For as long as human societies have existed, there have been those who look for opportunities to take advantage of the trust, naivete, ignorance, confusion, fear, and/or good intentions of others for their own personal gain. Human nature hasn’t changed in this regard over the centuries. What has changed are the methods and tools available to these unscrupulous actors to carry out their dishonest schemes. Technological developments have made it easier than ever for scammers to deceive or threaten honest, well-intentioned people into giving up their hard-earned money, their physical safety, or their personal privacy.
The purpose of this Navigator is to highlight the significance of this risk, as well as to discuss some of the common methods, tools, and tactics that scammers are currently using in their attempts to extract money and information from the unsuspecting public.
It is rare nowadays to meet someone who has not been the target of a scam of one sort or another (anyone know any wealthy Nigerian princes looking for a loan?) Many of us receive multiple text messages, emails, or phone calls each week from scammers trying to get us to click on a nefarious link, send money to an unknown party, download a malicious file, and/or divulge personal information, among other things. Fortunately, the majority of these simple, crude attempts are quickly identified and disregarded with little or no damage done. However, some scams are impressively sophisticated and can trick even the most vigilant among us. Modern technology has provided scammers with powerful tools that they can use to imitate friends, family, and/or trusted institutions or to create fake media content that can be used in various damaging ways. It is important to be aware of some of the ways in which scammers may try to deceive victims so that we can more readily identify scams before they have a chance to wreak havoc in our lives.
A virtually endless list of different scams may be used to deceive victims, but, ultimately, most scams share a few key characteristics, often referred to as the “anatomy of a scam.” Nearly all successful scams involve some or all of four primary elements: impersonation, a sense of urgency, pressure to act quickly, and a specific demand. By combining these elements in creative ways and incorporating powerful technological tools, scammers can manipulate the emotions of unsuspecting victims and ultimately convince them to turn over funds, divulge sensitive information, or make other illogical and damaging decisions.
Impersonation
Impersonation is a key component of nearly all scams. It is typically the first step in executing a scam, and when done effectively, it lays the foundation for a successful scam. Scammers routinely use impersonation to gain the trust of or instill fear in their victims. They may pose as organizations such as government agencies, financial institutions, or other known businesses in order to establish a sense of legitimacy and build trust with their victims. In some cases, these scammers may impersonate a law enforcement officer, attorney, or other legal entity in order to create a false sense of alarm. They may also simply pose as an individual with whom the victim is familiar so that the victim believes he or she is interacting with a trusted contact. Some of these impersonations may be quite sophisticated and detailed, making it extremely difficult to detect that anything is amiss. Some scammers use personal data and information from real people (which they can often glean from publicly available websites) in order to make themselves more believable. Those posing as legitimate institutions, legal professionals, or law enforcement officers will often use sophisticated terminology to enhance their credibility and possibly confuse their victims. Moreover, they utilize technology very effectively to make their scams even more difficult to identify.
Set forth below are popular tools that scammers often use to enhance their impersonations.
- Number spoofing – Number spoofing is a common technique that allows scammers to call victims and show up as someone else on the victim’s caller ID.
- Voice cloning – Modern technology has given scammers the ability to mimic the voice of someone else and effectively speak in that person’s voice, thereby fooling the victim into believing that they are speaking to someone else entirely.
- Virtual addresses – Scammers may register a business or personal address at a “virtual” location to disguise their actual location and create the appearance of legitimacy. Scammers will often establish virtual addresses in upscale locations and use mail-forwarding to have packages sent to their true locations.
- Fake websites – Scammers often create fake websites that mimic those of legitimate businesses or organizations to make victims believe that they’re engaging with trustworthy counterparties. These fake websites can be used to entice victims to make financial transactions or share sensitive personal information with the scammer.
- Fake email addresses – Often used along with fake websites, scammers can establish email addresses that look very similar to those of legitimate organizations or individuals with whom the victim might ordinarily interact. Typically, these fake email addresses will appear almost identical to the addresses they are mimicking, with only very slight alterations (g., a dash instead of a period, an extra letter, or a minor misspelling) and can thus be highly convincing.
- