Bank Scams in 2023: How to identify and avoid them

Online banking security has made huge progress in recent years, protecting account holders with a variety of identification methods and anti-fraud software. However, fraudsters can circumvent these protective measures by fooling us into giving away information or access to our accounts.

This is what makes banking scams so dangerous. They infiltrate through deception and trick us into doing the hard work for them. 2023 has already seen a number of these cases, with a particular upswing of financial crime in India. The US Federal Trade Commission also reported a significant rise in consumer-related crime during the COVID instigated lockdowns.

So what can be done about it?

As with many things, your first and strongest defence will always be education. Learning how to identify banking scams in all their versatility and creativity will give you an edge these criminals won’t expect.

In this blog, we’re going to help you get started on identifying banking scams in 2022. We’ll cover the major scams of today, how they do it, and what you can do if it happens to you. We’ll also discuss prevention methods, specifically how you can protect yourself using SCA, or Secure Customer Authentication, on your Qonto account.

Unfortunately, bank scammers have a number of tricks up their sleeves to access your account. We’ll go through these in detail below, with communication being the most common tool in the bank scammer’s kit.

Bank scammers will send potential victims a text, email, or other mode of online communication. These messages express a variety of concerns aimed at alarming you into action:

• A message from your bank claiming unusual login attempts to your account
• Spam emails requesting login codes to your account
• Fake bank representatives requesting your login details on a phone call

The key to these messages and points of contact is to prompt you into giving sensitive information through fear.

This method of appealing to fear in the consumer is effective because we act irrationally when we are afraid. Once you see the alarming notification that your account has already been hacked or breached, or several attempts have been made and will be made again, you may be pushed to respond quickly without looking further into the email.

The bank scammer will then capitalize on your panic response by immediately providing a solution—they’ll offer to help you protect yourself against these fabricated break-in attempts.

This method is designed to broker trust between you and the scammer, while also being the first point of contact you witness in relation to this new security breach. Anything you do at the request of a bank scammer is likely to push you past the point of no return. Once they have the information they need, they can do what they like with your account.

Let’s now look at eight of the most common bank scams still wreaking havoc on users’ bank accounts in 2023. Identification is the first step towards self-protection after all.

Business owners with production lines are often at risk of the overpayment scam. If you sell a product in your business and receive an overpayment for a certain product, this may be the beginning of an overpayment scam.

The payment will usually be done online, via credit card, online payment service, wire transfer, etc. The scammer will then contact you with excuses or reasons as to why they paid more than the asking price, such as:

• Covering agent’s shipping fees
• A mistake when filling out payment information

You’ll then be asked to refund the excess amount they paid, or to forward it to a third party. Soon after this, you’ll discover there has been some issue with the initial payment: a bounced check or faulty/stolen credit or debit card.

Recent iterations of this scam include the use of fake receipts or Paypal transactions, adding verisimilitude to the scam.

Be wary of any overpayments. Overpaying for an item isn’t normal consumer behaviour. If this happens, you should immediately be suspicious and watch how this situation develops.

Never send money on to a third party. This is often an attempt at money laundering. If you’re asked to do it after an overpayment, it’s probably a scam. Only ever refund back to the person who initially paid, if you’re going to refund.

Wait until the payment clears. If you receive an overpayment, to make sure it’s legitimate, wait until the check clears or the card payment is confirmed.

Automatic debits are a legitimate way of paying for products and services, and in the current subscription economy, consumers often accrue more than they can keep track of.

A scam which takes advantage of this modern economic landscape, automatic debit scams begin with an unsolicited call or point of contact from a telemarketer or email address. The message or call will include some kind of reward:

• A cash prize
• Pre-approval for a major credit card
• Lottery jackpot win

You will then be prompted to offer account details in order to claim your reward. You may be told that this information helps you qualify for claiming the reward, such as to ship it or begin the direct debit payments.

Your information is then put on something called a ‘demand draft’ which does not require your signature when it is sent to the bank. The amount decided by the scammer is then taken from your account by the bank, to whom this is a legitimate automatic debit transaction. 

Be wary of any cash prizes, pre-approvals, or anything you didn’t ask for. If you receive communication telling you you’ve won a competition you never entered, it’s probably a scam. Pre-approvals for credit cards are common, so make sure you investigate the email sender’s information if you receive one.

Use automatic transaction notifications. Your mobile banking app should provide real-time tracking of your direct debits. Switch on notifications for any direct debits you have so you will notice immediately if money comes out of your account.

Always avoid giving out your account information. Especially to companies or organisations you don’t recognise. Ask them why they need your information, if anything. 

Checks aren’t in circulation in the same way they were 10 years prior, but they’re still a common payment method all around the world. This of course means that Check fraud is still a serious financial crime consumers need to be aware of.

While it has been on a steady decline since the early 2000s, check fraud in the UK saw a spike in 2019 and still costs global economies millions.

Fake check-cashing scams can occur in person or online. A scammer may wait outside a banking branch for you, and ask if you’d be so kind as to cash a check in your name because they left their ID at home. It’s only after you cash the check that it turns out to be a bad check and the funds leave your account, after you’ve given the cash to the scammer.

Online, fake check scams are cropping up on P2P payment systems like Venmo. They work similar to overpayment scams, in which the scammer sends a check paying you for an item which exceeds the amount you’re charging. The check ounces, and you’re left paying the difference.

Avoid cashing cheques for strangers. Standing outside a bank waiting for someone to cash your cheque is especially strange in today’s online banking world. Best let someone else be the good samaritan in this case.

