legal but harmful content – but not for online scams. </p>
<p>Fraud prevention should be taught in schools and universities as part of the curriculum. </p>
<p>For older adults, charities <a href="https://www.aarp.org/money/scams-fraud/about-fraud-watch-network/">the AARP</a> and <a href="https://www.ageuk.org.uk/information-advice/money-legal/scams-fraud/">AgeUK</a> offer guidance and resources, but it is unclear how effective or widely used they are. </p>
<p>Fraud prevention programmes, training, and information have rarely been scrutinised and we lack data on their effectiveness. We need to develop programmes for each age group and evaluate their effectiveness. </p>
<h2>Improve deterrence</h2>
<p>One of the most important theories in criminology is <a href="https://www.house.mn.gov/hrd/pubs/deterrence.pdf">deterrence theory</a>, which says crime reduction relates to the severity of the punishment, and, more importantly, the likelihood of being caught. </p>
<p><a href="https://www.gov.scot/publications/works-reduce-crime-summary-evidence/pages/5/">Research suggests</a> that increasing the likelihood of being caught is far more effective than increasing punishment. However, fraudsters have little to worry about. By the <a href="https://www.gov.uk/government/publications/fraud-strategy/fraud-strategy-stopping-scams-and-protecting-the-public">UK government’s admittance</a>, fraud accounts for over 40% of all crimes yet it receives less than 1% of police resources. </p>
<h2>Businesses must better protect consumers</h2>
<p>During the COVID pandemic, media outlets reported that Google blocked <a href="https://www.bbc.co.uk/news/technology-52319093">18 million coronavirus scam</a> emails every day. Despite these efforts, according <a href="https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2023/10/social-media-golden-goose-scammers">to a report</a> by the Federal Trade Commission (FTC), a US agency that enforces consumer rights, tech companies and especially social network sites are a breeding ground for scammers.</p>
<p>Indeed, the FTC reported that a quarter of the people who lost money to fraud said the process started on social networking platforms. </p>
<p>The nature of social media sites provides scammers with the ability to hide behind fake personas and pretend to be a legitimate business. They also allow scammers to reach millions of people with a press of a button —- <a href="https://www.pewresearch.org/internet/2021/04/07/social-media-use-in-2021/">particularly younger adults</a> who tend to be more heavy and prolific users of social networking sites. </p>
<p>The FTC <a href="https://www.ftc.gov/news-events/news/press-releases/2023/03/ftc-issues-orders-social-media-video-streaming-platforms-regarding-efforts-address-surge-advertising">has issued orders</a> to a range of social media – including Meta, TikTok and YouTube – seeking information on how these companies screen for malicious and nefarious ads and scams. </p>
<h2>Introduce new policies</h2>
<p>California legislators are <a href="https://pluralpolicy.com/app/legislative-tracking/bill/details/state-ca-20232024-sb278/1277035">considering a bill</a> offering older adults greater protection against fraud by holding banks responsible when tellers facilitate fraudulent transactions.</p>
<p>In the UK, former home secretary Suella Braverman presented a
<a href="https://www.gov.uk/government/publications/fraud-strategy/fraud-strategy-stopping-scams-and-protecting-the-public">a fraud strategy</a> the parliament in May 2023, which proposes a range of measures such as banning all phone calls related to financial products. </p>
<p>We see these two bills as a move in the right direction but more work is needed, and urgently. Policymakers must allocate funding to research and law enforcement agencies, introduce laws that provide greater protection to people, and collaborate with international law enforcement bodies, such as Interpol. </p>
<p>Fraud affects society on all levels: individuals, organisations and governments. We are all in it together, whether we like it or not.</p><img src="https://counter.theconversation.com/content/219053/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Recent studies have shown fraud is an even bigger problem than people realise.Yaniv Hanoch, Professor in Decision Science, University of SouthamptonStacey Wood, Professor of Psychology, Scripps CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2182942023-12-08T16:14:45Z2023-12-08T16:14:45ZHow to protect yourself from cyber-scammers over the festive period<figure><img src="https://images.theconversation.com/files/562490/original/file-20231129-26-z85wnz.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6134%2C3228&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As online shopping increases over the festive period, so does the risk of cyber-scams. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/merry-xmas-eve-online-shopping-store-2089436578">Chay Tee/Shutterstock</a></span></figcaption></figure><p>The festive season is a time for joy, family and festive cheer. However, it’s also a prime target for cybercriminals. As online shopping ramps up, so does the risk of falling prey to cyber-attacks. That’s why it’s crucial to be extra vigilant about your <a href="https://blog.tctg.co.uk/12-cyber-security-tips-of-christmas">cybersecurity</a> during this time. </p>
<p>Here are some essential tips to safeguard yourself and your data during the festive period:</p>
<h2>Phishing</h2>
<p>Phishing is when criminals use scam emails, text messages or phone calls to trick their victims. Their <a href="https://www.ncsc.gov.uk/collection/phishing-scams">goal</a> is often to make you visit a certain website, which may download a virus on to your computer, or steal bank details or other personal data. </p>
<p>This type of scam tends to <a href="https://www.egress.com/blog/phishing/holiday-phishing-scam-guide">increase</a> at this time due to the amount of people having bought or received new gadgets and technology. </p>
<p>Look out for there being no direct reference to your name in any communications, with wording such as “Dear Sir/Madam” or other terms such as “valued customer” being used instead. Grammar and spelling mistakes are also often present. </p>
<p>Be wary of any suspicious links or attachments within emails too, and don’t click them. It’s better to contact the company directly to check if the message is genuine. You can also <a href="https://www.ncsc.gov.uk/collection/phishing-scams">report</a> suspicious messages and phishing scams to the government’s National Cyber Security Centre. </p>
<h2>Shopping safely online</h2>
<p>The convenience of online shopping is undeniable, especially during the festive season. However, it’s crucial to prioritise your security when buying online. </p>
<p>Before entering your personal and financial information on any website, ensure it’s legitimate and secure. Look for the “https” in the address bar and a <a href="https://theconversation.com/the-vast-majority-of-us-have-no-idea-what-the-padlock-icon-on-our-internet-browser-is-and-its-putting-us-at-risk-216581">padlock</a> icon, which indicates a secure and encrypted connection. </p>
<p>When creating passwords for online shopping accounts, use strong, unique combinations of letters, numbers and symbols. Avoid using the same password for multiple accounts, as a breach on one site could compromise all your others.</p>
<p>As with shopping in the real world, be cautious when encountering offers that are significantly below usual prices or which make extravagant promises. Always conduct thorough research on the seller and product before making a purchase. If a deal seems too good to be true, it probably is. </p>
<p>And if you are out shopping in towns or city centres, there will often be a large number of public wifi options available to you. However, criminals can intercept the data that is transferred across such open and unsecured wifi. So, avoid using public wifi where possible, especially when conducting any financial transactions. </p>
<figure class="align-center ">
<img alt="A person sits at a laptop with a coffee surrounded by festive packages." src="https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/562672/original/file-20231130-21-u6r9en.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Stay vigilant, exercise caution and don’t let your excitement for gifts and deliveries compromise your cybersecurity.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/christmas-online-shopping-top-view-female-520279837">Prostock-studio/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Social media</h2>
<p>While social media platforms provide people with a means to keep in touch with family and friends over the festive period, they are often a goldmine for <a href="https://www.which.co.uk/consumer-rights/advice/how-to-spot-a-social-media-scam-aMtwF3u1XKGt">scams</a> and malware (software designed to disrupt, damage or gain unauthorised access to a computer). In the spirit of the festive season, people often share an abundance of personal information on social media, often without considering the potential consequences. </p>
<p>This trove of data can make people vulnerable to cyber-attacks. Scammers can exploit this information to gain unauthorised access to social media accounts, steal personal information, or even commit identity theft. To protect yourself, be mindful of what you share. </p>
<p>Be wary when interacting with posts and direct messages, especially if they contain suspicious links or attachments. Before clicking on anything, hover over the link to verify its destination. If it shows a website you don’t recognise or seems unrelated to the message, do not click on it. If you receive a message from someone you know but the content seems strange or out of character, contact them directly through a trusted channel to verify its authenticity. </p>
<p>Likewise, be wary of messages containing urgent requests for money or personal information from businesses. Genuine organisations will never solicit sensitive details through social media.</p>
<p>There are many buy and sell platforms available on social media. But while such platforms can be a great place to find a unique gift, it is also important to remember that not all sellers may be legitimate. So, it’s vital that you don’t share your bank details. If the seller sends a link to purchase the item, do not use it. When meeting to collect an item, it’s generally safer to use cash rather than transferring funds electronically.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/aO858HyFbKI?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Advice for staying safe online.</span></figcaption>
</figure>
<h2>Package delivery scams</h2>
<p>As well as being a time for giving and receiving gifts, the festive season is also ripe for cybercriminals to exploit the excitement surrounding <a href="https://www.citizensadvice.org.uk/about-us/about-us1/media/press-releases/scams-linked-to-parcel-deliveries-come-top-in-2023/">package deliveries</a>. </p>
<p>Scammers often pose as legitimate delivery companies, sending emails or text messages claiming that a delivery attempt was unsuccessful or requiring additional fees for processing, or even customs clearance. Typically, these messages contain links or phone numbers that, when clicked or called, lead to fake websites or automated phone systems designed to collect personal information or payments.</p>
<p>To protect yourself, always verify the legitimacy of any delivery notifications you receive. Check the sender’s email address or phone number against the official contact information for the delivery company. If the information doesn’t match or seems suspicious, don’t click any links or provide personal details. </p>
<p>Legitimate delivery companies will never ask for upfront payment or sensitive information through unsolicited messages or calls. </p>
<p>Remember, cybercriminals are skilled at manipulating the festive spirit to their advantage. Stay vigilant, exercise caution, and don’t let your excitement for gifts and deliveries compromise your cybersecurity.</p><img src="https://counter.theconversation.com/content/218294/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachael Medhurst does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Cyber-scams tend to ramp up at this time of year, with criminals and scammers eager to exploit people’s generosity and excitement.Rachael Medhurst, Course Leader and Senior Lecturer in Cyber Security NCSA, University of South WalesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2187422023-12-01T16:10:14Z2023-12-01T16:10:14ZSantos, now booted from the House, got elected as a master of duplicity – here’s how it worked<figure><img src="https://images.theconversation.com/files/562816/original/file-20231130-15-kdugvt.jpeg?ixlib=rb-1.1.0&rect=9%2C9%2C6508%2C4319&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Rep. George Santos in the U.S. Capitol on Nov. 7, 2023. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/rep-george-santos-r-n-y-leaves-a-meeting-of-the-house-news-photo/1769554374?adppopup=true">Tom Williams/CQ-Roll Call, Inc via Getty Images</a></span></figcaption></figure><p>U.S. Rep. George Santos, a Republican from New York, was expelled on Dec. 1, 2023, from Congress for doing what most people think all <a href="https://theconversation.com/all-politicians-must-lie-from-time-to-time-so-why-is-there-so-much-outrage-about-george-santos-a-political-philosopher-explains-197877">politicians</a> <a href="https://journals.sagepub.com/doi/abs/10.1177/0261927X8800700204">do all the time</a>: lying.</p>
<p>Santos lied about his <a href="https://www.nytimes.com/2023/01/04/opinion/george-santos-jewish-heritage.html">religion</a>, <a href="https://www.advocate.com/politics/2022/12/22/george-santos-hid-marriage-woman-says-hell-explain-alleged-lies">marital status</a>, <a href="https://www.cnn.com/2022/12/26/politics/george-santos-admits-embellishing-resume/index.html">business background</a>, <a href="https://www.vanityfair.com/news/2023/01/george-santos-facebook-comment-hitler-jews-black-people">grandparents</a>, <a href="https://www.nytimes.com/2022/12/26/nyregion/george-santos-interview.html">college</a>, <a href="https://nymag.com/intelligencer/article/guide-george-santos-lies.html#:%7E:text=He%20lied%20about%20where%20he%20went%20to%20high%20school%20%E2%80%A6&text=But%20a%20spokesperson%20for%20the,a%20high%2Dschool%20equivalency%20diploma.">high school</a>, <a href="https://www.washingtonpost.com/politics/2023/01/11/santos-lies-volleyball/#:%7E:text=George%20Santos%20lied%20about%20being,star%2C'%20county%20GOP%20chair%20says&text=George%20Santos%20allegedly%20told%20a,he%20claimed%20to%20have%20played.">sports-playing</a>, <a href="https://www.justice.gov/usao-edny/pr/congressman-george-santos-charged-fraud-money-laundering-theft-public-funds-and-false">income</a> and <a href="https://ethics.house.gov/sites/ethics.house.gov/files/documents/Committee%20Report_52.pdf">campaign donation expenditures</a>.</p>
<p>Santos’ fellow members of Congress – a professional class <a href="https://www.pewresearch.org/politics/2023/09/19/evaluations-of-members-of-congress-and-the-biggest-problem-with-elected-officials-today">stereotypically</a> considered by the public to be littered with serial liars – apparently consider Santos peerless and are kicking him out of their midst <a href="https://www.nytimes.com/interactive/2023/12/01/us/politics/santos-expulsion-vote.html">on a 311-114 vote, with two members voting present</a>. </p>
<p>How could a politician engage in such large-scale deception and get elected? What could stop it from happening again, as politicians seem to be growing more <a href="https://www.washingtonpost.com/politics/joe-bidens-long-running-no-apology-tour-hits-the-metoo-era/2019/04/04/caf47bdc-56e7-11e9-9136-f8e636f1f6df_story.html">unapologetically</a> <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/psq.12809">deceptive</a> while evading voters’ scrutiny? </p>
<p>Santos’ success demonstrates a mastery of something more than just pathological lying. He managed to campaign in a district close to the media microscope of New York City, in one of the richest <a href="https://datausa.io/profile/geo/congressional-district-3-ny">districts</a> in the state, and get elected and stay in office for a year, despite making a mockery of any <a href="https://nymag.com/intelligencer/article/guide-george-santos-lies.html">semblance of honesty</a>. </p>
<p>I am <a href="https://scholar.google.com/citations?user=50tVKogAAAAJ&hl=en">a scholar of political deception</a>. <a href="https://doi.org/10.1080/03637751.2023.2244030">Experiments I conducted</a> have revealed how the trustworthiness of politicians is judged almost entirely from perceptions of their demeanor, not the words they utter.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/t8zU8yX0TcA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Politicians lie, as this compilation shows.</span></figcaption>
</figure>
<h2>Misleading with a smile</h2>
<p>I have found that voters are drawn in by politicians’ demeanor cues, which are forms of body language and nonverbal communication that signal honesty or dishonesty and yet have no relationship to actual honesty. For example, looking nervous and fidgety or appearing confident and composed are demeanor cues, which give impressions of a politician’s sincerity and believability. Someone’s demeanor cues might signal that they are trustworthy when they’re actually lying, or could signal lying in someone who is actually telling the truth.</p>
<p>The <a href="https://doi.org/10.1111/j.1468-2958.2011.01407.x">most authoritative index</a> of demeanor cues that affect people’s perceptions of honesty and deception was developed <a href="https://www.uab.edu/cas/communication/people/faculty/timothy-r-levine">by Tim Levine</a>, a professor of communication at the University of Alabama, Birmingham. Demeanor cues that convey sincerity and honesty include appearing confident and composed; having a pleasant, friendly, engaged and involved interaction style; and giving plausible explanations.</p>
<p>The insincere/dishonest demeanor cues include avoiding eye contact, appearing hesitant and slow in providing answers, vocal uncertainty in tone of voice, excessive fidgeting with hands or foot movements, and appearing tense, nervous or anxious. </p>
<p>Empirical research has long revealed that <a href="https://doi.org/10.1111/j.1460-2466.2007.00362.x">voters are overwhelmingly influenced by politicians’ nonverbal communication</a>. <a href="https://doi.org/10.1162/rest.91.3.523">In one experiment</a>, participants were shown 10-second clips of unfamiliar gubernatorial debates. The participants were asked to predict who won the election. </p>
<p>Participants who saw muted 10-second clips – making their judgments solely on nonverbal cues – were able to predict which candidate would go on to win. But those who watched the video with the sound were no better at picking the winner than if they picked randomly without ever watching or listening to anything. Voters make their <a href="https://doi.org/10.1126/science.1110589">judgments of a politician’s competence</a>, it turns out, based on a 1-second glance at the politician’s face. </p>
<p>Another <a href="https://doi.org/10.1016/S0140-1750(86)90190-9">study</a> also found that politicians’ facial expressions have the power to move us, literally: People watching clips of Ronald Reagan looking friendly adjusted their facial muscles accordingly and mimicked his smile, and people watching clips of Reagan looking angry tended to furrow their brow, too.</p>
<h2>How Santos does it</h2>
<p>Santos <a href="https://www.youtube.com/watch?v=wYmCx2eaTRE">speaks with certitude</a>. He has a <a href="https://academic.oup.com/hcr/article/37/3/377/4107525">charming, friendly and interactive manner – all</a> sincere demeanor cues. He makes intense <a href="https://youtu.be/wYmCx2eaTRE?si=uKIPFcqkJcbWNtcy">eye contact</a> without fidgeting. He <a href="https://www.nytimes.com/2023/01/17/style/george-santos-style.html">dresses well and is pleasant</a> looking. </p>
<p>He was able to make up <a href="https://www.nytimes.com/2022/12/19/nyregion/george-santos-ny-republicans.html">lies</a> out of whole cloth and have them believed – a feat rarely accomplished by liars. He exudes <a href="https://nymag.com/intelligencer/2023/10/george-santos-baby.html">confidence</a>. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1712908983403462691"}"></div></p>
<p>Santos dresses with sartorial elegance. He wears chic <a href="https://static01.nytimes.com/newsgraphics/2023-04-21-santos/4fbfc343e7ce7b04bd6d4d593ba08e0a5781cc29/_assets/stantos_desktop.jpg">eyeglasses</a> and <a href="https://www.youtube.com/watch?v=gU8evnkPLcg">sunglasses</a>, accessorized with bright but not tacky jewelry. All this is complemented by one of his signature <a href="https://static01.nyt.com/images/2022/12/15/multimedia/00ny-santos3-1-d66d/00ny-santos3-1-d66d-jumbo.jpg?quality=75&auto=webp">fleeces</a> or <a href="https://apnews.com/c89bf18bcd7e4133ad2794bfe863460b">sweaters</a>, typically worn over a collared dress shirt and under a smart <a href="https://pyxis.nymag.com/v1/imgs/03c/0df/28f256688a0f26500d713b0930eb4c6e52-GettyImages-1734001031.rhorizontal.w700.jpg">jacket</a>. Santos even bought his campaign staff Brooks Brothers <a href="https://www.nytimes.com/2022/12/19/nyregion/george-santos-ny-republicans.html">shirts</a> to wear. </p>
<p><a href="https://doi.org/10.1080/03637751.2023.2244030">In my experiments</a>, which have shown that voters base their judgment of politicians’ trustworthiness almost entirely from perceptions of demeanor, I found that Republicans are especially susceptible to demeanor cues. Republican voters will disbelieve their own honest politician if they perceive that the politician’s demeanor is insincere. But they will believe their own politician if they perceive sincerity. </p>
