Financial Fraud—The Hidden Pandemic

What’s the first thing you think about when it comes to financial literacy in 2021? For me, it was political and pandemic uncertainty and how it could impact our savings goals, while real estate, inflation, and jobs are all hot topics and getting hotter by the day. However, my mindset quickly changed after dropping my kids off at school one day in early September. A report on the radio announced that, according to CPA Canada, Canadians lost $106.4 million to fraud in 2020 (up 10 million from 2019).¹

I didn’t know if I heard that stat correctly, so out of sheer curiosity, I googled it when I came home, and yes, it was true. This was shocking to me. Although I know many people, including myself, who have been the target of fraud attempts, I personally don’t know anybody who has been the victim of financial fraud, or at least anyone who isn’t ashamed to admit it. Fraudsters are taking the opportunity to use the fear of the unknown caused by COVID-19 to target victims in more complex ways, and these tactics have continued well into 2021.

We may laugh at the broken English robocalls we receive demanding we pay a penalty to Canada Revenue (often in Google-Play gift cards) or risk imprisonment. Still, email and telemarketing are the most frequent methods used to perpetrate these fraud attempts, disguised as advertisements or clickbait and often urgent.²

A perfect storm

When it comes to online fraud attempts, fraud detection firm DataVisor reports three significant factors that have driven the recent increase in claims:

• A massive shift from offline to online transactions in retail sales
• The quick transition to remote working and schooling, where inevitable security gaps appeared due to lack of preparedness
• The continued growth of mobile device usage for shopping and banking

Digital fraud on financial platforms like banking and retail apps and websites mainly consisted of “account takeover” attempts where the perpetrator steals banking credentials or backdoors into existing accounts. From that point, it’s a potential shopping spree, which, unfortunately, you won’t have the luxury of enjoying.³

Identity fraud has also become much more sophisticated. Have you ever received a phone call from an unknown number and called it back, only to be told by the confused person answering that they didn’t call you? I’ve been “called back” by annoyed people asking why I keep repeatedly calling them when, in fact, I hadn’t, even though my number popped up on their call display. Criminals have also been leveraging “spoofing.” Spoofing mimics the use of a physical device that has been “jailbroken” to obtain the same permissions and personal information that criminals would have had access to if they were holding your device in their hands.⁴ Spoofing has many uses, and it exists to create confusion while maintaining some level of legitimacy to the victim.

Although not as prevalent, the investment world is not immune to fraud activity. Perhaps surprisingly, the 2020 CSA Investor Index study shows that since 2006, the overall incidence of investment fraud victimization has remained steady; however, the age of fraud victims is dropping; fraud instances in people under 35 have been steadily increasing. With a tight connection between age and information sources used, younger respondents are less likely to rely solely on their bank or advisor and more likely to rely exclusively on third-party sources. They are also much more likely to look to social media sources for investing information. Although personal relationships (friends, family, co-workers) of investment fraudster attempts represent a small percentage (15%) of those who became victims, 31% reported that they were defrauded by someone they trusted and had a closer personal relationship with. When it comes to the elderly, the most common forms of fraud were loans not being repaid, misuse of bank accounts, and pressure to give monetary gifts.⁵

Protecting yourself from financial fraud

How can we protect ourselves, our families, and our finances in an easy-to-understand way?

• Speak up. Speak openly to your loved ones about fraud, current fraudster strategies, and offer to guide them through uncertainty; the more these discussions are normalized, the more protection we will all have
• Don’t ignore your mail! Check your bank statements, credit card bills, etc., regularly, whether they come hardcopy or electronically. One quick scan can reveal potential fraudulent transactions
• Share personal info cautiously. Stick to trusted websites and retailers online and share personal information cautiously; although often challenging to detect, some online retailers are just too good to be true and legitimate
• Be wary of unknown numbers. Avoid engaging with unfamiliar numbers (phone or text)
• Update passwords often. Change your key passwords somewhat frequently (or if you feel you may have been compromised), and store them somewhere secure
• Work with a professional. For your personal investments and retirement planning, protect yourself by working with a reputable and trusted advisor or financial planner through your workplace savings program or bank

Sources

1. Canadians more aware of fraud but must stay alert, survey says (cpacanada.ca). Retrieved from URL. ↵
2. Canadians more aware of fraud but must stay alert, survey says (cpacanada.ca). Retrieved from URL. ↵
3. Digital Fraud Jumps Dramatically Due to COVID-19 Pandemic, Increased E-Commerce and Digital Banking Traffic – CPO Magazine. Retrieved from URL. ↵
4. Digital Fraud Jumps Dramatically Due to COVID-19 Pandemic, Increased E-Commerce and Digital Banking Traffic – CPO Magazine. Retrieved from URL. ↵
5. CSA 2020 Investor Index (securities-administrators.ca). Retrieved from URL. ↵