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Social Media Financial Scams Balloon

Around the world, fraudsters are turning to social media platforms like Facebook and Instagram to reach billions of potential victims. As losses continue to pile up, regulators are voicing their concerns, with one going as far as suing a social media giant for not taking sufficient steps to tackle the rampant issue.

Just last month, Australia’s Competition and Consumer Commission (ACCC) instituted Federal Court proceedings against Facebook owner Meta Platforms for allegedly misleading users by publishing scam advertisements featuring local celebrities.

The ads promoted cryptocurrency investments and linked to fake media articles in which public figures endorsed the schemes. The watchdog said Meta Platforms “engaged in false, misleading or deceptive conduct.” The firm was allegedly aware of the fraudulent ads being placed on Facebook but did not take sufficient steps to have them removed.

In some instances, the ads remained online even after the public figures reported that their name and image were being featured in celebrity endorsement cryptocurrency scam ads.

Meta Platforms’ technology enables ads to be targeted at users most likely to engage with the ads, the ACCC said, adding that data suggest that social media is far more profitable to scammers than any other method. One individual lost more than A$650,000 (US$480,000), according to the media release.

In the UK, the Financial Conduct Authority (FCA) warned Meta Platforms and Twitter just last week that more needs to be done to take on fraudsters as investment scams continue to rise.

Currently, investments companies are allowed to post ads on Facebook and Twitter regardless of whether or not they are regulated by the FCA. This has led to a surge in the number of scams and fraud attempts seeking to lure users into putting their money into fake investment schemes.

“Following our public intervention, Google changed policy to only permit FCA-registered firms to advertise financial promotions with them,” Nikhil Rathi, head of the FCA, wrote in The Telegraph. “We now expect commitments from Meta, Twitter and others to be turned into clear timetables for action.”

Social media companies are coming under fire as scammers and fraudsters flock into these platforms to gain access to a large pool of potential victims. This surge is attributed in part to the COVID-19 pandemic which has led to more criminal activity online.

In 2021, more than 95,000 people in the US reported about US$770 million in losses to fraud initiated on social media platforms, according to the Federal Trade Commission (FTC). Those losses accounted for about 25% of all reported losses to fraud in 2021 and represented a stunning 18-fold increase over 2017 reported losses.

In a January 2022 statement, the agency highlighted the surge in crypto investment scams taking place over social media platforms. According to the FTC, 54% of people who reported losses to investment scams in 2021 said the scam started on social media with the top platforms identified being Instagram (36%), Facebook (28%), WhatsApp (9%), and Telegram (7%).

In the UK, an estimated 86% of fraud is committed online, according to the Home Office. Action Fraud, the UK’s national reporting center for fraud and cybercrime, said it received 9,458 reports referring to crypto in 2021, an increase of 64% from 5,758 in 2020. Total losses reached GBP 204.5 million (US$266 million) in 2021.

According to blockchain analytics firm Chainalysis, crypto-based crime hit a new all-time high in 2021, netting scammers a record of US$14 billion. This represents a 79% year-on-year (YoY) increase. Of the US$14 billion pocketed by criminals in 2021, US$7.8 billion came from scams. The sum represents a 82% YoY increase.

Meta Platforms and digital banking company Chime filed in January 2022 a joint lawsuit against two Nigeria-based individuals who engaged in phishing attacks to deceive people online and gain access to their online financial accounts.

The lawsuit alleges that the defendants used Chime-impersonating social media accounts to direct users to fake branded phishing websites with the aim of obtaining their Chime account login information to withdraw funds.

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Fintechnews Switzerland
Fintech News Switzerland provides a source of timely, deep insights and the latest local and global news about Fintech. Launched in 2014, the Fintech News Network team works very hard to deliver fintech-centric content in various forms to an audience looking for updates on fintech events and webinars, stunning opinions from highly-reputable digital finance innovators, analysis on fintech applications from active insiders, breaking news on fintech topics and fintech market alerts.
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