<p>Santos’ believable demeanor follows in the lineage of other con artists who could deceive absurdly yet adroitly. Disgraced financier <a href="https://www.theguardian.com/tv-and-radio/2023/jan/04/netflix-bernie-madoff-monster-of-wall-street">Bernie Madoff</a> dressed well, looked dignified, acted <a href="https://youtu.be/Or3xOfemMEE?si=yuA0YqLyuuJauP3A">friendly and cordial</a>, and his resting face was a smiling expression. The <a href="https://www.netflix.com/title/81035279">Fyre Festival</a> fraudster Billy McFarland also had a resting face that was a smiling, aw-shucks <a href="https://www.cnbc.com/2019/08/18/how-fyre-festivals-organizer-scammed-investors-out-of-26-million.html">expression</a>, and acted harmless and friendly.</p>
<p>And Elizabeth <a href="https://www.nytimes.com/2023/05/07/business/elizabeth-holmes-theranos-interview.html">Holmes</a> of <a href="https://www.cnn.com/2022/07/07/tech/theranos-rise-and-fall/index.html">Theranos</a> – who became the youngest female billionaire in <a href="https://www.wsj.com/news/collection/theranos-coverage-ea13b200">history</a> – faked a deep voice, walked upright with perfect posture, smiled and conveyed unrelenting confident poise, and maintained an unblinking gaze. All this enabled her to tell lies to some of the richest, most accomplished, intelligent titans of <a href="https://www.wsj.com/articles/theranos-whistleblower-shook-the-companyand-his-family-1479335963">industry</a>. </p>
<p>Madoff, <a href="https://www.cnbc.com/2018/03/06/billy-mcfarland-organizer-of-disastrous-fyre-festival-pleads-guilty-to-misleading-investors.html">McFarland</a> and <a href="https://www.bbc.com/news/world-us-canada-63685131">Holmes</a> could look people in the eye and steal their money – swindling largely through the same sorts of demeanor cues that Santos exhibits. </p>
<p><a href="https://youtu.be/T1NkZ41zjUg?si=LDqLiJWSIN2lwqpS">McFarland</a>, <a href="https://youtu.be/rGfaJZAdfNE?si=DYur3J8AJtqwvXB5">Holmes</a> and <a href="https://youtu.be/wYmCx2eaTRE?si=_Y9BJkfIsPfbAiqZ">Santos</a> have the ability to smile with their upper teeth showing while they are answering tough questions in interviews, which <a href="https://doi.org/10.2307/2111127">research shows</a> exudes trustworthiness.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A brown haired man with glasses, wearing a white shirt and blue vest, fistbumps another man." src="https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/562734/original/file-20231130-27-gptkfv.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Republican candidate George Santos, left, fist-bumps campaign volunteer John Maccarone while campaigning on Nov. 5, 2022, in Glen Cove, N.Y.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/Election2022NewYorkHouse/58045c130be64798a4eed98ed7a1e93c/photo?Query=George%20Santos%20campaigning&mediaType=photo&sortBy=arrivaldatetime:asc&dateRange=Anytime&totalCount=103&currentItemNo=4">AP Photo/Mary Altaffer</a></span>
</figcaption>
</figure>
<h2>Fool me once …</h2>
<p>Just because someone speaks confidently, dresses well and acts friendly does not mean the person is honest. Pay attention to what people say – the content of their verbal messaging. </p>
<p>Don’t fall prey to <a href="https://www.thewrap.com/george-santos-snaps-at-oan-host-caitlin-sinclair/">body language or seemingly sincere behavioral impressions</a>, which actually have no correlation to actual truthfulness. As my <a href="https://doi.org/10.1177/0261927X211045724">research</a> has shown, the appearance of sincerity is misleading. It is a <a href="https://psycnet.apa.org/doi/10.1037/1076-8971.13.1.1">myth</a> <a href="https://journals.sagepub.com/doi/abs/10.1177/0261927x14535916">that eye contact means someone is telling you the truth</a> and that a roving gaze or elevated blinking means they are lying. </p>
<p>Some people just <a href="https://journals.sagepub.com/doi/10.1177/0261927X14528804">look honest</a> but they are pulling the proverbial wool over your eyes. Some people <a href="https://psycnet.apa.org/doi/10.1037/0033-2909.134.4.477">look sketchy</a> and appear unbelievable, but what they say is truthful.</p>
<p>Santos’ disgrace is a teachable moment for citizens. As the proverb goes: Fool me once, shame on you; fool me twice, shame on me.</p><img src="https://counter.theconversation.com/content/218742/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David E. Clementson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A scholar of political deception says there is something especially deceitful about George Santos, and his success getting elected demonstrates mastery of something more than just pathological lying.David E. Clementson, Assistant Professor, Grady College of Journalism and Mass Communication, University of GeorgiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2170262023-11-07T13:37:52Z2023-11-07T13:37:52ZSam Bankman-Fried sentenced to 25 years − how he went from $30B crypto CEO to prison inmate<figure><img src="https://images.theconversation.com/files/585146/original/file-20240328-16-k9vxuj.jpeg?ixlib=rb-1.1.0&rect=189%2C146%2C5208%2C3492&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sam Bankman-Fried got 25 years for his role in overseeing a multibillion-dollar crypto fraud.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/BankmanFriedFTX/649eb5aa36574414b000b71c063de543/photo?Query=bankman-fried&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=322&currentItemNo=15">AP Photo/Seth Wenig</a></span></figcaption></figure><p><em>The case of Sam Bankman-Fried, who <a href="https://www.reuters.com/technology/sam-bankman-fried-be-sentenced-multi-billion-dollar-ftx-fraud-2024-03-28/">was sentenced on March 28, 2024, to 25 years in prison</a>, is emblematic of the fast-paced world of cryptocurrency, in which vast sums of money can be made or lost in the blink of an eye.</em></p>
<p><em>In early November 2022, the crypto exchange FTX was valued at more than US$30 billion. By the middle of that month, <a href="https://www.cnn.com/2022/11/15/business/ftx-madoff-bankman-fried-bair/index.html">FTX was in bankruptcy proceedings</a>. And less than a year later, on Nov. 3, 2023, its founder, Sam Bankman-Fried, was found guilty of <a href="https://www.wired.com/story/sam-bankman-fried-trial-explained/">seven counts of money laundering and fraud</a>, following a trial that featured less than a month of <a href="https://www.wsj.com/finance/currencies/sam-bankman-fried-ftx-trial-news-updates-fbef824b">testimony</a> and only about four hours of jury deliberation.</em></p>
<p><em><a href="https://scholar.google.com/citations?user=VxWst50AAAAJ&hl=en&oi=ao">D. Brian Blank</a> and <a href="https://scholar.google.com/citations?user=FKJSqjEAAAAJ&hl=en&oi=ao">Brandy Hadley</a> are professors who study finance, <a href="https://www.doi.org/10.1111/EUFM.12311">executives</a>, <a href="https://doi.org/10.1111/fire.12274">corporate governance</a> and financial technology. They explain how and why this incredible collapse happened, what effect it might have on the traditional financial sector and whether you should care.</em></p>
<h2>1. What happened?</h2>
<p>A million years ago, back in <a href="https://inside.com/campaigns/inside-tech-2021-07-21-28706/sections/243700">2019</a>, Bankman-Fried founded FTX, a company that ran one of the largest cryptocurrency exchanges.</p>
<p>FTX was where many crypto investors traded and held their cryptocurrency, similar to the New York Stock Exchange for stocks. Bankman-Fried also founded <a href="https://www.forbes.com/profile/alameda-research/?sh=563773816570">Alameda Research</a>, a hedge fund that invested in cryptocurrencies and crypto companies. </p>
<p>In the traditional financial sector, these two companies would be entirely separate firms, or at least have firewalls in place to avoid conflicts of interest. But in early November 2022, news outlets reported that a <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/">significant proportion of Alameda’s assets</a> were a type of cryptocurrency released by FTX itself. </p>
<p>A few days later, news broke that FTX had allegedly been loaning customer assets to Alameda for risky trades <a href="https://www.cnbc.com/2022/11/13/sam-bankman-frieds-alameda-quietly-used-ftx-customer-funds-without-raising-alarm-bells-say-sources.html">without customers’ consent</a> and also issuing its own FTX cryptocurrency for Alameda to use as <a href="https://www.cnbc.com/2022/11/13/sam-bankman-frieds-alameda-quietly-used-ftx-customer-funds-without-raising-alarm-bells-say-sources.html">collateral</a>. As a result, criminal and regulatory investigators began scrutinizing FTX for potentially <a href="https://www.law360.com/assetmanagement/articles/1549319?nl_pk=c7efe457-0cc1-4a20-9d63-ded5145502ae&utm_source=newsletter&utm_medium=email&utm_campaign=assetmanagement&utm_content=2022-11-15&read_more=1&nlsidx=0&nlaidx=0">violating securities law</a>.</p>
<p>These two pieces of news basically led to a bank run on FTX, and soon afterward, FTX, Alameda Research and 130 other affiliated companies founded by Bankman-Fried filed for bankruptcy. This left <a href="https://www.cnbc.com/2022/11/15/ftx-says-could-have-over-1-million-creditors-in-new-bankruptcy-filing.html">huge numbers</a> of investors who bought cryptocurrencies through the exchange with <a href="https://www.cnn.com/2022/11/14/business/ftx-customer-money-bankruptcy/index.html">no good way to get their money back</a>.</p>
<p>Within a month, Bankman-Fried was <a href="https://www.nytimes.com/2022/12/12/business/ftx-sam-bankman-fried-bahamas.html">arrested</a> and <a href="https://www.foxbusiness.com/politics/ftx-founder-sam-bankman-fried-arrested-bahamas-us-expected-request-extradition-authorities-say">charged with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering</a> by the Southern District of New York. In February 2023, <a href="https://www.reuters.com/legal/new-indictment-unsealed-against-bankman-fried-containing-12-charges-2023-02-23/">additional criminal charges</a> related to political donations were announced, followed by <a href="https://www.cnbc.com/2023/03/28/sam-bankman-fried-paid-over-40-million-to-bribe-at-least-one-chinese-official-doj-alleges-in-new-indictment.html">another indictment</a> in March related to bribery.</p>
<p>Bankman-Fried’s <a href="https://edition.cnn.com/2023/10/03/investing/sbf-trial-jury-selection/index.html">first trial began on Oct. 3, 2023</a>, and largely focused on the “<a href="https://www.bloomberg.com/news/live-blog/2023-10-26/sam-bankman-fried-testifies-at-fraud-trial">essentially unlimited</a>” access to capital Alameda had on the exchange through a secret line of credit. </p>
<h2>2. Did a lack of oversight play a role?</h2>
<p>In traditional markets, corporations generally <a href="https://www.law360.com/bankruptcy/articles/1549089?nl_pk=6ef803a8-f435-44cb-93f5-de6a024ff206&read_more=1&nlsidx=0&nlaidx=3">limit the risk they expose themselves to</a> by maintaining liquidity and solvency. Liquidity is the ability of a firm to sell assets quickly without those assets losing much value. Solvency is the idea that a company’s assets are worth more than what that company owes to <a href="https://www.wsj.com/livecoverage/stock-market-news-today-11-15-2022/card/ftx-says-number-of-creditors-in-bankruptcy-could-top-1-million-LrfYrHxDtIoVBV42QDiG?mod=djemMoneyBeat_us">debtors and customers</a>.</p>
<p>But the crypto world has generally operated with much less caution than the traditional financial sector, and <a href="https://www.nytimes.com/2022/11/11/technology/ftx-investors-venture-capital.html?smid=tw-dealbook&smtyp=cur">FTX is no exception</a>. About <a href="https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad">two-thirds</a> of the money that FTX owed to the people who held cryptocurrency on its exchange – roughly $11.3 billion of $16 billion owed – was backed by illiquid coins created by FTX. FTX was taking its customers’ money, giving it to Alameda to make risky investments and then creating its own currency, known as FTT, as a replacement – cryptocurrency that it was unable to sell at a high enough price when it needed to.</p>
<p>In addition, nearly 40% of Alameda’s assets were in FTX’s own cryptocurrency – and remember, both companies were founded by the same person. </p>
<p>This all came to a head when investors decided to sell their coins on the exchange. FTX did not have enough <a href="https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is-still-looking-for-money">liquid</a> assets to meet those demands. This in turn drove the value of FTT from over $26 a coin at the beginning of November 2022 to under $2 by Nov. 13. By this point, FTX owed more money to its customers than <a href="https://www.bloomberg.com/opinion/articles/2022-11-09/bankman-fried-s-ftx-had-a-death-spiral-before-binance-deal">it was worth</a>.</p>
<p>In regulated exchanges, investing with customer funds is <a href="https://www.cnbc.com/2022/11/13/sam-bankman-frieds-alameda-quietly-used-ftx-customer-funds-without-raising-alarm-bells-say-sources.html">illegal</a>. Additionally, auditors validate financial statements, and firms must publish the amount of money they hold in reserve that is available to fund customer withdrawals. And even if things go wrong, the Securities Investor Protection Corporation – or SIPC – protects depositors against the loss of investments from an exchange failure or financially troubled brokerage firm. The crypto world lacks such guardrails.</p>
<h2>3. Why is this a big deal in crypto?</h2>
<p>While the collapse of FTX and Alameda – valued at more than $30 billion and now essentially worth nothing – was dramatic, the bigger implication is simply the potential <a href="https://apnews.com/article/sam-bankman-fried-ftx-crypto-downfall-a2eaec231027dfd9f18426ff8982bbf8">lost trust in crypto</a>. </p>
<p>Bank runs are rare in traditional financial institutions, but they are <a href="https://www.wsj.com/articles/crypto-com-withdrawals-rise-after-ceo-admits-transaction-problem-11668350510">increasingly common</a> in the crypto space. Given that Bankman-Fried and FTX were seen as some of the biggest, most trusted figures in crypto, these events may lead more investors to think twice about putting money in crypto.</p>
<h2>4. If I don’t own crypto, should I care?</h2>
<p>Though investment in cryptocurrencies has grown rapidly, the entire crypto market – <a href="https://www.coindesk.com/markets/2021/10/21/crypto-market-cap-surges-to-new-record-27-trillion/">valued at over $3 trillion</a> at its peak – <a href="https://beincrypto.com/institutional-investment-in-crypto-experts-weigh-in-on-implications/">is much smaller</a> than the $120 trillion <a href="https://medium.com/ngrave/too-big-to-fail-crypto-market-size-vs-traditional-assets-eff4bb2ec529">traditional stock market</a>.</p>
<p>While investors and regulators are still evaluating the consequences of this fall, the impact on any person who doesn’t personally own crypto will be minuscule. It is true that many larger investment funds, such as
BlackRock and the Ontario Teachers Pension, held investments in FTX, but the estimated <a href="https://www.ai-cio.com/news/ontario-teachers-pension-could-lose-95-million-on-ftx-investment">$95 million the Ontario Teachers Pension lost</a> through the collapse of FTX is just 0.05% of the entire fund’s investments.</p>
<p>The takeaway for most individuals is not to invest <a href="https://www.wsj.com/articles/ftx-sam-bankman-fried-sit-in-the-crosshairs-of-u-s-prosecutors-11668398012?mod=djem10point">in unregulated markets</a> without understanding the risks. In high-risk environments like crypto, it’s possible to lose everything – a lesson investors in FTX learned the hard way.</p>
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<h2>5. What does the trial reveal about the regulatory environment for crypto?</h2>
<p>The trial of Bankman-Fried brought attention to the ever-evolving and complex nature of cryptocurrency regulation and oversight. At the conclusion of the case, <a href="https://www.reuters.com/legal/bankman-fried-trial-poses-biggest-test-date-cryptos-top-cop-2023-09-29/">Damian Williams, the federal prosecutor for the U.S. Justice Department</a>, underlined the <a href="https://www.reuters.com/legal/ftx-founder-sam-bankman-fried-thought-rules-did-not-apply-him-prosecutor-says-2023-11-02/">department’s dedication to fighting fraud,</a> even in the relatively new crypto space.</p>
<p>This case shows that the U.S. is willing to assert broad jurisdiction over financial crimes targeting its citizens, regardless of where the perpetrating company is based, which in FTX’s case was <a href="https://www.wired.com/story/sam-bankman-fried-crypto-paradise-bahamas/">the Bahamas</a>. Notably, this trial did not fall directly under the supervision of the Securities and Exchange Commission or other regulatory bodies, although pending civil cases from both <a href="https://www.sec.gov/news/press-release/2022-219">the SEC</a> and the <a href="https://www.coindesk.com/policy/2023/02/13/cftc-case-against-sam-bankman-fried-postponed-until-after-criminal-trial/">Commodity Futures Trading Commission</a>, <a href="https://news.bloomberglaw.com/securities-law/bankman-frieds-legal-woes-extend-far-beyond-criminal-trial">along with ongoing</a> class-action lawsuits, underscore the <a href="https://www.nri.com/-/media/Corporate/en/Files/PDF/knowledge/publication/lakyara/2023/09/lakyaravol376.pdf?la=en&hash=48DA9E99702BA223ACB48E1C378E1F6833C399EF">complexities in regulating the cryptocurrency sphere</a>. </p>
<p>Despite a recent crypto crackdown by the SEC, the U.S. continues to lag behind other nations in establishing comprehensive crypto regulations. This is evident in the <a href="https://www.cnbc.com/2023/10/30/uk-confirms-plans-to-regulate-crypto-industry-with-formal-legislation.html">formal regulatory frameworks introduced by places such as the U.K.</a> and the European Union. The International Monetary Fund’s <a href="https://www.imf.org/en/Blogs/Articles/2023/07/18/crypto-needs-comprehensive-policies-to-protect-economies-and-investors">call for comprehensive regulations</a> further underscores the necessity for more robust regulatory measures within the crypto industry, hinting at a widening gap between the U.S. and much of the rest of the world.</p>
<p><em>This is an updated version of a story that was <a href="https://theconversation.com/dramatic-collapse-of-the-cryptocurrency-exchange-ftx-contains-lessons-for-investors-but-wont-affect-most-people-194692">originally published</a> on Nov. 17, 2022.</em></p><img src="https://counter.theconversation.com/content/217026/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The downfall of the onetime multibillionaire holds lessons for investors and regulators alike.D. Brian Blank, Associate Professor of Finance, Mississippi State UniversityBrandy Hadley, Associate Professor of Finance and the David A. Thompson Distinguished Scholar of Applied Investments, Appalachian State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2169912023-11-03T04:18:06Z2023-11-03T04:18:06ZSam Bankman-Fried convicted for massive FTX fraud, in stark reminder of risks of crypto trading<p>It is not just crypto tokens that have spectacular downfalls. So can crypto personalities. </p>
<p>Sam Bankman-Fried founded FTX, one of the world’s largest exchanges for so-called cryptocurrencies, which collapsed last year owing billions of dollars. Now he has gone from being hailed as potentially the <a href="https://www.newyorker.com/magazine/2023/10/02/inside-sam-bankman-frieds-family-bubble">world’s first trillionaire</a> to a lengthy term in prison.</p>
<p>After a month-long trial, a New York jury took less than five hours to <a href="https://www.theverge.com/policy/2023/11/2/23943236/sam-bankman-fried-trial-sbf-fraud-guilty">find him guilty</a> on seven counts of fraud and money laundering. </p>
<p>Bankman-Fried’s conviction highlights the risks of crypto markets, where people trade tokens with no fundamental value via hugely complex and poorly regulated financial machinery.</p>
<p>The Australian government is currently considering how to protect consumers in such markets. Treasury has commenced a <a href="https://treasury.gov.au/consultation/c2023-427004">consultation process</a>. But it will not be an easy task when so much of the activity occurs overseas or in cyberspace.</p>
<h2>FTX was not fine</h2>
<p>Bankman-Fried chose to testify in his own defence. But he failed to convince the jury he was merely a <a href="https://www.reuters.com/legal/sam-bankman-frieds-trial-ftx-fraud-charges-heads-closing-arguments-2023-11-01/">maths nerd</a> with a poor memory who was unaware of what his friends and colleagues were doing with the companies in which he was the largest stakeholder.</p>
<p>In FTX’s final days, as concerned customers started withdrawing their deposits, Bankman-Fried tweeted “<a href="https://www.ft.com/content/eef6d795-3442-44e1-bab4-05863094d9b9">FTX is fine. Assets are fine</a>”. It appears the jury did not accept he truly believed this at the time.</p>
<p>The verdict is a salutary warning about the dangers of unregulated financial markets such as crypto. As the former chair of the United Kingdom’s Financial Conduct Authority put it, fraud is “<a href="https://www.ft.com/content/723b5753-06e1-4cd8-a629-dd795f9068f2">a feature, not a bug</a>” for much of the industry.</p>
<p>Crypto tokens such as Bitcoin have no underlying assets to give them some fundamental value. They only generate a return if the owner can sell at a higher price, to someone who expects the price to go even higher. This makes them one of the purest examples of a speculative bubble.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/almost-no-one-uses-bitcoin-as-currency-new-data-proves-its-actually-more-like-gambling-207909">Almost no one uses Bitcoin as currency, new data proves. It's actually more like gambling</a>