Don’t take cheques on P2P payment platforms. Paper cheques on these platforms are unusual, unnecessary, and probably scams. Avoid them and go with someone else.

Government imposter or ‘impersonator’ scams begin with a text message, email, or phone call. Your scammer pretends to be some kind of government representative:

• Health insurance representative
• Member of a government agency
• Representative of a made up agency

The scammer will then claim you have missed a payment on something important, and need to send them funds immediately to avoid legal action. Government imposter scams work based on the appeal to authority and on the basis of fear.

A government representative would never ask for bank account details. Especially over the phone, email, or text message. This is an immediately obvious sign that it is a scam and you should not go any further with them.

Charity scams prey on the emotions of their victims by inventing organizations that claim to provide services for a dire situation, disease, or illness. They may take the form of disaster relief campaigns, or use a person with an illness or injury as spokesperson for their particular concern.

Charity scammers will usually contact you via phone or email. Phone scammers may be extra pushy in trying to get you to donate quickly while you’re on the phone with them, using the urgency of the charity’s focus as a selling point.

Hang up on pushy representatives. Beyond being an unpleasant interaction, this is usually a big sign you’re being scammed into donating.

Research any organization that contacts you unsolicited. The internet is a great resource for weeding out scammers, especially public organizations like charities. Chances are, someone will have fallen for it and exposed it online.

Online lenders are more popular than ever, and while most companies offer legitimate lending services, the online lending world has its fair share of scammers.

Instead of advertising by normal means and drawing in customers based on their marketing campaigns and attractive rates, an online lending scam will contact you, usually by phone, email, or text message.

The lender will offer you a deal (probably one with interest rates and fees that seem too good to be true) and won’t need to look at your credit history in order to approve you. They will probably push you to act fast, fabricating some reason you’ll miss out if you don’t do it as soon as possible. 

Background check any lending company you come across. Read reviews, find a physical address, parent company—anything that will help legitimise the company you’re looking into.

Avoid lending companies that contact you. Online lenders should draw in customers with their marketing techniques and reputation. Any lending company contacting potential customers directly is likely to be a scam. 

One of the most common (and obvious) scams is the fake lottery scam. Usually by email, you’ll receive a notification that you’ve won either a cash prize or some kind of expensive gift: a car, smartphone/device, jewellery, etc. To try and convince you, the scammer will make up organizations or impressive-sounding credentials that add validity to their claims.

The scammer will then ask you to pay in advance because it might increase your chances of winning or cover shipping costs or some other excuse. More dangerous ones will ask you for your bank details.

Never send money or financial information to collect a prize. No legitimate award or lottery organization should need your financial information or money to collect a prize.

Investment scams put users at risk of moving money into fake funds or accounts to pay for fictitious investments. The victim is usually presented with a persuasive case for an investment opportunity, one that nearly guarantees a massive return on investment.

Promising high returns, the fraudster then asks their victim to make a few small payments to some kind of investment website. The victim might be then prompted to send more money, or the fraudster will simply disappear, leaving with the initial payment. 

If you are approached for an investment opportunity by a stranger, you should immediately be wary. Most investments should be something you seek out and research, or vetted through a friend or colleague.

If you’re still interested in the investment, consult a friend or any uninvolved party for an objective view of the offer and its sender. To further investigate the matter:

• Consult a financial authority in your region
• Do a thorough background check on the investment website you’re being asked to transfer funds to
• Verify whether the investment is registered locally
• Be wary of guaranteed high returns, high pressure from the seller, and calls to act fast

One of the best modern ways to protect yourself against fraud and bank scams is with SCA, or Strong Customer Authentication. To help you get the most out of this, let’s discuss SCA in more detailed terms. 

Strong Customer Authentication refers to a customer verification method that protects the user when they make a transaction or payment transfer. The idea behind SCA is to firmly verify that you are the initiator of the action, thus protecting you against impersonation fraud.

SCA differs from 2FA or 2-step verification because where 2FA asks for a mobile TAN or SMS to verify your identity, SCA asks for an extra step in personal verification. By pairing a device in addition to your password, you’ll be asked to verify your action via notification on that paired device.

SCA has been implemented as part of the European PSD2 (Payment Services Directive 2) and its goal to protect consumer data and make banking more secure. 

Taking advantage of the extra security offered by SCA is easy with your Qonto account. Log in with the mobile app and go to **pair this phone**. You’ll receive a confirmation code by SMS - make sure you **open settings** and turn on your notifications - which you then enter to confirm the pairing.

Your phone is now paired, which means you can now use SCA.

If you realise you’ve fallen victim to a bank scam, the first thing you need to do is remain calm—there are things you can do to minimise the damage. In addition, a panicked state is the worst one to be in when trying to manage a crisis situation. 

Depending on the kind of scam you’ve fallen for, you may be losing money at a steady drip feed or have suddenly lost a large sum.

Contact your bank. Inform them of what’s happened so they are aware of the sudden departure of funds from your account, or you can freeze your accounts to avoid losing any more money.

Contact debt collectors and the courts. If you’ve been scammed and had your information stolen some time ago, you may have a number of bad debts against you already. This could result in a court summons or some other contact from legal representatives. You’ll have to explain your situation to them prior to being summoned, otherwise you could face legal action.

Contact the police. It’s important to let the police know of any suspected scams. You may need to defend yourself later in a legal setting and having the crime reported soon after it happened is better for your case. Also, reporting scammers will help to save others from being scammed in the future. 

We might like to think we’re too computer savvy or experienced to fall for bank scams, but they can befall almost anyone. We may find ourselves in dire financial straits, or with children using the internet for the first time, and have to deal with banking scams in ways we never have in the past.