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<h2>No government</h2>
<p>One of the ironies of the crypto market is that cryptocurrency is sold as a way to avoid having to trust governments or banks, as one does with traditional currency. But in practice, crypto trading often relies on trusting individuals – some of them charlatans such as Bankman-Fried.</p>
<p>Punters thought they could trust FTX to mind their funds for them while they switched between speculative crypto tokens such as Bitcoin and Dogecoin. They were not investing in FTX, or even lending their money to it. </p>
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Read more:
<a href="https://theconversation.com/the-spectacular-collapse-of-a-30-billion-crypto-exchange-should-come-as-no-surprise-194442">The spectacular collapse of a $30 billion crypto exchange should come as no surprise</a>
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<p>But instead of letting customers’ funds sit around waiting to be withdrawn, FTX transferred a lot of them to another company, Alameda Research. This was an investment fund, poorly run by Bankman-Fried and his cronies. </p>
<p>It is still not clear what happened to all the missing billions. Some of the money was frittered away on extravagant living. Some went to pay celebrities for advertisements and endorsements, such as the famous Super Bowl clip starring comedian Larry David. At least David can say he was warning people against “getting into crypto”.</p>
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<p>Some of the missing cash went on large political donations. Much was lost on poor bets by Alameda which failed to hedge against the risk that the price of crypto tokens could quickly plummet.</p>
<p>FTX was essentially a casino. But Bankman-Fried both owned the casino and was gambling in it – and gambling with other people’s chips. </p>
<h2>Prison looms</h2>
<p>Bankman-Fried is still <a href="https://www.reuters.com/legal/ftx-founder-sam-bankman-fried-thought-rules-did-not-apply-him-prosecutor-says-2023-11-02">proclaiming his innocence</a>. But he looks likely to be in prison for decades. </p>
<p>He will find out how long on March 28 2024. It <a href="https://www.ft.com/content/24d153b0-0c28-4946-acbe-2e93329bca52">could be more than a century</a> if he receives the maximum penalty on all the counts on which he has been convicted. And he may yet face further charges. </p>
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<strong>
Read more:
<a href="https://theconversation.com/fallen-crypto-king-sam-bankman-fried-was-perfectly-positioned-to-make-a-religion-of-himself-213893">Fallen crypto king Sam Bankman-Fried was 'perfectly positioned to make a religion of himself'</a>
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<p class="fine-print"><em><span>John Hawkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Cryptocurrency tycoon Sam Bankman-Fried may face a jail term of more than a century after conviction on seven counts of fraud and money laundering.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2125622023-09-07T09:25:37Z2023-09-07T09:25:37ZFyre Festival II: a psychologist on why some people fall for fraudsters over and over again<p>If you’ve ever been scammed, perhaps you resolved to never allow someone to take you for a fool again. But research shows not everyone reacts this way and in fact some fraud victims go into denial. </p>
<p>This might help explain why the founder of the disastrous 2017 Fyre Festival (a fraudulent luxury music festival), William “Billy” McFarland, has <a href="https://www.theguardian.com/culture/2023/aug/22/tickets-on-sale-for-reboot-of-fyre-the-fraudulent-luxury-festival-that-flopped">confidently announced plans</a> for a Fyre Festival II. </p>
<p>The main organiser, McFarland, was charged with several fraud offences, <a href="https://www.justice.gov/usao-sdny/pr/william-mcfarland-sentenced-6-years-prison-manhattan-federal-court-engaging-multiple">sentenced to six years in prison</a> and ordered to forfeit US$26 million (£20 million). </p>
<p>But about a year after his early release from prison, McFarland posted a video on Instagram about the launch of a second attempt at Fyre Festival. He said it has a target date for the end of 2024 but provided no information about who will perform.</p>
<p>At present, it is impossible to tell whether the new Fyre Festival will turn out like the first. </p>
<h2>Ponzi’s legacy</h2>
<p>Infamous fraudster Charles Ponzi’s story shows con artists who get caught often try again. Arriving in the US in 1903, Ponzi had US$2.50 in his pocket, having lost much of his savings to gambling. </p>
<p>Four years later, Ponzi <a href="https://www.biography.com/crime/charles-ponzi">was sentenced to three years</a> in a Quebec prison for forging a check, and a few years later was sentenced an additional two years in an Atlanta prison for helping smuggle Italian immigrants into the US. </p>
<p>This did not stop Ponzi from starting his own company in 1920 and offering investors a return of 45% in 90 days, a time when banks were giving 5% a year. As some investors were paid on time with the promised interest, many more people joined the scheme. By the end of 1920, however, Ponzi was sentenced to five years in prison. </p>
<p><a href="https://www.penguinrandomhouse.com/books/196122/ponzis-scheme-by-mitchell-zuckoff">Many fraudsters</a> — the best known is probably Bernie Madoff — have used the same technique to defraud millions of people. You might wonder why people use the same scam again and again. The simple answer is that schemes that <a href="https://digitalcommons.sacredheart.edu/cgi/viewcontent.cgi?referer&httpsredir=1&article=1003&context=cj_fac">promise extraordinary opportunities</a> appeal to people. </p>
<p>They appeal to fraudsters, too. Ponzi managed to generate millions of dollars in less than a year, as did McFarland. Working a normal nine-to-five job — as McFarland’s release conditions require him to do — is unlikely to give him an income anywhere close to what he accumulated from Fyre Festival. </p>
<h2>If you scam them, they will come: again and again</h2>
<p>Fraudsters often create more refined plans when initial schemes fail.</p>
<p>In fact, there is a growing sense that scammers are <a href="https://www.wired.com/story/chat-gpt-crypto-botnet-scam/">becoming more sophisticated</a>. Reports in the media have revealed that scammers started using AI technology, <a href="https://unit42.paloaltonetworks.com/chatgpt-scam-attacks-increasing/">such as ChatGTP</a>, to dupe people, even being able to <a href="https://www.theguardian.com/lifeandstyle/2023/aug/04/experience-scammers-used-ai-to-fake-my-daughters-kidnap">imitate a person’s voice</a> to fake a kidnapping event. </p>
<p>McFarland seems to have learned from his mistakes, but not perhaps in the way we would have hoped for. The promotion for Fyre Festival II is as vague as possible, which reduces the possibility that attendees will be able to sue him. It’s hard to prove someone has failed to deliver an event that, in McFarland’s words, is “everything I’ve been working towards”. </p>
<p>The publicity he has received from the <a href="https://www.netflix.com/gb/title/81035279">Netflix documentary</a> about the failed Fyre Festival, and invitations to present at international conferences after his prison release serve to provide McFarland with a sense of reassurance that people will, nevertheless, buy the tickets. </p>
<p>The 2017 failure doesn’t seem to have put people off. The first 100 tickets were put on sale for US$499 while future tickets will cost between US$799 - $7,999. Having <a href="https://posh.vip/e/fyre">checked the website</a>, it seems that the first 100 tickets are sold out. </p>
<p>We may be able to understand McFarland’s actions and motivation. It is a bit more puzzling why people would buy tickets to a festival whose founder has gone to jail for defrauding ticket holders. That is, at least, until you read research about fraud victims.</p>
<p>A study into mass marketing online fraud found that a <a href="https://ieeexplore.ieee.org/document/7180222">quarter of cyber-crime victims</a> have been scammed more than twice. </p>
<p>A 2021 report indicates that some victims are considered <a href="https://www.aarp.org/content/dam/aarp/money/scams_fraud/2021/03/AARP-chronic-fraud-victimization-report-2-26.pdf">chronic victims of fraud</a> – they are hit time and time again. </p>
<p>It’s not possible to know for sure why people may have spent so much money on Fyre Festival II tickets. But the 2021 report found chronic fraud victims sometimes have recurring hope that next “opportunity” will work out. They may be in denial and refuse to admit they have been a victim of fraud, be motivated by a persistent need (such as status, companionship or to pay off debt), or struggle to see the link between their behaviour and the consequences. </p>
<p>The researchers found that while these factors may also apply to one-off victims, chronic fraud victims experience more intense emotional swings, as the temporary feelings of fulfilment are replaced with despair once the scam is exposed. This heightened despair makes them more vulnerable to future scams. </p>
<p>We cannot assume Fyre Festival II is a fraud. The stakes this time around are perhaps even higher as a second offence could potentially result in a longer prison sentence for McFarland.</p>
<p>Regardless, the law enforcement agencies will be watching closely. Will he be able to redeem himself or end up like Ponzi? We will know soon enough.</p><img src="https://counter.theconversation.com/content/212562/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yaniv Hanoch does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Billy McFarland went to prison for fraud offences connected to the first Fyre Festival in 2017.Yaniv Hanoch, Professor in Decision Science, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2106592023-09-05T17:03:24Z2023-09-05T17:03:24ZUniversities and their students are vulnerable to money laundering – new research<figure><img src="https://images.theconversation.com/files/542976/original/file-20230816-21-towf59.jpg?ixlib=rb-1.1.0&rect=46%2C0%2C5184%2C3445&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students are at risk of being exploited by financial and organised criminals.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/back-view-man-presenting-students-lecture-478521652">Monkey Business Images/Shutterstock</a></span></figcaption></figure><p>Money laundering jeopardises the security of UK citizens and the integrity of its economy. Money launderers often target financial institutions, but they are also increasingly <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945411/NRA_2020_v1.2_FOR_PUBLICATION.pdf">targeting</a> lesser regulated or unregulated sectors, such as universities. </p>
<p>Our <a href="https://orca.cardiff.ac.uk/id/eprint/160289/">research</a> has focused on how universities apply anti-money laundering legislation, as well as their response to identified threats. We have found that universities, their employees and students are vulnerable to threats from money launderers because universities are not explicitly included within the UK’s money laundering, terrorist financing and transfer of funds <a href="https://www.legislation.gov.uk/uksi/2017/692/contents/made">regulations</a>.</p>
<p>The government’s anti-money laundering laws and regulations focus on preventing the crime by requiring organisations to submit suspicious activity reports to the National Crime Agency’s (NCA) <a href="https://nationalcrimeagency.gov.uk/what-we-do/crime-threats/money-laundering-and-illicit-finance/ukfiu">Financial Intelligence Unit</a>. These are reports of financial transactions that may be linked to money laundering.</p>
<p>In the UK, <a href="https://www.nationalcrimeagency.gov.uk/who-we-are/publications/480-sars-annual-report-2020/file">more than 90%</a> of suspicious activity reports submitted to the NCA are from financial or credit institutions. However, money launderers have adapted their techniques to exploit the weaker controls and regulations in the university sector. </p>
<p>UK universities, in some cases, <a href="https://carnegieendowment.org/files/Page_AfricaUK_Corruption_1.pdf">attract</a> the family members of convicted criminals and corrupt politically exposed persons. These are people who hold prominent positions in government, business or other organisations. Their status makes them <a href="https://www.fatf-gafi.org/content/fatf-gafi/en/publications/Fatfrecommendations/Peps-r12-r22.html">vulnerable</a> to corruption and involvement in money laundering schemes.</p>
<p>The NCA <a href="https://www.nationalcrimeagency.gov.uk/news/nsa2020">revealed</a> in 2020 that increasing numbers of students are having their bank accounts used by organised criminals. Young people can be used or exploited as “<a href="https://www.bbc.co.uk/news/uk-england-45797603">money mules</a>” by crime gangs for laundering money. In 2018, students Abdi Mohamed and Nyanjura Biseko were <a href="https://www.bbc.co.uk/news/uk-england-sussex-46196850">found guilty</a> of laundering more than £10,000 through their bank accounts, part of a £37,986 fraud.</p>
<p>There have also been instances where people have used their student loans to finance terrorism. For example, Yahya Rashid was <a href="https://www.theguardian.com/world/2015/nov/18/yahya-rashid-used-student-loan-join-isis-syria-youth-custody">jailed</a> for five years in 2015 after using his student loan to pay for himself and four friends to go to Syria to join the terror group, Islamic State.</p>
<h2>What we found</h2>
<p>We sent freedom of information requests to 120 universities across the UK to discover how anti-money laundering legislation is being applied. Nine out of ten institutions responded to our requests, and while some universities provided a full response to every question we asked, others declined to answer some or all questions. Overall, <a href="https://orca.cardiff.ac.uk/id/eprint/160289/">we found</a> there is a disparity among universities regarding the implementation of anti-money laundering legislation. </p>
<p>A significant minority of universities are failing to provide staff and students with guidance on money laundering and terrorism financing risks. We found that 20% of respondents do not provide any internal anti-money laundering training for staff. While 24% of respondents do not provide any guidance to their students on the risks posed to them by financial and organised criminals. </p>
<p>Some universities are failing to recognise the money laundering risks inherent in large cash payments, with more than 21% of respondents willing to accept cash payments. For example, three universities received more than £1 million in cash between 2019 and 2020, for tuition fees and accommodation. This is concerning, particularly given that some universities do not impose any limits on cash payments. </p>
<p>Also, universities are seemingly failing to recognise the value of the financial intelligence created by submitting suspicious activity reports. This is despite the fact that university employees are bound by the obligation to submit these reports under the <a href="https://www.legislation.gov.uk/ukpga/2000/11/contents">Terrorism Act 2000</a> and the <a href="https://www.legislation.gov.uk/ukpga/2002/29/contents">Proceeds of Crime Act 2002</a>. </p>
<p>In fact, we found that most universities do not submit any suspicious activity reports at all to the NCA. Most suspicious activity reports are submitted by a small number of universities. </p>
<p>This means that while universities are not explicitly included within the regulations, the current disparity of its application by the sector will continue. It means that universities and their employees are at risk of criminal and civil liability for committing money laundering and terrorism financing offences, or for failing to establish preventative measures. </p>
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<img alt="Students wearing black gowns throw their mortar board hats in the air." src="https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/545238/original/file-20230829-15-tf55pk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Students can be exploited as ‘money mules’ by organised criminals.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/portsmouth-july-20-graduation-ceremony-university-298907810">Enrico Della Pietra/Shutterstock</a></span>
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<p>To reduce the risks to which universities and their students are exposed, the UK’s money laundering, terrorist financing and transfer of funds <a href="https://www.legislation.gov.uk/uksi/2017/692/contents/made">regulations</a> should be explicitly applied to the higher education sector. This should include providing guidance to staff and students on terrorism financing and money laundering risks. And allowing cash payments for accommodation and tuition fees should be prohibited, or at least severely restricted.</p><img src="https://counter.theconversation.com/content/210659/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Higher education institutions are not explicitly included within the UK’s anti-money laundering regulations.Nicholas Ryder, Professor of Law, Cardiff UniversityHenry Hillman, Lecturer in Law, University of ReadingSam Bourton, Senior Lecturer in Law, University of the West of EnglandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2106632023-08-10T12:25:02Z2023-08-10T12:25:02ZAI threatens to add to the growing wave of fraud but is also helping tackle it<figure><img src="https://images.theconversation.com/files/541723/original/file-20230808-19-q8t3ng.jpg?ixlib=rb-1.1.0&rect=0%2C24%2C5452%2C3812&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The government, banks and other financial organisations are now dealing with fraud by using increasingly sophisticated detection methods.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/internet-fraud-darknet-data-thiefs-cybercrime-1716862513">Maksim Shmeljov/Shutterstock</a></span></figcaption></figure><p>There were <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/articles/natureoffraudandcomputermisuseinenglandandwales/yearendingmarch2022">4.5 million</a> reported incidents of fraud in the UK in 2021/22, up 25% on the year before. It is a growing problem which costs billions of pounds every year. </p>
<p>The COVID pandemic and the cost of living crisis have created <a href="https://www.bbc.co.uk/news/business-55769991">ideal conditions</a> for fraudsters to exploit the vulnerability and desperation of many households and businesses. And with the use of AI increasing in general, we will likely see a further increase in <a href="https://www2.deloitte.com/uk/en/blog/auditandassurance/2023/generative-ai-and-fraud-what-are-the-risks-that-firms-face.html">new types of fraud</a> and is probably contributing to the increased frequency of fraud we are seeing today. </p>
<p>Already, the ability of AI to absorb personal data, such as emails, photographs, videos and <a href="https://www.cbsnews.com/news/scammers-ai-mimic-voices-loved-ones-in-distress/#:%7E:text=Artificial%20intelligence%20is%20making%20phone,mounting%20losses%20due%20to%20fraud.">voice recordings</a> to imitate people is proving to be a new and unprecedented challenge. </p>
<p>But there is also an upside. The government, banks and other financial organisations are now fighting back with increasingly sophisticated fraud-detection methods. AI and machine learning models could be a <a href="https://www.weforum.org/agenda/2023/04/as-generative-ai-gains-pace-industry-leaders-explain-how-to-make-it-a-force-for-good/">part of the solution</a> to deal with the increasing complexity, sophistication and prevalence of such scams.</p>
<p>The rising gap between prices and people’s incomes appears to have made people more <a href="https://www.citizensadvice.org.uk/about-us/about-us1/media/press-releases/over-40-million-targeted-by-scammers-as-the-cost-of-living-crisis-bites/">receptive</a> to scams which offer grants, rebates and support payments. </p>
<p>Fraudsters often target individuals by posing as genuine organisations. Examples include pretending to be your bank or posing as the government telling you that you are eligible for a lucrative scheme, in order to steal your identity details and then money. </p>
<p>This follows a dramatic rise in recent years of fraudulent applications to government and regional support packages, mainly implemented in response to the pandemic. Here fraudsters often pose as fake businesses to secure multiple loans or grants. </p>
<p>One of the <a href="https://www.manchestereveningnews.co.uk/news/greater-manchester-news/man-who-pretended-greggs-bakery-27251086">most outlandish examples</a> of this was a Luton man who posed as a Greggs bakery to swindle three local authorities in England out of almost £200,000 worth of COVID small business grants.</p>
<p>The hurried roll out of such schemes for faster economic impact made it difficult for officials to effectively review applications. The UK government’s Department for Business and Trade now <a href="https://www.bbc.co.uk/news/business-59504943">estimates</a> that 11% of such loans, roughly £5 billion, were fraudulent. By March 2022 only £762 million <a href="https://www.gov.uk/government/publications/hmrc-issue-briefing-tackling-error-and-fraud-in-the-covid-19-support-schemes/tackling-error-and-fraud-in-the-covid-19-support-schemes">had been recovered</a>.</p>
<h2>Fraud detection</h2>
<p>Over the past few years, complex mathematical models combining traditional statistical techniques and machine learning analysis have shown promise in the <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/acfi.12742">early detection</a> of financial statement fraud. This is when companies typically misrepresent or deceive investors into believing they are more profitable than they really are.</p>
<p>One of the breakthroughs has been the incorporation of both financial and non-financial information into data analysis systems. For example, the risk of fraud decreases if there is <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/acfi.12742">better corporate governance</a> and a lower proportion of directors who are also executives. </p>
<p>In a small business context, we can think about this as promoting transparency and making sure that important positions do not have sole authority to make significant decisions. </p>
<p>Such data analytics models can be used to rank applications in terms of potential fraud risk, so that the riskiest applications get additional scrutiny by government officials. We are now starting to see implementations of such systems to tackle <a href="https://www.theguardian.com/society/2023/jul/11/use-of-artificial-intelligence-widened-to-assess-universal-credit-applications-and-tackle">universal credit</a> fraud, for example.</p>
<p><a href="https://www.ft.com/content/0dca8946-05c8-11e8-9e12-af73e8db3c71">Banks, financial services providers</a> and <a href="https://www.ft.com/content/d3bd46cb-75d4-40ff-a0cd-6d7f33d58d7f">insurers</a> are developing machine-learning models to detect financial fraud too. A Bank of England survey published in October 2022 <a href="https://www.bankofengland.co.uk/report/2022/machine-learning-in-uk-financial-services">revealed</a> that 72% of financial services firms are already testing and implementing them. </p>
<p>We are also seeing new collaborations in the industry, with the likes of Deutsche Bank partnering with chip maker Nvidia to <a href="https://www.db.com/news/detail/20221207-deutsche-bank-partners-with-nvidia-to-embed-ai-into-financial-services">embed AI</a> into their fraud detection systems.</p>
<h2>Risks of AI systems</h2>
<p>However, the advent of new automated AI systems bring with it worries of potential unintended biases within them. In a <a href="https://www.bbc.co.uk/news/uk-politics-66133665">recent trial</a> of a new AI fraud detection system by the Department of Work and Pensions, campaign groups were worried about potential biases. </p>
<p>A common issue that needs to be overcome with such systems is that they work for the majority of people, but are often biased against minority groups. This means if left unadjusted they are disproportionately more likely to flag applications from ethnic minorities as risky.</p>
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<a href="https://theconversation.com/scams-deepfake-porn-and-romance-bots-advanced-ai-is-exciting-but-incredibly-dangerous-in-criminals-hands-199004">Scams, deepfake porn and romance bots: advanced AI is exciting, but incredibly dangerous in criminals' hands</a>
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<p>But AI systems should not be used as a fully automated process to detect and accuse fraud but rather <a href="https://www.ft.com/content/2df33fc5-981a-4952-8dc6-d4eee7343acc">as a tool</a> to assist assessors. They can help auditors and civil servants, for example, to identify cases where greater scrutiny is required and to reduce processing time.</p><img src="https://counter.theconversation.com/content/210663/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian Gepp has received funding from the Accounting and Finance Association of Australia and New Zealand. He is also affiliated with the Association of Certified Fraud Examiners. </span></em></p><p class="fine-print"><em><span>Laurence Jones does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Fraud was up 25% in the UK in 2021/22.Laurence Jones, Lecturer in Finance, Bangor UniversityAdrian Gepp, Professor of Data Analytics, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2087582023-07-28T15:38:08Z2023-07-28T15:38:08ZTerrorists are using fraud to fund their activities – the UK government needs to act urgently<figure><img src="https://images.theconversation.com/files/539487/original/file-20230726-17-fgwvcy.jpg?ixlib=rb-1.1.0&rect=49%2C0%2C5472%2C3604&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The link between fraud and terrorism financing in the UK has been overlooked by successive governments.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/concept-credit-card-theft-hackers-cards-1107463670">JARIRIYAWAT/Shutterstock</a></span></figcaption></figure><p>Fraud is one of the most popular methods now used to fund terrorist activities. But the connection between fraud and terrorism financing in the UK has been overlooked by successive governments, despite <a href="https://www.justiceinspectorates.gov.uk/hmicfrs/publications/an-inspection-of-the-police-response-to-fraud/">an acknowledgement</a> of that link. </p>
<p>Worryingly, the UK government’s new <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1154660/Fraud_Strategy_2023.pdf">fraud</a> and <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1171084/CONTEST_2023.pdf">counter-terrorism</a> strategies offer no policies to tackle the problem.</p>
<p>Until the terrorist attacks in the US in September 2001, the international community had focused its financial crime efforts on tackling money laundering. As a result of 9/11, governments instigated a “<a href="https://www.routledge.com/The-Financial-War-on-Terrorism-A-Review-of-Counter-Terrorist-Financing/Ryder/p/book/9781138708310">financial war</a>” on terrorism which has limited the sources available to terrorist groups. Now similar work is needed to tackle the acts of terror funded through fraud.</p>
<p><a href="https://orca.cardiff.ac.uk/id/eprint/160123/">My research</a> focuses on the numerous terrorist attacks which have been financed by fraud. This work has identified a terrorism financing dossier, which includes passport fraud, immigration fraud, identify theft, financial fraud and tax fraud. </p>
<p>Benefit fraud is one of the most common methods used to fund terrorism in Europe, especially in Belgium, Scandinavia and the UK. Credit card, personal loan and bank fraud is prevalent in terrorism networks in the US and the UK. And not-for-profit organisation fraud and tax fraud are also prevalent in the US, UK and Spain.</p>
<p>The UK government has introduced a series of measures to try to tackle these issues. These include the <a href="https://www.legislation.gov.uk/ukpga/2022/10/contents/enacted">Economic Crime (Transparency and Enforcement) Act 2022</a> and the <a href="https://bills.parliament.uk/bills/3339">economic crime and corporate transparency bill (2022)</a>, which is still going through parliament. Both are intended to extend the UK’s sanctions regime and improve the use of <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-9098/#:%7E:text=Unexplained%20Wealth%20Orders%20allow%20for,reversing%20the%20burden%20of%20proof.">unexplained wealth orders</a> (which allow for the confiscation of property without proving criminality).</p>
<p>However, there are no specific measures to tackle the association between fraud and the financing of terrorism. This means there are still a number of loopholes that terrorists could exploit. And organisations are under no obligation to report fraud to the security services. But terrorists have used fraud to help finance attacks in the UK over the past two decades.</p>
<h2>UK terror attacks</h2>
<p>In July 2005, four suicide bombers killed 52 people and injured more than 770 others after detonating four improvised explosive devices in London. The financing of this terrorist attack and its association with fraud stretch back to 1995. </p>
<p>That is when HMRC connected several suspected frauds with <a href="https://www.bbc.co.uk/news/uk-12621383">Shehzad Tanweer</a>, one of the terrorists. Yet this information <a href="https://bills.parliament.uk/publications/48886/documents/2575">was not disclosed</a> to either the UK’s Financial Intelligence Unit or the security and intelligence services by HMRC.</p>
<p>In May 2017, <a href="https://www.telegraph.co.uk/news/2017/05/26/everything-know-manchester-suicide-bomber-salman-abedi/">Salman Abedi</a> detonated an improvised explosive device in the Manchester Arena, killing 22 people and injuring more than 800 others. Abedi had fraudulently used student loans and his maintenance grant to fund the attack. </p>
<p>He received £7,000 from the Student Loans Company after securing a place at university in October 2015. Higher education institutions are under <a href="https://orca.cardiff.ac.uk/id/eprint/160289/3/Criminal%20Law%20Review%20%281%29.pdf">no legal obligation</a> to report any suspicions of fraud or terrorism financing to the National Crime Agency (NCA).</p>
<p>In June 2017, <a href="https://www.bbc.co.uk/news/uk-48580750">Khuram Butt</a>, <a href="https://www.bbc.co.uk/news/uk-40173157#:%7E:text=Rachid%20Redouane%2C%2030%2C%20claimed%20to,by%20the%20name%20Rachid%20Elkhdar.">Rachid Redouane</a> and <a href="https://www.theguardian.com/uk-news/2017/jun/06/london-bridge-attack-third-attacker-named-in-italy-as-youssef-zaghba">Youssef Zaghba</a> used a van to knock down several pedestrians on London Bridge before continuing their terrorist attack on foot. In total, eight people were killed and 48 others were injured.</p>
<p>Butt had been <a href="https://news.sky.com/story/london-bridge-attack-mi5-accused-of-damning-list-of-failures-11750204">investigated and arrested</a> by Scotland Yard on suspicion of falsely reporting fraudulent activity on three separate bank accounts in October 2016. After his arrest, Butt was granted bail and the fraud charges were eventually dropped due to insufficient evidence. But the banks had been under no legal obligation to submit a report to the NCA.</p>
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<p>What these examples demonstrate is that the current reporting obligations are unable to prevent such terrorism financing threats. In light of these cases, the reporting of fraud should become mandatory for organisations. It would place fraud on the same legislative footing as money laundering, for example, which is already recognised as an important source of terror finance. </p>
<p>The UK government also needs to reconsider its current fraud and counter terrorism strategies. They should include measures that focus on using fraud investigation as a disruptive mechanism to prevent future acts of terrorism.</p><img src="https://counter.theconversation.com/content/208758/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicholas Ryder receives funding from InnovateUK. </span></em></p>Numerous terrorist attacks in the UK and abroad have been financed by fraud and the government needs to close financial loopholes to prevent future tragedies.Nicholas Ryder, Professor of Law, Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2086322023-07-24T14:47:04Z2023-07-24T14:47:04ZWhen mafia threatens democracy: research shows ordinary people are less honest in countries hit by organised crime<p>Organised crime casts a <a href="https://www.unodc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">long shadow</a>, driving violence and an illicit economy. But our <a href="https://journals.sagepub.com/doi/10.1177/19485506231176615">research</a> has uncovered some more subtle dimensions to its influence, too. We’ve found that organised crime can undermine the civic honesty of ordinary, law abiding people. </p>
<p>Civic honesty means adhering to shared moral norms that characterise actions such as tax evasion, bribery or welfare fraud as unacceptable. Civic honesty is a cornerstone for a robust and thriving democracy. It creates a society where people follow rules not out of fear of reprisal but due to their moral convictions. That, in turn, lessens the need for intensive surveillance and costly punitive measures. </p>
<p>Typically, civic honesty is driven by trust in public bodies such as the government and police. This trust represents citizens’ stake in a tacit <a href="https://www.econometricsociety.org/publications/econometrica/2020/07/01/state-capacity-reciprocity-and-social-contract">social contract</a> according to which they perform their civic duties in exchange for the competency, fairness and reliability of their government.</p>
<p>However, the link between political trust and civic honesty varies substantially from country to country. We wanted to explore if the presence of organised crime was a factor in this variability.</p>
<h2>83 countries</h2>
<p>To test this, we used an <a href="https://ocindex.net/">index</a> of global organised cime to rate the influence of criminal groups in different countries and regions on a scale of 1 to 10. We included mafia-style groups with a clear structure and a recognisable name like the Cosa Nostra in Italy or the Yakuza in Japan, and looser criminal associations without a clear structure or name. </p>
<p>We also looked at state-embedded groups – organised criminals that operate by infiltrating the state apparatus – and foreign criminal groups operating outside their home country, such as the Italian mafia operating in the US.</p>
<p>We paired this index with survey data from more than 128,000 people in 83 countries from two <a href="https://www.worldvaluessurvey.org/WVSEVSjoint2017.jsp">large-scale research studies</a> investigating beliefs, opinions and values. From these studies, we obtained two measures of individual differences: political trust and civic honesty.</p>
<p>The political trust measure was based on how much confidence people had in key legal and political institutions – the police, civil service, government, political parties and the justice system.</p>
<p>The civic honesty index was based on how justifiable respondents thought four illegal actions were – accepting a bribe, cheating on taxes, fare dodging on public transport and benefit fraud.</p>
<p>Data for these two measures were available from eight African countries, 13 countries in the Americas, 26 Asian nations, 34 European nations and two in Oceania. </p>
<h2>Corruption undermines civic honesty</h2>
<p>We found that citizens tended to be less inclined towards civic honesty in countries where organised criminal groups were more widespread. In these places, corruption is more commonly justified. </p>
<p>We also expected that people who report higher political trust would be <a href="https://doi.org/10.1007/s11109-006-9013-6">more civically honest</a>. If you believe in the integrity and reliability of the government, the police and the courts, you are more likely to abide by the rules they impose. </p>
<p>Political trust is a reflection of the legitimacy of institutions because when people see institutions as legitimate, they are more likely to internalise the norms and values they promote as their own. </p>
<p>People tend to follow the directives of legitimate institutions out of a conviction that such directives constitute the proper, moral way to act. Therefore, how much people trust institutions should be linked to their civic honesty.</p>
<p>That was indeed the case in countries that had fewer problems with organised crime, such as Denmark, Finland and Singapore. However, the picture was quite different in countries where there was more organised crime, exposing an interesting dynamic.</p>
<p>In countries such as Italy, Mexico and Russia, the association between civic honesty and political trust was weaker or even non-existent. Knowing how much trust a person has in institutions therefore tells you little or nothing about what they think about civic honesty.</p>
<p>We interpret this as an indication that in countries more strongly influenced by organised crime, institutions lose their role as moral referents. People’s judgements about the justifiability of illegal actions are not predicted by how much they trust political and legal institutions. </p>
<p>When our understanding of the appropriateness of tax evasion becomes disconnected from our confidence in institutions, for example, it shows that our norms are out of step with those of the institution. We don’t yet know what drives people’s judgements in these situations but it is likely that the perceived <a href="https://doi.org/10.1146/annurev.psych.57.102904.190038">probability of being caught</a> or personal values become more central.</p>
<h2>Total takeover</h2>
<p>Remarkably, however, in countries experiencing the most extreme criminal influence, the correlation between trust and honesty actually inverted. If people had a greater trust in public institutions, they were more likely to show a lower level of civic honesty. </p>
<p>In countries such as Colombia, Iraq and Venezuela, people’s trust in institutions is associated with higher justification of illegal actions like bribery and fare dodging.</p>
<p>In these countries, not only do institutions lose their role as moral referents, but people’s confidence in what presumably are corrupted institutions is linked to them finding it easier to justify illegality. </p>
<p>This seemingly paradoxical outcome could be attributed to criminal groups successfully co-opting the state, thereby subverting the nature and moral responsibilities of institutions. </p>
<p>Institutions may be perceived as being manipulated to serve illegal interests, which leads to a situation where the citizens who have confidence in corrupted institutions are also the ones with a higher tendency towards immorality and crime. </p>
<h2>Crime as a democratic issue</h2>
<p>The implications of these findings for democratic systems are profound. Organised criminal groups can play a part in altering societal norms by undermining the moral authority of public bodies. An insidious erosion of the social contract can follow, shifting norms away from the principles of civic honesty.</p>
<p>The unchecked growth of organised crime doesn’t merely lead to more illegal activities and lower public security, it threatens the very fabric of our democracies. It can lead to a broader acceptance of illegal behaviours by subtly limiting, or even sabotaging, political and legal authorities’ capacity to promote a culture of legality and cooperation.</p><img src="https://counter.theconversation.com/content/208632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni A. Travaglino receives funding from the UKRI for the "Secret Power" project (Grant No. EP/X02170X/1). The grant was awarded to him under the European Commission’s “European Research Council - STG” Scheme.</span></em></p><p class="fine-print"><em><span>Alberto Mirisola and Pascal Burgmer do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Mafia groups don’t just cause harm through violence, they can erode the principles that make a democracy function.Giovanni A. Travaglino, Professor of Social Psychology and Criminology, Royal Holloway University of LondonAlberto Mirisola, Associate Professor of Social Psychology, University of Palermo Pascal Burgmer, Lecturer in Psychology, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2077592023-06-21T15:19:29Z2023-06-21T15:19:29ZHow scammers use psychology to create some of the most convincing internet cons – and what to watch out for<figure><img src="https://images.theconversation.com/files/532755/original/file-20230619-19-1die33.jpg?ixlib=rb-1.1.0&rect=42%2C25%2C5618%2C4005&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Scammers are blending different types of fraud to persuade people to hand over their cash. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-woman-having-online-date-fake-1194339238">Pixel-Shot/Shutterstock</a></span></figcaption></figure><p><a href="https://www.experian.co.uk/blogs/latest-thinking/fraud-prevention/cybercrime-fraud-most-common-crime-uk/">Online fraud is today’s most common crime</a>. Victims are often told they are foolish for falling for it, but fraudsters use psychological mechanisms to infiltrate the defences of their targets, regardless of how intelligent they are. </p>
<p>So it’s important to keep up with the latest scams and understand how they work. </p>
<p>Recently, consumer protection magazine Which? <a href="https://www.which.co.uk/news/article/the-4-most-convincing-scams-weve-seen-in-2023-so-far-a7bRP9s0KJvG">identified some of the most convincing scams of 2023</a>. These scams all have one thing in common – they insidiously take advantage of people’s cognitive biases and psychological blind spots. </p>
<p>They included “pig butchering” a way of fattening up victims with affection, the missing person scam which involves posting fake content on social media pages, the traditional PayPal scam, and a new scam called the “fake app alert” in which malware is hidden on apps that look legitimate. </p>
<h2>Pig butchering</h2>
<p>In our work as fraud psychology researchers we have noticed a trend towards hybrid scams, which combine different types of fraud. Hybrid scams often involve crypto investments and <a href="https://www.psychologytoday.com/us/blog/the-fraud-crisis/202210/new-scams-committed-forced-trafficked-labor">sometimes use trafficked labour</a> In the US alone, <a href="https://www.fbi.gov/contact-us/field-offices/springfield/news/internet-crime-complaint-center-releases-2022-statistics">the FBI recently reported</a> that people lost US $3.3 billion (£2.6 billion) in 2023 to investment fraud. </p>
<p>Pig butchering is a long-term deception. <a href="https://www.cnbc.com/2023/05/02/pig-butchering-scammers-make-billions-convincing-victims-of-love.html">This type of scam</a> combines elements of <a href="https://www.actionfraud.police.uk/a-z-of-fraud/romance-scams">romance scams</a> with an investment con. The name comes from the strategy of <a href="https://www.theguardian.com/money/2023/may/22/dating-cons-and-dodgy-apps-among-most-common-scams-says-uk-watchdog">“fattening up” a victim with affection before slaughter</a>.</p>
<p>It will usually begin with <a href="https://www.which.co.uk/policy-and-insight/article/pig-butchering-among-most-convincing-scams-of-2023-so-far-which-warns-aDRtr4I1UT1R">standard scam approach like a text</a>, social media message, or an introduction at a job board site. </p>
<p>Victims may have their guard up at first. However, these scams can unfold over months, with the scammer slowly gaining the victims’ trust and initiating a romantic relationship all the while learning about their vulnerabilities. </p>
<p>For example, details of their financial situation, job stresses, and dreams about the life they want. Romance scammers often saturate their targets with affection and almost constant contact. Pig butchering sometimes involves several trafficked people working as a team to create a single persona. </p>
<p>Once the victim depends on the scammer for their emotional connection, the scammer introduces the idea of making an investment and uses fake crypto platforms to demonstrate returns. The scammers may use legitimate sounding cryptocoins and platforms. Victims can invest and “see” strong returns online. In reality, their money is going directly to the scammer.</p>
<p>Once a victim transfers a substantial amount of money to the con artist, they are less likely to pull out. This phenomenon is known as the <a href="https://www.sciencedirect.com/science/article/abs/pii/0749597885900494">“sunk cost fallacy”</a>. Research has shown people are likely to carry on investing money, time and effort in activities they have already invested in and ignore signs the endeavour isn’t in their best interests. </p>
<p>When the victim runs out of money or tries to withdraw funds, they are blocked.</p>
<p>The victim is left with not only financial devastation, but also the loss of what they may imagine to be their most intimate partnership. They are often <a href="https://cloud-platform-e218f50a4812967ba1215eaecede923f.s3.amazonaws.com/uploads/sites/6/2021/12/VC-Who-Suffers-Fraud-Report-1.pdf">too embarrassed to discuss the experience</a> with friends and family or to report to the police. </p>
<figure class="align-center ">
<img alt="Red broken heart paper on white keyboard computer background." src="https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/532756/original/file-20230619-21623-tl07qb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">It’s hard to imagine what a romance scam is like if you haven’t experienced it.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/red-broken-heart-paper-on-white-2145026513">Pla2na/Shutterstock</a></span>
</figcaption>
</figure>
<h2>PayPal scams</h2>
<p>Fake payment requests are a common attack that works by volume rather than playing the long game. Payment requests appear to come from a genuine PayPal address. Fraudulent messages typically begin with a generic greeting, an urgent request and a fake link.</p>
<p>For example, Dear User: You’ve received a payment, or you have paid too much. Please click link below for details. Users are directed to a spoofed website with a legitimate sounding name such as www.paypal.com/SpecialOffers and asked to enter their account information and password.</p>
<p>Both of us have received these scam requests – and even we found them difficult to discern from legitimate PayPal request emails. These scams work through mimicry and play on the human tendency to trust authority. Legitimate PayPal correspondence is usually automatic bot language, so it is not difficult to imitate. </p>
<p>But remember, genuine messages from PayPal <a href="https://www.paypal.com/ca/for-you/account/security/fraud-dangers#:%7E:text=Any%20email%20from%20PayPal%20will,bank%20account%2C%20or%20credit%20card.">will use your first and last name</a>. </p>
<h2>The missing person scam</h2>
<p>This seems to be a new scam that exploits a person’s kindness. In the past, charity scams involved posing as charitable organisation responding to a <a href="https://www.aarp.org/money/scams-fraud/info-2019/charity.html">recent, real calamity</a>. </p>
<p>The new missing person scam is more sophisticated. The initial plea is a <a href="https://www.thesun.co.uk/tech/20875699/facebook-fake-missing-child-scam-warning/">fake missing person post</a> that generates likes and shares, increasing its credibility and exposure. Then the fraudster edits the content to create an investment scheme which now has the veneer of legitimacy. </p>
<p>This scam may work because the initial consumers are unaware that the content is fraudulent, and there is no obvious request. In psychology, this type of persuasion is known as “<a href="https://thedecisionlab.com/reference-guide/psychology/social-proof">social proof</a>” – the tendency of individuals to follow and copy behaviour of others. </p>
<h2>Fake app alerts</h2>
<p>People post mobile apps, designed to steal users’ personal information, on the Google Play or Apple app store. </p>
<p>The app often has a <a href="https://www.edinburghnews.scotsman.com/news/crime/another-person-comes-forward-after-banking-app-scam-3584340">legitimate function</a>, which gives it a cover. Consumers unknowingly jeopardise their private information by downloading these apps which use malware to access additional information. </p>
<p>Although there has been <a href="https://tech.co/news/fake-android-apps-delete">media coverage of Android security issues</a>, many users assume malware <a href="https://www.ben-evans.com/benedictevans/2020/8/18/app-stores">cannot bypass app store screening</a>. Again, this scam plays on people’s <a href="https://psycnet.apa.org/doiLanding?doi=10.1037%2F0021-9010.92.3.639">trust in authority figures</a> to keep them safe. </p>
<p>Discuss any investment opportunities with friends, family members or professionals. It’s much easier said than done, but exercising caution one of the best strategies to reduce the chance of becoming a fraud victim. </p>
<p>Scammers count on people paying little to no attention to their emails or messages before clicking on them or providing valuable information. When it comes to scams, the devil is in the missing details.</p><img src="https://counter.theconversation.com/content/207759/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>‘Pig butchering’, fake apps and missing person scams and conning people out of huge amounts of money.Stacey Wood, Professor of Psychology, Scripps CollegeYaniv Hanoch, Professor in Decision Science, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2068932023-06-21T11:58:44Z2023-06-21T11:58:44ZHeists Worth Billions: An investigation found criminal gangs using sham bank accounts and secret online marketplaces to steal from almost anyone – and little being done to combat the fraud<p>In January 2020, Debi Gamber studied a computer screen filled with information on scores of check deposits. As a manager for eight years at a TD Bank branch in the Baltimore suburb of Essex, she had reviewed a flurry of account activity as a security measure. These transactions, though, from the ATM of a tiny TD location nestled in a nearby mall, <a href="https://www.documentcloud.org/documents/23808373-23-02-14-tdc-jt-2-usa-v-seck-diape-v-vaduva-et-al_exc-dg-dir_p-2">struck her as suspicious</a>.</p>
<p>Time and again, Gamber saw that these checks were payable to churches – many states away from the Silver Spring shopping center branch – <a href="https://www.documentcloud.org/documents/23808369-diape-seck-indictment">yet had been deposited into personal accounts</a>, a potential sign of theft.</p>
<p>Digging deeper, she determined that the same customer service representative, Diape Seck, had opened at least seven of the accounts, which had received more than 200 church check deposits. Even fishier, the purported account holders had used Romanian passports and driver’s licenses to prove their identities. Commercial bankers rarely see those forms of ID. So why were all these Romanians streaming into a small branch located above a Marshall’s clothing store?</p>
<p>Suspecting crimes, Gamber submitted an electronic fraud intake form, then contacted TD’s security department to inform them directly of what she had unearthed. Soon, the bank discovered that Seck had relied on Romanian documents for not just seven accounts but for <a href="https://www.justice.gov/usao-md/pr/former-bank-employee-convicted-after-trial-fraudulently-opening-bank-accounts">412 of them</a>. The bank phoned local police and federal law enforcement to report that an insider appeared to be helping criminals cheat churches and TD.</p>
<p>Nine months after TD’s tip, agents started rounding up conspirators, eventually arresting <a href="https://www.documentcloud.org/documents/23808369-diape-seck-indictment">nine</a> of them for crimes that netted more than <a href="https://www.justice.gov/usao-md/pr/former-bank-employee-sentenced-three-years-federal-prison-fraudulently-opening-bank">US$1.7 million</a> in stolen checks. They all <a href="https://www.documentcloud.org/documents/23809801-district-of-maryland-cmecf-live-nextgen-1">pleaded guilty</a> to financial crimes except for Seck, who was <a href="https://www.justice.gov/usao-md/pr/former-bank-employee-convicted-after-trial-fraudulently-opening-bank-accounts">convicted</a> in February 2023 for bank fraud, accepting a bribe and other crimes. He was <a href="https://www.justice.gov/usao-md/pr/former-bank-employee-sentenced-three-years-federal-prison-fraudulently-opening-bank">sentenced in June 2023</a> to three years in prison. </p>
<p><iframe id="zhfmR" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/zhfmR/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Sophisticated crimes</h2>
<p>How could it happen? How could criminals engineer a yearlong, multimillion-dollar fraud just by relying on a couple of employees at two small bank branches in a scheme with victims piling up into hundreds? </p>
<p>The answer is, because it’s easy. Crimes like these happen every day across the country. Scams facilitated by deceiving financial institutions – from international conglomerates to regional chains, community banks, and credit unions – are robbing millions of people and institutions out of billions and billions of dollars. At the heart of this unprecedented crime wave are so-called drop accounts created by street gangs, hackers and even rings of friends. These fraudsters are leveraging technology to obtain fake or stolen information to create the drop accounts, which are then used as the place to first “drop” and then launder purloined funds. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A person in a white hooded sweatshirt walks toward a U.S. postal carrier" src="https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=537&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=537&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531032/original/file-20230608-20-gs66fj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=537&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An October 2022 surveillance photo of an armed robber approaching a mail carrier.</span>
<span class="attribution"><a class="source" href="https://www.documentcloud.org/documents/23809211-usa_v_capers__flmdce-23-01027__00010">The Conversation/court records</a></span>
</figcaption>
</figure>
<p>To better understand the growing phenomenon of drop accounts and their role in far-reaching crime, the <a href="https://ebcs.gsu.edu/">Evidence-Based Cybersecurity Research Group</a> at Georgia State University joined The Conversation in a four-month investigation of this financial underworld. The inquiry involved extensive surveillance of criminals’ interactions on the dark web and secretive messaging apps that have become hives of illegal activity. The reporting shows:</p>
<ul>
<li><strong>The technological skills of street gangs</strong> and other criminal groups are exceptionally sophisticated, allowing them to loot billions from individuals, businesses, municipalities, states and the federal government.</li>
<li><strong>Robberies of postal workers have <a href="https://www.durbin.senate.gov/imo/media/doc/Letter%20to%20PMG%20DeJoy%20on%20Carrier%20Robberies%20Signed.pdf">escalated sharply</a></strong> as fraudsters steal public mailbox keys in the first step of a chain of crimes that ends with drop accounts’ being loaded with millions in stolen funds.</li>
<li><strong>A robust, anonymous online marketplace</strong> provides everything an aspiring criminal needs to commit drop account fraud, including <a href="https://www.documentcloud.org/documents/23824400-binder1">video tutorials and handbooks</a> that describe tactics for each bank. The dark web and encrypted chat services have become one-stop shops for cybercriminals to buy, sell and share stolen data and hacking tools.</li>
<li><strong>The federal government and banks know the scope</strong> and impact of the crime but have so far failed to take meaningful action.</li>
</ul>
<p>“What we are seeing is that the fraudsters are collaborating, and they are using the latest tech,” said Michael Diamond, general manager of digital banking at Mitek Systems, a San Diego-based developer of digital identity verification and counterfeit check detection systems. “Those two things combined are what are driving the fraud numbers way, way up.”</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/7BrqAMx2vMg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Criminals target letter carriers for their arrow keys, giving them access to public mailboxes. Via Evidence-Based Cybersecurity Research Group.</span></figcaption>
</figure>
<h2>Billions stolen</h2>
<p>The growth is staggering. Financial institutions <a href="https://www.fincen.gov/sites/default/files/shared/FinCEN%20Alert%20Mail%20Theft-Related%20Check%20Fraud%20FINAL%20508.pdf">reported more than 680,000</a> suspected check frauds in 2022, nearly double the 350,000 such reports the prior year, according to the Treasury Department’s Financial Crimes Enforcement Network, also known as FinCEN. Through internet transactions alone, swindles typically facilitated by drop accounts cost individuals and businesses almost $4.8 billion last year, a jump of about 60% from comparable fraud losses of more than $3 billion in 2020, the Federal Bureau of Investigation <a href="https://www.ic3.gov/Media/PDF/AnnualReport/2022_IC3Report.pdf">reported</a>.</p>
<p>Plus, a portion of the <a href="https://www.documentcloud.org/documents/23834834-ssrn-id3906395">estimated $64 billion</a> stolen from just one COVID-19 relief fund went to gangsters who rely on drop accounts, according to a <a href="https://www.documentcloud.org/documents/23808364-20221201-how-fintechs-facilitated-fraud-in-the-paycheck-protection-program-compressed">congressional report</a> and an analysis from the <a href="https://www.documentcloud.org/documents/23834834-ssrn-id3906395">University of Texas at Austin</a>. Criminals using drop accounts also hit the pandemic unemployment relief funds, which experienced improper payments of as much as $163 billion, the <a href="https://www.oig.dol.gov/doloiguioversightwork.htm">Labor Department found</a>. Indeed, experts say the large sums of government money meant to combat economic troubles from COVID-19 fueled the rapid growth of drop account fraud, as trillions of dollars in rescue funds were disbursed in the form of wires and paper checks.</p>
<p>“There were a huge range of criminals who were trained in this during the pandemic,” said one banking industry official who spoke on condition of anonymity because of the sensitivity of the matter. “A lot of them have grown up in the pandemic and seen that it is easy to make a lot of money with these schemes, with very little risk of prosecution.”</p>
<hr>
<p></p><div style="float:right;width:205px;">
<a href="https://theconversation.com/us/investigations/mailbox-robberies-drop-accounts-checkwashing-fraud-gangs-of-fullz"><img alt="Graphic showing a masked criminal on a stamp and saying 'Heists worth billions'" class="ls-is-cached lazyloaded" data-src="https://images.theconversation.com/files/532510/original/file-20230618-28-hh0pox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=200&fit=clip" src="https://images.theconversation.com/files/532510/original/file-20230618-28-hh0pox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=200&fit=clip"></a></div>
<em>This article is an excerpt from <strong><a href="https://theconversation.com/us/investigations/mailbox-robberies-drop-accounts-checkwashing-fraud-gangs-of-fullz">Heists Worth Billions</a></strong>, an investigation from The Conversation that found criminal gangs using sham bank accounts and secret online marketplaces to steal from almost anyone – and uncovered just how little being done to combat the fraud.</em><p></p>
<p>• <strong><a href="https://theconversation.com/how-to-protect-yourself-from-drop-account-fraud-tips-from-our-investigative-unit-206840">How to protect yourself from drop account fraud – tips from our investigative unit</a>.</strong></p>
<p>• <strong><a href="https://theconversation.com/behind-the-scenes-of-the-investigation-heists-worth-billions-207158">Behind the scenes of the investigation</a></strong></p>
<p>• <strong><a href="https://theconversation.com/announcing-the-conversations-new-investigative-unit-were-looking-for-collaborators-in-academia-207394">Announcing The Conversation’s new investigative unit</a></strong></p><img src="https://counter.theconversation.com/content/206893/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Maimon receives funding from the National Science Foundation, the Criminal Investigations and Network Analysis Center at George Mason University, and other private grants which support the Evidence Based Cybersecurity research group. </span></em></p><p class="fine-print"><em><span>Kurt Eichenwald does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Check fraud is one of history’s oldest financial crimes and criminals are finding new ways to use it to steal billions from banks.David Maimon, Professor of Criminal Justice and Criminology, Georgia State UniversityKurt Eichenwald, Senior Investigative Editor, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2068402023-06-20T13:40:12Z2023-06-20T13:40:12ZHow to protect yourself from drop account fraud – tips from our investigative unit<figure><img src="https://images.theconversation.com/files/532280/original/file-20230615-15-z17k8.png?ixlib=rb-1.1.0&rect=11%2C187%2C2546%2C1388&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Loot stolen from the U.S. Postal Service is displayed on the dark web.</span> <span class="attribution"><span class="source">Via Evidence-Based Cybersecurity Research Group</span></span></figcaption></figure><h2>The types of crimes that use drop accounts are multiplying rapidly, but there are ways to decrease your chances of becoming a victim.</h2>
<ul>
<li>Do not mail checks from anywhere but your local post office. Not even your own mailbox is safe. <a href="https://theconversation.com/how-cybercriminals-turn-paper-checks-stolen-from-mailboxes-into-bitcoin-173796">The best option? Pay bills and send money online</a>.</li>
</ul>
<h2>Protect your identity online by following these steps</h2>
<ul>
<li>Guard your Social Security number. Never use it on medical forms - if asked, write “available upon request” - for a job interview, when applying for a grocery store reward card or when booking travel. If you believe the number has been compromised, <a href="https://faq.ssa.gov/en-us/Topic/article/KA-02220">contact the Social Security Administration to get a new one</a>.</li>
<li>Use only one credit card for online shopping, and never use a debit card.</li>
<li><a href="https://theconversation.com/choose-better-passwords-with-the-help-of-science-82361">Strengthen your online and mobile phone passwords</a>.</li>
<li>If you don’t expect to apply for a credit card or loan soon, <a href="https://www.consumerfinance.gov/ask-cfpb/what-does-it-mean-to-put-a-security-freeze-on-my-credit-report-en-1341/">freeze your credit with all three credit rating agencies</a>.</li>
<li><a href="https://theconversation.com/your-credit-report-is-a-key-part-of-your-privacy-heres-how-to-find-and-check-it-116999">Check your credit reports</a>.</li>
<li>Do not respond to preapproved credit card or loan offers delivered by mail, and, to reduce offers, consider <a href="https://www.optoutprescreen.com/">opting out of receiving these mailings</a>.</li>
<li>Shred your financial information; don’t simply throw it out.</li>
<li>Never give out personal information to anyone contacting you through unsolicited phone calls or emails. </li>
</ul>
<h2>To prevent fraud involving a tax return refund or any other tax issue</h2>
<ul>
<li>Complete and send in your tax return as early as possible, which makes it more difficult for someone to steal your refund. </li>
<li><a href="https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin">Establish an identity protection PIN with the IRS</a>, which only you and the agency will know. </li>
<li>If the IRS rejects your attempt to file your tax return, or if you receive any unusual mail from the agency such as a tax transcript you didn’t request, or it notifies you of suspicious activity, contact the agency at the number <a href="https://www.irs.gov/individuals/understanding-your-cp01c-notice">listed here</a> to report possible identity theft. </li>
<li>Pay any <a href="https://www.irs.gov/payments">taxes owed online</a>, not by check.</li>
</ul>
<h2>To prevent losses through business email compromise scams</h2>
<ul>
<li>Learn and teach employees basic email safety techniques. </li>
<li>Confirm urgent emails from supervisors or vendors demanding immediate wire transfers. In fact, urgent requests are the most suspicious.</li>
<li>Assure employees that double-checking whether these purportedly urgent emails came from the listed sender will not result in criticism or punishment. </li>
<li>Never purchase a gift card requested by a supervisor through email or text.</li>
<li>Human resources officials should never change bank accounts for direct deposit if employees ask by email or text. Always call to double-check that the request is real.</li>
</ul>
<hr>
<p></p><div style="float:right;width:205px;">
<a href="https://theconversation.com/us/investigations/mailbox-robberies-drop-accounts-checkwashing-fraud-gangs-of-fullz"><img alt="Graphic showing a masked criminal on a stamp and saying 'Heists worth billions'" class="ls-is-cached lazyloaded" data-src="https://images.theconversation.com/files/532510/original/file-20230618-28-hh0pox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=200&fit=clip" src="https://images.theconversation.com/files/532510/original/file-20230618-28-hh0pox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=200&fit=clip"></a></div>
<em>This article accompanies <strong><a href="https://theconversation.com/us/investigations/mailbox-robberies-drop-accounts-checkwashing-fraud-gangs-of-fullz">Heists Worth Billions</a></strong>, an investigation from The Conversation that found criminal gangs using sham bank accounts and secret online marketplaces to steal from almost anyone – and uncovered just how little being done to combat the fraud.</em><p></p>
<ul>
<li><p><strong><a href="https://theconversation.com/behind-the-scenes-of-the-investigation-heists-worth-billions-207158">Behind the scenes of the investigation</a></strong></p></li>
<li><p><strong><a href="https://theconversation.com/announcing-the-conversations-new-investigative-unit-were-looking-for-collaborators-in-academia-207394">Announcing The Conversation’s new investigative unit</a></strong></p></li>
</ul><img src="https://counter.theconversation.com/content/206840/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kurt Eichenwald does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Cyber bank fraud is on the rise. Here are some important ways to protect yourself.Kurt Eichenwald, Senior Investigative Editor, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2061362023-06-18T11:19:56Z2023-06-18T11:19:56ZGold fraud: the Goldenberg scam that cost Kenya billions of dollars in the 1990s – and no one was jailed<figure><img src="https://images.theconversation.com/files/528027/original/file-20230524-15-ipamm.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><em>The <a href="https://www.theguardian.com/world/2006/mar/16/kenya.jeevanvasagar">Goldenberg scandal</a> in the early 1990s is Kenya’s largest documented gold fraud. The scheme involved Goldenberg International Limited, which pretended to export gold and diamonds, and in exchange received substantial subsidies from the government for “earning” foreign exchange. Kenyan businessman Kamlesh Pattni – who was at the centre of the scandal and was charged with fraud but <a href="https://www.businessdailyafrica.com/bd/economy/court-formally-terminates-goldenberg-case-2031264">eventually acquitted</a> – was recently <a href="https://www.aljazeera.com/news/2023/3/23/gold-smuggler-pattni-kenya-zimbabwe">named</a> in a new investigation into gold fraud. This time his operation is allegedly being run through Zimbabwe from his base in Dubai. Economists Roman Grynberg and Fwasa Singogo, who have <a href="https://core.ac.uk/download/pdf/304991797.pdf">researched</a> the Goldenberg case, and <a href="https://www.researchgate.net/profile/Fwasa-Singogo-2">the gold mining industry and its role in illicit financial flows in Africa</a>, unpack the issue.</em></p>
<h2>What was the Goldenberg scandal?</h2>
<p>The scandal centred on two companies: Goldenberg International and Exchange Bank Limited. Both were owned and directed by businessman <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=32">Kamlesh Pattni</a> and his partner James Kanyotu, the director of intelligence in the Kenyan police force. The two were licensed by the government to export gold and diamonds from Kenya. But they did not. They just collected an inflated subsidy.</p>
<p>The Goldenberg scandal occurred at a time of <a href="https://www.elibrary.imf.org/view/journals/002/1995/133/article-A001-en.xml">severe economic austerity</a> in Kenya in the early 1990s. The country’s economy was characterised by long periods of macroeconomic instability and dwindling foreign reserves. </p>
<p>Economic policy was inward-looking. It leaned towards the protection of local industries and the retention of foreign exchange. This period also coincided with the <a href="https://www.britannica.com/topic/Kenya-African-National-Union">one-party state that began in 1982</a> and was marked by political oppression. </p>
<p>As a result, donors gradually reduced support and investment evaporated. Foreign debt payments became irregular and the government increasingly fell back on local borrowing. </p>
<p>The Kenyan government turned to international financial institutions for cheaper loans. These were provided, but were conditional on <a href="https://core.ac.uk/download/pdf/304991797.pdf#page=2">economic reforms</a>, such as measures intended to stimulate trade. </p>
<p>Coincidentally, or otherwise, Goldenberg International applied to the Kenyan government in <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=33">July 1990</a> for certain privileges that spoke directly to the economic needs of the country. The company received a monopoly on exports of gold and diamonds from Kenya. </p>
<p>It was also given a subsidy of 35% of the value of these exports – 15% more than the official rate at the time. </p>
<p>Goldenberg managed to defraud the Kenyan state of between <a href="https://core.ac.uk/download/pdf/304991797.pdf#page=1">US$600 million and US$1.5 billion</a> in <a href="https://www.wto.org/english/res_e/booksp_e/anrep_e/wtr06-2b_e.pdf#page=1">subsidies</a>. Subsidies can be direct (such as cash payments) or indirect (such as tax breaks). Goldenberg’s subsidy was in monetary form, on condition that the company proved foreign exchange gains through exporting non-traditional commodities. </p>
<p>The fraud was that Kenya had <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=44">insignificant amounts of known gold deposits and absolutely no diamonds</a>. Government officials authorised payments for fictitious exports.</p>
<p>Goldenberg’s main transactions were recorded between <a href="https://issafrica.s3.amazonaws.com/site/uploads/Paper117.pdf#page=1">1991 and 1993</a>. The <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=312">2003 Judicial Commission of Inquiry</a> into the scandal estimated that Goldenberg pilfered a <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=379">total of KSh158.3 billion</a> (US$2.3 billion at the time). However, the exact amount remains in the area of speculation. </p>
<h2>What institutional gaps enabled the fraud?</h2>
<p>The architects of the Goldenberg scandal abused a number of <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=32">trade policies</a>. These included the <a href="http://kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=CAP.%20482">Export Compensation Act</a>, <a href="http://supplychainfinanceforum.org/techniques/pre-shipment-finance/">Pre-shipment Finance</a> and the Retention Scheme.</p>
<p>There’s inherently nothing wrong with these measures, which are intended to stimulate trade. But they were implemented in the context of a corrupt political system and became <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=364">instruments of fraud</a>.</p>
<p>Another significant aspect of the fraud was Kenya’s exchange rate system. The difference between official and parallel exchange rates, and the depreciating Kenyan shilling, allowed Goldenberg to earn illegal returns on foreign exchange. </p>
<p><a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf#page=135">Cheque kiting</a> is another tool that was used. It’s a form of cheque fraud that utilises the time it takes for a cheque to clear to use non-existent money in an account. </p>
<p>Officials at the highest levels of government were heavily involved in authorising payments to Goldenberg. </p>
<p>Under the rules to obtain subsidies, Goldenberg had to get signatories from the customs department that exports had occurred; from the Central Bank of Kenya that revenue had arrived; from the ministry of minerals that production had occurred; and from the ministry of finance for final authorisation. </p>
<p>As was alleged in a recent <a href="https://www.aljazeera.com/news/2023/4/14/six-secrets-uncovered-by-al-jazeeras-gold-mafia-investigation">Al-Jazeera exposé on gold fraud in Zimbabwe</a>, where Pattni’s name has featured, corrupt and well-paid senior government officials in Kenya played a part in the plunder of the nation during the Goldenberg years. </p>
<p>An audit ordered by the International Monetary Fund and World Bank into cheque kiting and forex fraud <a href="https://issafrica.s3.amazonaws.com/site/uploads/Paper117.pdf#page=9">in April 1993</a> sparked the unravelling of the Goldenberg scandal.</p>
<p>No one ever went to jail for this grand fraud despite <a href="http://kenyalaw.org/kl/fileadmin/CommissionReports/Report-of-the-Judicial-Commission-of-Inquiry-into-the-Goldenberg-Affair.pdf">years of inquiry</a> and the <a href="https://www.businessdailyafrica.com/bd/economy/court-formally-terminates-goldenberg-case-2031264">prosecution of some of the parties involved</a>. </p>
<h2>What was the cost to Kenya?</h2>
<p>The government of Kenya received no benefit as there were no official export earnings from the sale of gold and diamonds. </p>
<p>There are no reliable estimates as to the scandal’s effect on Kenyans to date, largely because the payments made and money siphoned <a href="https://www.standardmedia.co.ke/article/2000065911/goldenberg-scandal-still-a-mystery-decades-later">couldn’t be easily accounted for</a>.</p>
<h2>What are the lessons learned?</h2>
<p>The judges in the judicial review of the Goldenberg scandal blamed the International Monetary Fund and World Bank for setting the <a href="https://www.imf.org/external/pubs/ft/esaf/exr/">context</a> that enabled the abuse of subsidies.</p>
<p>In a world where more people and nations are subject to sanctions if they trade in US dollars, <a href="https://www.aljazeera.com/news/2023/4/14/six-secrets-uncovered-by-al-jazeeras-gold-mafia-investigation">gold</a> has become a way to evade economic restrictions. It isn’t easily detected in developed country jurisdictions. For instance, since 2019, trade in gold in <a href="https://ahvalnews-com.cdn.ampproject.org/c/s/ahvalnews.com/node/36566?amp">Venezuela</a> and <a href="https://financialtribune.com/articles/domestic-economy/98593/77-rise-in-irans-non-oil-trade-with-turkey">Iran</a> has increased drastically with Turkey despite US sanctions. </p>
<p>The use of physical gold traded through a country like the United Arab Emirates – Pattni now operates out of Dubai – evades the financial sanctions imposed on nations like Zimbabwe. </p>
<p>Regulatory frameworks governing trade in gold are weaker than the ones governing the entry of US dollars into the global banking system. To address this, the international community must put pressure on <a href="https://taxjustice.net/faq/what-is-a-secrecy-jurisdiction/">secrecy jurisdictions</a> to align their gold trade and anti-money laundering regulatory frameworks with global best practices. </p>
<p>Both Kenya and Zimbabwe have had long reputations of being politically risky, mired in corruption and having unsound policies. Political connections are also important in doing business. </p>
<p>Deliberate and continuous efforts to curb corruption, have stable and sound policies, and establish solid independent institutions are needed for these countries to have some semblance of accountability. If not curbed, the systemic greed of the political elite and those politically connected will continue to lead countries into ruin and citizens to destitution. Competing limited resources will continue to end up in the pockets of a select few and not cater to the public good so often championed in policy pronouncements.</p><img src="https://counter.theconversation.com/content/206136/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In a world where economic sanctions make trade in US dollars almost impossible, gold has offered a way to evade these restrictions.Roman Grynberg, Adjunct Professor, Griffith UniversityFwasa K Singogo, Research Associate, Indaba Agricultural Policy Research Institute (IAPRI)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2011112023-06-09T15:09:25Z2023-06-09T15:09:25ZPyramid schemes are on the rise – but do those who join up deserve prosecution or compensation?<figure><img src="https://images.theconversation.com/files/528634/original/file-20230526-19-mop3o6.jpg?ixlib=rb-1.1.0&rect=111%2C74%2C4829%2C3214&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/concept-exchange-financial-markets-collapse-system-2151387881">diy13/Shutterstock</a></span></figcaption></figure><p>Let’s say we invite you to invest £1,000 in our new and brilliant business. We promise you an impressive return on your money, and all we ask is that you persuade a few of your friends to invest the same amount. They in turn will need to find some more investors. But remember, we’re all in this together, and everyone will end up richer.</p>
<p>Sound too good to be true? That’s because it is. Such an offer would be an example of a pyramid scheme, which is illegal in most countries. But such schemes, often promoted on social media with promises of cash and luxurious lifestyles, are rising at an alarming rate – <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/datasets/crimeinenglandandwalesappendixtables">59% annually</a> – in the UK. </p>
<p>If you do join one, you are <a href="https://www.which.co.uk/news/article/the-12-emerging-fraud-threats-to-watch-out-for-ad2T82w8ri9Y">highly likely</a> to lose money. UK authorities <a href="https://pure.port.ac.uk/ws/portalfiles/portal/62600863/Hock_and_Button_2022_AAM.pdf">once estimated</a> that in the UK millions of people every year lose several hundred pounds.</p>
<p>On top of the likely financial loss, people who participate in pyramid schemes may also face legal punishment. But if you were to join a pyramid and recruit new members, does that make you a victim because you lost money, or a criminal because your actions caused others to lose out too?</p>
<p>Another legal grey area comes in distinguishing which money-making schemes are actually against the law. Some are completely fraudulent, like the UK-based Give and Take scheme, which promised members £24,000 in cash handed over during <a href="https://www.theguardian.com/uk-news/2014/sep/18/get-rich-quick-scam-champagne-celebration-give-and-take#:%7E:text=The%20scheme%2C%20called%20Give%20and,%C2%A33%2C000%20and%20%C2%A315%2C000">“champagne celebration nights”</a>. (Its founders were jailed.) </p>
<p>Other schemes, which offer specialist training or “secrets” to getting rich quick, can be harmful but not fraudulent. <a href="https://researchportal.port.ac.uk/en/publications/why-do-people-join-pyramid-schemes">Our research</a> shows that many of those are operating in a legal hinterland. </p>
<p>Our <a href="https://www.tandfonline.com/doi/full/10.1080/15564886.2023.2186996">research</a> also reveals that policing authorities around the world are understandably confused about this strange legal situation – especially how difficult it is to draw a clear line between victims and offenders. </p>
<p>Some countries, like Australia, consider the vast majority of pyramid scheme participants to be offenders. Others, such as the US, treat those same people as victims who deserve compensation for the financial harm they have suffered. </p>
<p>Our <a href="https://www.tandfonline.com/doi/full/10.1080/15564886.2023.2186996">work</a> aimed to clarify the situation, and we ended up identifying seven distinct categories of pyramid scheme participants. Some should be considered perpetrators, others victims, and others somewhere between the two, as illustrated in the following table.</p>
<figure class="align-center ">
<img alt="Table showing range of pyramid scheme member categories." src="https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=489&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=489&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515469/original/file-20230315-28-p6qc1p.PNG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=489&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A wide scope of involvement.</span>
<span class="attribution"><span class="source">Author provided.</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>We found that each pyramid scheme participant deserves different treatment according to their knowledge, engagement and status. Some should be protected and compensated, others left alone, and those at the tip of the pyramid should be punished. </p>
<h2>A balancing act</h2>
<p>This is the kind of distinction that could help to clarify the situation for police authorities dealing with the increasing presence of pyramid schemes. The first step should be a better understanding of the specific characteristics of the people involved – a proper consideration of their role, their awareness, and the level of their financial gain or loss. </p>
<p>Governments also need to work on finding the right balance between punishment and reform. Yet another complication comes from the fact that pyramid schemes could arguably fall under multiple legal categories, including consumer law, competition law and fraud law. </p>
<p>This means that different authorities with competing priorities may all be involved. While some have more powers to support victims, others might be interested in prosecuting fraudsters, so it is important to coordinate policing. </p>
<p>Those police authorities also need the resources to be able to keep a closer eye on the harm caused by pyramid schemes – which is not always financial, as many victims may go on to suffer <a href="https://link.springer.com/article/10.1057/sj.2012.11">psychologically</a>. And aside from the <a href="https://www.londondaily.news/south-of-england-suffers-the-worst-from-fraud-in-the-uk/">economic damage done</a> to individuals, they are a drain on a struggling <a href="https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm">wider economy</a>.</p>
<p>During a cost of living crisis, the appeal of pyramid schemes to those who are unaware of the gamble they are taking is likely to increase. With the desperation that comes with a turbulent economy, many people may see a pyramid scheme as an opportunity to transform their life. </p>
<p>But amid all the confusion and legal complications that surround pyramid schemes, the simple rule to remember is the one money making schemes that sound too good to be true. Avoid them.</p><img src="https://counter.theconversation.com/content/201111/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Government of New Zealand has previously funded Branislav Hock's research on pyramid schemes but not directly related to this article.</span></em></p><p class="fine-print"><em><span>The Government of New Zealand has previously funded research conducted by me on Pyramid Schemes, but not relevant to this article. I am a member of the Labour Party, but not active. </span></em></p>It’s a complicated and growing grey area of the law.Branislav Hock, Associate Professor in Economic Crime and Compliance, University of PortsmouthMark Button, Professor of Security and Fraud, University of PortsmouthLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2040182023-04-21T03:39:42Z2023-04-21T03:39:42ZAustralians lost more than $3bn to scammers in 2022. Here are 5 emerging scams to look out for<figure><img src="https://images.theconversation.com/files/522269/original/file-20230421-15-jncq5b.png?ixlib=rb-1.1.0&rect=228%2C213%2C1377%2C1003&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Facebook</span></span></figcaption></figure><p>The Australian Competition and Consumer Commission’s latest <a href="https://www.accc.gov.au/system/files/Targeting%20scams%202022.pdf">Targeting Scams report</a> indicates Australians reported more than A$3 billion lost to fraud in 2022. This is about a $1 billion increase on <a href="https://theconversation.com/australians-lost-2b-to-fraud-in-2021-this-figure-should-sound-alarm-bells-for-the-future-186459">reported losses from 2021</a>. </p>
<p>Year upon year, we’re witnessing a rise in monetary losses to fraud. Behind these figures sit millions of Australians who experience a range of financial and non-financial <a href="https://www.aic.gov.au/sites/default/files/2020-05/29-1314-FinalReport.pdf">harms</a>. </p>
<p>Here’s what we’ve learned from the latest report – and some advice on what to look out for in the year ahead. </p>
<h2>2022 at a glance</h2>
<p>Of the reported $3 billion lost, about half was stolen as part of investment schemes – more than double the $701 million figure from 2021. A desire to invest in cryptocurrency has driven up these losses, with potential investors inadvertently transferring money to offenders advertising a range of falsehoods. </p>
<p>Remote access schemes – in which a scammer convinces the victim to grant them access to their computer – jumped into second place, with $229 million in reported losses. This was followed by payment redirection scams (also known as business email compromise fraud). </p>
<p>Those who reported directly to Scamwatch lost an average of $19,654 – an increase of 54% from the $12,742 reported in 2021. </p>
<p>The report also shows not all victims are targeted equally; people aged 65 years and older reported the highest losses across all demographics. Indigenous Australians, people with a disability, and those from culturally and linguistically diverse backgrounds were also overrepresented.</p>
<p>For the first time in many years, text message was the most popular method for offenders to target victims. And while bank transfers were the most popular way to send funds to offenders, <a href="https://theconversation.com/crypto-theft-is-on-the-rise-heres-how-the-crimes-are-committed-and-how-you-can-protect-yourself-176027">cryptocurrency transfers</a> continue to increase in popularity – rising 162.4% in one year. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=286&fit=crop&dpr=1 600w, https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=286&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=286&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=360&fit=crop&dpr=1 754w, https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=360&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/522276/original/file-20230421-2632-p8wwc0.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=360&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Scammers are always looking for new ways to deceive people, and this often involves trying to build rapport.</span>
<span class="attribution"><span class="source">Michael Lucy</span></span>
</figcaption>
</figure>
<p>There was, however, a reduction in fraudulent phone calls. This is likely attributable to the introduction of <a href="https://www.commsalliance.com.au/__data/assets/pdf_file/0015/72150/C661_2022.pdf">regulatory action</a> to block known scam calls. It’s a bright spot in an otherwise dark report.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/scammers-can-slip-fake-texts-into-legitimate-sms-threads-will-a-government-crackdown-stop-them-200644">Scammers can slip fake texts into legitimate SMS threads. Will a government crackdown stop them?</a>
</strong>
</em>
</p>
<hr>
<h2>Trends to look out for</h2>
<p>The Targeting Scams report demonstrates the many ways offenders seek to defraud victims. On one hand, people are becoming more aware of common scam tactics. On the other, criminals are adjusting their methods to gain the upper hand. </p>
<p>Here are five types of relatively lesser-known frauds everyone should be aware of.</p>
<p><strong>1. Romance baiting</strong></p>
<p>Also known as “<a href="https://news.sophos.com/en-us/2021/05/12/fake-android-and-ios-apps-disguise-as-trading-and-cryptocurrency-apps/">cryptorom</a>” or “<a href="https://krebsonsecurity.com/2022/07/massive-losses-define-epidemic-of-pig-butchering/">pig butchering</a>”, this scam is a convergence of investment fraud and traditional romance fraud approaches. </p>
<p>The offender first initiates a relationship with the victim – through dating apps, websites or social media platforms. Once they’ve established trust, they encourage the victim to put their money into an “investment” opportunity, often cryptocurrency. The victim will then unknowingly transfer their money to the offender, who is under a different guise. </p>
<p>This kind of romance baiting raises fewer red flags than directly asking for money, and is targeting a younger demographic compared to more traditional romance fraud. </p>
<p>Such deceptions are coded under investment schemes. This is likely driving the surge in investment scheme losses reported in recent years, while also accounting for a lack of substantial increases in romance fraud.</p>
<p><strong>2. Online shopping fraud</strong></p>
<p>Offenders are skilled at creating fake websites and product advertisements that look genuine.</p>
<p>Often these fake sites will have only subtle differences from their real counterparts. Consumers may not be able to tell the difference. Criminals can directly access funds through victims’ credit card details obtained on these sites. </p>
<p>Online shopping fraud targets a range of demographics. It’s happening on stand-alone websites, social media platforms and online marketplaces.</p>
<p><strong>3. Jobs and employment fraud</strong></p>
<p><a href="https://research.qut.edu.au/centre-for-justice/wp-content/uploads/sites/304/2022/02/Briefing-Paper-Series-Feb2022-Issue21-17022022.pdf">Research</a> has indicated that working from home and flexible working conditions are strong indicators of a fraudulent job listing.</p>
<p>But in a post-COVID world, flexibility at work is often a key criterion for job seekers, if not a deal-breaker. Offenders have noticed this, and are responding by posting attractive job advertisements that offer flexibility and high incomes. </p>
<p>Victims submit their CVs and personal credentials (setting themselves up for identity crime), or may be required to pay upfront for training or materials costs for a job that doesn’t exist. </p>
<p>Employment scams are targeting younger people in particular, as they’re more likely to have <a href="https://australiainstitute.org.au/report/youth-unemployment-and-the-pandemic/">experienced job loss and insecurity</a> in the wake of the pandemic. </p>
<p><strong>4. Recovery schemes</strong></p>
<p>Many fraud victims will want to take whatever action possible to recover lost funds. </p>
<p>To exploit this, offenders will trade the details of victims with each other. They will then pose as authorities (often law enforcement, banks or private agencies) who are aware of the victim’s circumstances and promote their ability to regain the missing funds for a fee. </p>
<p>In this way, victims who are desperate to recover losses are manipulated into paying even more money to offenders.</p>
<p><strong>5. Remote access schemes</strong></p>
<p>Receiving a phone call from a computer technician advising of a problem with your computer and offering to fix it is a common experience for many. While this approach isn’t new, it made a strong resurgence in 2022 – particularly targeting older people. </p>
<p>These scam calls often come through landlines and prey on people’s fear for the security of their bank details and other personal data. The fraudsters often invoke a sense of urgency about needing to rectify the “problem”, and victims are persuaded to give the offender remote access to their computer. </p>
<p>The criminal can then access a wealth of personal information. They can gain direct entry to bank accounts to transfer funds, and can access identity credentials and other sensitive details to commit identity crime in the future. </p>
<h2>Change is needed to protect the public</h2>
<p>The threat of fraud will only increase alongside technological evolution. Experts are concerned about artificial intelligence tools such as <a href="https://www.theguardian.com/technology/2023/mar/08/darktrace-warns-of-rise-in-ai-enhanced-scams-since-chatgpt-release">ChatGPT</a> and image and video generators giving cybercriminals yet another tool to add to their arsenal.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/scams-deepfake-porn-and-romance-bots-advanced-ai-is-exciting-but-incredibly-dangerous-in-criminals-hands-199004">Scams, deepfake porn and romance bots: advanced AI is exciting, but incredibly dangerous in criminals' hands</a>
</strong>
</em>
</p>
<hr>
<p>The latest Scamwatch report is further evidence banks and financial institutions need to implement measures to help reduce fraud losses; among these, the checking of account names against BSB numbers for all transactions. The UK has a <a href="https://www.ukfinance.org.uk/policy-and-guidance/guidance/confirmation-payee">confirmation-of-payee</a> policy that does this. </p>
<p>The government is attempting to address the continued surge in fraud losses through the revision of its <a href="https://www.homeaffairs.gov.au/about-us/our-portfolios/cyber-security/strategy/2023-2030-australian-cyber-security-strategy">cybersecurity strategy</a> and the potential establishment of a <a href="https://consultation.accc.gov.au/accc/national-anti-scams-centre-survey/">National Anti-Scams Centre</a>. </p>
<p>These are both positive steps but it’s clear there’s a need for more work to be done.</p>
<p><em>If you or someone you know has been a victim of fraud, you can report it to <a href="https://www.cyber.gov.au/report-and-recover/report">ReportCyber</a>. For support, contact <a href="https://www.idcare.org/">iDcare</a>. For prevention advice, consult <a href="https://www.scamwatch.gov.au/">Scamwatch</a>.</em></p><img src="https://counter.theconversation.com/content/204018/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cassandra Cross has previously received funding from the Australian Institute of Criminology and the Cybersecurity Cooperative Research Centre.</span></em></p>Losses have surged, and change is needed to better protect Australians into the future.Cassandra Cross, Associate Dean (Learning & Teaching) Faculty of Creative Industries, Education and Social Justice, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2013432023-04-10T15:50:13Z2023-04-10T15:50:13ZSweet little lies: Maple syrup fraud undermines the authenticity of Canada’s ‘liquid gold’<figure><img src="https://images.theconversation.com/files/518225/original/file-20230329-14-6942ek.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4288%2C2848&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ensuring that maple syrup products are not mixed or substituted with other sugar syrups protects the reputation of Canadian products.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/sweet-little-lies--maple-syrup-fraud-undermines-the-authenticity-of-canada-s--liquid-gold-" width="100%" height="400"></iframe>
<p>Maple syrup, Canada’s “<a href="https://www.cbc.ca/news/canada/manitoba/weekend-morning-show-francobeat-maple-syrup-1.5913736">liquid gold</a>,” is among the <a href="https://www.cbsnews.com/media/food-frauds-10-most-adulterated-foods/">10 most adulterated foods</a> globally.</p>
<p>Maple syrup’s desirability has made it a target for delinquent activities, including food fraud and theft. In 2011 and 2012, almost 3,000 tonnes of maple syrup were stolen from the <a href="https://ppaq.ca/en/sale-purchase-maple-syrup/worlds-only-reserve-maple-syrup/">Strategic Reserve in Québec</a>.</p>
<p>The <a href="https://www.forbes.com/sites/nicholasreimann/2022/03/31/ringleader-of-great-canadian-maple-syrup-heist-ordered-to-pay-multi-million-dollar-fine/">Great Maple Syrup Heist</a> reflects the food’s status as a highly valuable commodity and the target of delinquent activities. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/31RGcVPnNN8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">CBC’s The National takes a look at the Global Strategic Maple Syrup Reserve in Laurierville, Que.</span></figcaption>
</figure>
<p>In addition to the threat posed to maple syrup by thieves and smugglers, unreliable production yields due to climate events have required establishing <a href="https://ppaq.ca/en/our-organization/operation-and-regulations/maple-syrup-production-quotas/">production quotas</a> to <a href="https://arrow.tudublin.ie/cgi/viewcontent.cgi?article=1158&context=dgs">stabilize pricing and supply</a>. </p>
<p>As a consequence, there have been reports of <a href="https://www.nydailynews.com/life-style/eats/selling-fake-maple-syrup-proposed-law-felony-article-1.970122">Prohibition-style smuggling and sugar syrups labelled as maple syrup permeating the market</a>. These actions cheat consumers and introduce food safety risks into the supply chain. </p>
<p>Consumers pay more for a lower value product. In addition, the introduction of other sugars or sugar syrups may pose risks to individuals with sugar sensitivities, <a href="https://www.diabete.qc.ca/en/living-with-diabetes/diet/food-and-nutrients/maple-syrup-not-a-miracle-food-after-all/">as maple syrup has a lower glycemic index</a> than white sugar or corn syrups.</p>
<h2>Fingerprinting maple syrup glow</h2>
<p>Some methods of detecting maple syrup adulteration involve targeted analysis, such as the separation and identification of sugars in a sample, and <a href="https://gestion.centreacer.qc.ca/UserFiles//publications/adulte%CC%81ration---sirop-d'e%CC%81rable-english.pdf">non-targeted analysis such as spectroscopy</a>. But there is still a need for the continuous development of cost-effective, accurate and rapid testing tools to monitor maple syrup fraud.</p>
<p>Our research team at the University of Guelph has been developing methods to detect maple syrup fraud. We use <a href="https://doi.org/10.1016/j.cofs.2021.06.005">fluorescence fingerprinting</a>, which analyzes how <a href="https://gestion.centreacer.qc.ca/fr/UserFiles/Publications/227_Fr.pdf">certain molecules in maple syrup glow when exposed to UV and visible light</a>, to see if there is any potential maple syrup adulteration.</p>
<p>In UV light, maple syrup naturally glows. Fluorescence fingerprinting maps the intensity of the light emitted by these specific fluorescent (glowing) compounds, and can provide a unique 3D rendering of a sample’s composition while also reporting on its quality, safety and identity.</p>
<p>Using key features found in the fluorescence fingerprints, we explored ways to better detect maple syrup adulteration even when the levels are as low as one per cent.</p>
<p>Our study examines the adulteration of dark and amber maple syrups with common maple syrup adulterants, at percentages ranging from one to 50 per cent. </p>
<p>Distinct fluorescence fingerprints were found for each tested syrup and mixture, revealing features that can be used to distinguish pure from adulterated samples.</p>
<h2>Machine learning and identification</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="an aerial photo of a cup with glowing liquid" src="https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=555&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=555&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=555&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=698&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=698&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519086/original/file-20230403-20-koz51k.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=698&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Maple syrup glows under UV light.</span>
<span class="attribution"><span class="source">(M. Singh)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The fluorescence fingerprints obtained when the samples were exposed to UV and visible light show several features (or peaks) that gradually changed in samples tampered with adulterants. We were able to correctly detect adulteration in 70 to 100 per cent of samples, depending on how the features were quantified and analyzed, by creating a fluorescence index or by using machine learning techniques. </p>
<p>To fully validate this approach, we will need to use larger datasets that will help us control for other factors — like the environments maple trees grow in — that may affect the content of the syrups.</p>
<p>Other common fingerprinting techniques, such as <a href="https://doi.org/10.1080/07388551.2021.1874279">DNA barcoding</a> that examines short DNA fragments, can detect adulteration in other foods, like <a href="https://doi.org/10.1016/j.foodres.2018.12.047">fish</a> or <a href="https://doi.org/10.1016/j.foodres.2019.01.030">sausages</a>. </p>
<p>These methods don’t work well for maple syrup because the <a href="https://ppaq.ca/en/maple-production/step-by-step-production-maple-syrup/">extensive processing required to transform sap into syrup</a> potentially degrades the DNA.</p>
<p>In contrast, fluorescence fingerprints rely on a food’s chemical composition, so identifying the presence of adulterants can happen even in highly processed samples. Most <a href="https://doi.org/10.1016/j.cofs.2021.06.005">foods naturally contain intrinsic fluorescent compounds</a>, which means they glow under UV and visible light — the amount of and type of glow represent distinguishing characteristics.</p>
<h2>Quality control</h2>
<p>Since using fluorescent fingerprinting only requires the use of light, it is a non-invasive, efficient and affordable strategy for checking whether maple syrup contains any other sugar syrups. It is also fast, providing information about a sample within minutes.</p>
<p>This approach can be applied at different points in the supply chain as part of quality assurance and control. This would ensure that consumers receive safe, high-quality foods, and that they are not cheated financially. Confirming the quality of maple syrup would also protect the brand reputation of Canadian products.</p>
<p><em>Maia Zhang, research assistant at the University of Guelph, co-authored this article.</em></p><img src="https://counter.theconversation.com/content/201343/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maleeka Singh receives funding from the Arrell Food Institute.</span></em></p><p class="fine-print"><em><span>Maria G. Corradini receives funding from NSERC</span></em></p><p class="fine-print"><em><span>Robert Hanner has received funding from the Arrell Food Institute, the Canadian Food Inspection Agency, and Oceana (US & Canada). </span></em></p><p class="fine-print"><em><span>Sujani Rathnayake received funding from the Arrell Food Institute of the University of Guelph from 2019-2022.</span></em></p>Maple syrup can often be adulterated with other syrups. A technique that uses fluorescence to indicate the presence of other compounds is an easy and quick method to determine quality.Maleeka Singh, PhD Candidate, Food Science, University of GuelphMaria G. Corradini, Associate Professor - Arrell Chair in Food Quality, University of GuelphRobert Hanner, Professor, Department of Integrative Biology, University of GuelphSujani Rathnayake, Research assistant, Hanner Lab, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2022932023-03-27T12:23:56Z2023-03-27T12:23:56ZWatermarking ChatGPT, DALL-E and other generative AIs could help protect against fraud and misinformation<figure><img src="https://images.theconversation.com/files/517456/original/file-20230324-26-56qzk1.jpg?ixlib=rb-1.1.0&rect=47%2C0%2C5340%2C3517&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Images generated by AI systems, like these fake photos of Donald Trump being arrested (he hasn't been arrested), can be a dangerous source of misinformation.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/MisinformationAIDeepfakes/b3b1f26aced14c3aafc92dfb40631c29/photo">AP Photo/J. David Ake</a></span></figcaption></figure><p>Shortly after rumors leaked of former President Donald Trump’s impending indictment, images purporting to show his arrest appeared online. These images looked like news photos, but they were fake. They were <a href="https://arstechnica.com/tech-policy/2023/03/fake-ai-generated-images-imagining-donald-trumps-arrest-circulate-on-twitter/">created by a generative artificial intelligence system</a>.</p>
<p>Generative AI, in the form of image generators like <a href="https://openai.com/product/dall-e-2">DALL-E</a>, <a href="https://www.midjourney.com/">Midjourney</a> and <a href="https://stablediffusionweb.com/">Stable Diffusion</a>, and text generators like <a href="https://bard.google.com/">Bard</a>, <a href="https://chat-gpt.org/">ChatGPT</a>, <a href="https://www.deepmind.com/publications/an-empirical-analysis-of-compute-optimal-large-language-model-training">Chinchilla</a> and <a href="https://ai.facebook.com/blog/large-language-model-llama-meta-ai/">LLaMA</a>, has exploded in the public sphere. By combining clever machine-learning algorithms with billions of pieces of human-generated content, these systems can do anything from create an eerily realistic image from a caption, synthesize a speech in President Joe Biden’s voice, replace one person’s likeness with another in a video, or write a coherent 800-word op-ed from a title prompt.</p>
<p>Even in these early days, generative AI is capable of creating highly realistic content. My colleague Sophie Nightingale and I found that the average person is <a href="https://doi.org/10.1073/pnas.2120481119">unable to reliably distinguish</a> an image of a real person from an AI-generated person. Although audio and video have not yet fully passed through the uncanny valley – images or models of people that are unsettling because they are close to but not quite realistic – they are likely to soon. When this happens, and it is all but guaranteed to, it will become increasingly easier to distort reality.</p>
<p>In this new world, it will be a snap to generate a video of a CEO saying her company’s profits are down 20%, which could lead to billions in market-share loss, or to generate a video of a world leader threatening military action, which could trigger a geopolitical crisis, or to insert the likeness of anyone into a sexually explicit video. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/gLoI9hAX9dw?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The technology to make fake videos of real people is becoming increasingly available.</span></figcaption>
</figure>
<p>Advances in generative AI will soon mean that fake but visually convincing content will proliferate online, leading to an even messier information ecosystem. A secondary consequence is that detractors will be able to easily dismiss as fake actual video evidence of everything from police violence and human rights violations to a world leader burning top-secret documents.</p>
<p>As society stares down the barrel of what is almost certainly just the beginning of these advances in generative AI, there are reasonable and technologically feasible interventions that can be used to help mitigate these abuses. As a computer scientist who <a href="https://scholar.google.com/citations?user=3OKn_UYAAAAJ&hl=en">specializes in image forensics</a>, I believe that a key method is watermarking.</p>
<h2>Watermarks</h2>
<p>There is a long <a href="https://doi.org/10.1016/B978-1-59-749743-5.00001-8">history of marking documents</a> and other items to prove their authenticity, indicate ownership and counter counterfeiting. Today, Getty Images, a massive image archive, <a href="https://www.gettyimages.com/detail/video/orange-housecat-hilariously-rides-robot-vaccum-as-it-stock-footage/1459444837">adds a visible watermark</a> to all digital images in their catalog. This allows customers to freely browse images while protecting Getty’s assets. </p>
<p>Imperceptible digital watermarks are also <a href="https://doi.org/10.1007/978-3-540-69861-6_19">used for digital rights management</a>. A watermark can be added to a digital image by, for example, tweaking every 10th image pixel so that its color (typically a number in the range 0 to 255) is even-valued. Because this pixel tweaking is so minor, the watermark is imperceptible. And, because this periodic pattern is unlikely to occur naturally, and can easily be verified, it can be used to verify an image’s provenance. </p>
<p>Even medium-resolution images contain millions of pixels, which means that additional information can be embedded into the watermark, including a unique identifier that encodes the generating software and a unique user ID. This same type of imperceptible watermark can be applied to audio and video.</p>
<p>The ideal watermark is one that is imperceptible and also <a href="https://doi.org/10.1016/j.image.2021.116523">resilient to simple manipulations</a> like cropping, resizing, color adjustment and converting digital formats. Although the pixel color watermark example is not resilient because the color values can be changed, many watermarking strategies have been proposed that are robust – though not impervious – to attempts to remove them. </p>
<h2>Watermarking and AI</h2>
<p>These watermarks can be <a href="https://doi.org/10.1109/ICCV48922.2021.01418">baked into the generative AI systems</a> by watermarking all the training data, after which the generated content will contain the same watermark. This baked-in watermark is attractive because it means that generative AI tools can be open-sourced – as the image generator <a href="https://stablediffusionweb.com/">Stable Diffusion</a> is – without concerns that a watermarking process could be removed from the image generator’s software. Stable Diffusion has <a href="https://medium.com/@steinsfu/stable-diffusion-the-invisible-watermark-in-generated-images-2d68e2ab1241">a watermarking function</a>, but because it’s open source, anyone can simply remove that part of the code.</p>
<p>OpenAI is <a href="https://techcrunch.com/2022/12/10/openais-attempts-to-watermark-ai-text-hit-limits/">experimenting with a system to watermark</a> ChatGPT’s creations. Characters in a paragraph cannot, of course, be tweaked like a pixel value, so text watermarking takes on a different form. </p>
<p>Text-based generative AI is based on <a href="https://www.oreilly.com/radar/what-are-chatgpt-and-its-friends/">producing the next most-reasonable word</a> in a sentence. For example, starting with the sentence fragment “an AI system can…,” ChatGPT will predict that the next word should be “learn,” “predict” or “understand.” Associated with each of these words is a probability corresponding to the likelihood of each word appearing next in the sentence. ChatGPT learned these probabilities from the large body of text it was trained on. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1599878401397231616"}"></div></p>
<p>Generated text can be watermarked by secretly tagging a subset of words and then biasing the selection of a word to be a synonymous tagged word. For example, the tagged word “comprehend” can be used instead of “understand.” By periodically biasing word selection in this way, a body of text is watermarked based on a particular distribution of tagged words. This approach won’t work for short tweets but is generally effective with text of 800 or more words depending on the specific watermark details.</p>
<p>Generative AI systems can, and I believe should, watermark all their content, allowing for easier downstream identification and, if necessary, intervention. If the industry won’t do this voluntarily, lawmakers could pass regulation to enforce this rule. Unscrupulous people will, of course, not comply with these standards. But, if the major online gatekeepers – Apple and Google app stores, Amazon, Google, Microsoft cloud services and GitHub – enforce these rules by banning noncompliant software, the harm will be significantly reduced.</p>
<h2>Signing authentic content</h2>
<p>Tackling the problem from the other end, a similar approach could be adopted to authenticate original audiovisual recordings at the point of capture. A specialized camera app could cryptographically sign the recorded content as it’s recorded. There is no way to tamper with this signature without leaving evidence of the attempt. The signature is then stored on a centralized list of trusted signatures. </p>
<p>Although not applicable to text, audiovisual content can then be verified as human-generated. The <a href="https://c2pa.org/">Coalition for Content Provenance and Authentication</a> (C2PA), a collaborative effort to create a standard for authenticating media, recently released an open specification to support this approach. With major institutions including Adobe, Microsoft, Intel, BBC and many others joining this effort, the C2PA is well positioned to produce effective and widely deployed authentication technology.</p>
<p>The combined signing and watermarking of human-generated and AI-generated content will not prevent all forms of abuse, but it will provide some measure of protection. Any safeguards will have to be continually adapted and refined as adversaries find novel ways to weaponize the latest technologies. </p>
<p>In the same way that society has been fighting a <a href="https://doi.org/10.1016/S1361-3723(18)30016-2">decadeslong battle against other cyber threats</a> like spam, malware and phishing, we should prepare ourselves for an equally protracted battle to defend against various forms of abuse perpetrated using generative AI.</p><img src="https://counter.theconversation.com/content/202293/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hany Farid is affiliated with C2PA.</span></em></p>In a world of increasingly convincing AI-generated text, photos and videos, it’s more important than ever to be able to distinguish authentic media from fakes and imitations. The challenge is how.Hany Farid, Professor of Computer Science, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006442023-03-20T04:45:51Z2023-03-20T04:45:51ZScammers can slip fake texts into legitimate SMS threads. Will a government crackdown stop them?<figure><img src="https://images.theconversation.com/files/515987/original/file-20230317-16-etb4gn.jpeg?ixlib=rb-1.1.0&rect=0%2C0%2C4500%2C2775&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Are you tired of receiving SMS scams pretending to be from Australia Post, the tax office, MyGov and banks? You’re not alone. Each year, thousands of Australians fall victim <a href="https://theconversation.com/being-bombarded-with-delivery-and-post-office-text-scams-heres-why-and-what-can-be-done-167975">to SMS scams</a>. And losses <a href="https://www.scamwatch.gov.au/scam-statistics">have surged</a> in recent years. </p>
<p>In 2022 SMS scam losses exceeded A$28 million, which is nearly triple the amount from 2021. This year they’ve already reached A$4 million – more than the 2020 total. These figures are probably much higher if you include unreported losses, as victims often won’t speak up due to shame and social stigma. </p>
<p>Last month, the federal government announced plans to fight SMS-based scams by implementing an SMS sender ID registry. Under this system, organisations that want to SMS customers will first have to register their sender ID with a government body. </p>
<p>What kinds of scams would the proposed registry help prevent? And is it too little, too late? </p>
<hr>
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<strong>
Read more:
<a href="https://theconversation.com/we-have-filed-a-case-under-your-name-beware-of-tax-scams-theyll-be-everywhere-this-eofy-162171">'We have filed a case under your name': beware of tax scams — they'll be everywhere this EOFY</a>
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<h2>Sender ID manipulation</h2>
<p>One of the more concerning types of SMS scams is when fraudulent messages creep into legitimate message threads, making it difficult to differentiate between a <a href="https://7news.com.au/business/finance/major-aussie-banks-warn-of-new-text-message-scam-c-6257180">legitimate service and a scam</a>.</p>
<p>SMS is an older technology that lacks many modern security features, including end-to-end encryption and origin authentication (which lets you verify whether a message is sent by the claimed sender). The absence of the latter is the reason we see highly believable scams like the one below.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=694&fit=crop&dpr=1 600w, https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=694&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=694&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=872&fit=crop&dpr=1 754w, https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=872&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/514108/original/file-20230308-14-5zv41z.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=872&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An example of a scam SMS message ending up in a legitimate message thread.</span>
<span class="attribution"><span class="source">Luu Y Nhi Nguyen</span></span>
</figcaption>
</figure>
<p>There are two main types of SMS:</p>
<ul>
<li><p>peer-to-peer (P2P) is what most people use to send messages to friends and family</p></li>
<li><p>application-to-person (A2P) is a way for companies to send messages in bulk through the use of a web portal or application. </p></li>
</ul>
<p>The problem with A2P messaging is that applications can be used to enter any text or number (or combination) in the sender ID field – and the recipient’s phone uses this sender ID to group messages into threads. </p>
<p>In the example above, the scammer would have simply needed to write “ANZ” in the sender ID field for their fraudulent message to show up in the real message thread with ANZ. And, of course, they could still impersonate ANZ even if no previous legitimate thread existed, in which case it would show up in a new thread.</p>
<p>Web portals and apps offering A2P services generally don’t do their due diligence and check whether a sender is the actual owner of the sender ID they’re using. There are also no requirements for telecom companies to verify this. </p>
<p>Moreover, telecom providers generally can’t block scam SMS messages due to how difficult it is to distinguish them from genuine messages.</p>
<h2>How would sender ID registration help?</h2>
<p>Last year the Australian Communications and Media Authority introduced <a href="https://www.acma.gov.au/articles/2022-07/new-rules-fight-sms-scams">new rules</a> for the telecom industry to combat SMS scams by tracing and blocking them. The Reducing Scam Calls and Scam Short Messages Industry Code required providers to share threat intelligence about scams and report them to authorities.</p>
<p>In January, A2P texting solutions company Modica <a href="https://www.acma.gov.au/sites/default/files/2023-02/Direction%20to%20Comply%20-%20Modica.pdf">received a warning</a> for failing to comply with the rules. <a href="https://www.acma.gov.au/sites/default/files/2023-02/Investigation%20report%20-%20Modica%20Group%20Limited_0.pdf">ACMA found</a> Modica didn’t have proper procedures to verify the legitimacy of text-based SMS sender IDs, which allowed scammers to reach many mobile users in Australia.</p>
<p>Although ACMA’s code is useful, it’s challenging to identify all A2P providers who aren’t following it. More action was needed. </p>
<p>In February, the <a href="https://www.smh.com.au/business/consumer-affairs/proposed-sms-registry-could-block-scams-that-cost-australians-over-1m-a-day-20230212-p5cjw2.html">government instructed</a> ACMA to explore establishing an SMS sender ID registry. This would essentially be a whitelist of all alphanumeric sender IDs that can be legitimately used in Australia (such as “ANZ”, “T20WorldCup” or “Uber”).</p>
<p>Any company wanting to use a sender ID would have to provide identification and register it. This way, telecom providers could refer to the registry and block suspicious messages at the network level – allowing an extra defence in case A2P providers don’t do their due diligence (or become compromised).</p>
<p>It’s not yet decided what identification details an Australia registry would collect, but these could include sender numbers associated with an organisation, and/or a list of A2P providers they use. </p>
<p>So, if there are messages being sent by “ANZ” from a number that ANZ hasn’t registered, or through an A2P provider ANZ hasn’t nominated, the telecom provider could then flag these as scams.</p>
<p>An SMS sender ID registry would be a positive step, but arguably long overdue and sluggishly taken. The <a href="https://mobileecosystemforum.com/2020/04/22/industries-unite-to-tackle-sms-fraudsters-exploiting-covid-19-text-alerts/">UK</a> and <a href="https://www.sgnic.sg/smsregistry/rules-of-registration">Singapore</a> have had similar systems in place since 2018 and last year, respectively. But there’s no clear timeline for Australia. Decision makers must act quickly, bearing in mind that adoption by telecom providers will take time.</p>
<h2>Remaining alert</h2>
<p>An SMS sender ID registry will reduce company impersonation, but it won’t prevent all SMS scams. Scammers can still use regular sender numbers for scams such as the “<a href="https://www.accc.gov.au/media-release/accc-warning-of-suspicious-messages-as-hi-mum-scams-spike">Hi Mum</a>” scam.</p>
<p>Also, as SMS security comes under increased scrutiny, bad actors may shift to messaging apps such as WhatsApp or Viber, in which case regulatory control will be challenging. </p>
<p>These apps are often end-to-end encrypted, which makes it very difficult for regulators and service providers to detect and block scams sent through them. So even once a registry is established, whenever that may be, users will need to <a href="https://www.sydney.edu.au/news-opinion/news/2019/10/11/how-to-stay-safe-online.html">remain alert</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australians-lost-more-than-10-million-to-scammers-last-year-follow-these-easy-tips-to-avoid-being-conned-109728">Australians lost more than $10 million to scammers last year. Follow these easy tips to avoid being conned</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/200644/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new proposal aims to prevent SMS scams by introducing a national SMS sender ID registry.Suranga Seneviratne, Senior Lecturer - Security, University of SydneyCarol Hsu, Professor of Business Information Systems, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1990122023-02-24T17:19:45Z2023-02-24T17:19:45ZHow to avoid falling victim to an online scam – research says slow down<figure><img src="https://images.theconversation.com/files/510557/original/file-20230216-22-ind8te.jpg?ixlib=rb-1.1.0&rect=12%2C12%2C8194%2C5413&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's easy to fall for an online scam if you're in a hurry</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/phishing-attack-concept-computer-hacker-using-2103963407">Bits And Splits/Shutterstock</a></span></figcaption></figure><p>Keeping up with the latest digital cons is exhausting. Fraudsters always seem to be one step ahead. <a href="https://www.sciencedirect.com/science/article/pii/S074756322200468X">But our study found</a> there is one simple thing you can do to drastically reduce your chances of losing money to web scams: slow down. </p>
<p>In fact, among the various techniques used by scammers, creating a sense of urgency or the need to act or respond quickly is probably the most damaging. As with many legitimate sales, acting fast reduces your ability to think carefully, evaluate information and make a careful decision. </p>
<p>The COVID lockdowns made us all more reliant on online services such as shopping and banking. Quick to take advantage of this trend, scammers have since increased the rate and spectrum of online fraud. Cybersecurity company F5 found <a href="https://www.f5.com/company/news/features/phishing-attacks-soar-220--during-covid-19-peak-as-cybercriminal">phishing attacks alone</a> increased by over 200% during the height of the global pandemic, compared to the yearly average.</p>
<p>One fraud type many people fall victim to is fake websites (spoof legitimate business or government websites). According to a nonprofit that handles consumer complaints Better Business Bureau, fake websites are <a href="https://www.bbb.org/article/news-releases/27843-bbb-study-update-reported-online-retail-fraud-losses-to-approach-$380m-in-2022">one of the leading reported scams</a>. They caused estimated retail losses of approximately US$380 million (£316 million) in the US in 2022. Actually, losses are probably far higher because many cases go unreported. </p>
<p>We developed a series of experiments to evaluate what factors impact people’s ability to distinguish between real and fake websites. In our studies, participants viewed screenshots of real and fake versions of six websites: Amazon, ASOS, Lloyds Bank, the World Health Organisation COVID-19 donation website, PayPal and HMRC. The number of participants varied, but we had more than 200 in each experiment. </p>
<figure class="align-center ">
<img alt="Website address with fishing hooks" src="https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/510560/original/file-20230216-22-noozoc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fake websites cause millions in retail losses every year.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/phishing-website-358076822">wk1003mike/Shutterstock</a></span>
</figcaption>
</figure>
<p>Each study involved asking participants whether they thought the screenshots showed authentic websites or not. Afterwards, they also took tests to evaluate their internet knowledge and analytical reasoning. <a href="https://link.springer.com/chapter/10.1007/978-3-030-40690-5_54">Earlier research has shown</a> analytical reasoning impacts our ability to tell between real and fake news and phishing emails. </p>
<p>People tend to employ two types of information processing – system one and system two. <a href="http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/2224/1/Daniel-Kahneman-Thinking-Fast-and-Slow-.pdf">System one is quick</a>, automatic, intuitive and related to our emotions. We know experts rely on system one to make quick decisions. <a href="http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/2224/1/Daniel-Kahneman-Thinking-Fast-and-Slow-.pdf">System two is slow</a>, conscious and laborious. The ability to perform well on analytical reasoning tasks has been associated with system two but not system one thinking. So we used analytical reasoning tasks as a proxy to help us tell whether people are leaning more on system one or two thinking. </p>
<p>An example of one of the questions in our analytical reasoning test is: “A bat and ball together cost $1.10. The bat costs $1.00 more than the ball. How much does the ball cost?”</p>
<p>Our results showed higher analytical reasoning ability was linked to a better ability to tell fake and real websites apart.</p>
<p>Other researchers have found time pressure <a href="https://www.sciencedirect.com/science/article/pii/S0167404822003297">reduces people’s ability</a> to detect phishing emails. It also tends to engage system one processing rather than system two. Scammers do not want us to carefully evaluate the information but engage emotionally with it. So our next step was to give people less time (about 10 seconds compared to 20 seconds in the first experiment) to do the task. </p>
<p>This time we used a new set of participants. We found participants who had less time to judge the credibility of a webpage showed poorer ability to discriminate between real and fake websites. They were about 50% less accurate compared to the group who had 20 seconds to decide whether a website was fake or real. </p>
<p>In our final study, we provided a new set of participants with 15 tips on how to spot fake websites (for instance, check the domain name). We also asked half of them to prioritise accuracy and take as much time as they needed while the other half were instructed to work as quickly as possible. Working quickly rather than accurately was linked to worse performance, and to poor recall of the 15 tips we provided earlier. </p>
<p>With increasing internet use among all age groups, scammers are capitalising on peoples’ tendencies to use more intuitive information processing mechanisms to evaluate whether a website is legitimate. Scammers often design their solicitations in a way that encourages people to act quickly because they know that decisions made under such conditions are in their favour. For example, advertising that a discount is ending soon. </p>
<p>Muck of the advice about how to identify fake websites suggests you carefully examine the domain name, check for the padlock symbol, use website checkers such as <a href="https://www.getsafeonline.org/checkawebsite/">Get Safe Online</a>, look for spelling errors, and be wary of deals that sound too good to be true. These suggestions, obviously, require time and deliberate action. Indeed, possibly the best advice you could follow is: slow down.</p><img src="https://counter.theconversation.com/content/199012/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Hoax websites are becoming more popular with fraudsters. So it’s more important than ever to protect yourself.Yaniv Hanoch, Professor in Decision Science, University of SouthamptonNicholas J. Kelley, Assistant Professor in Social Psychology, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.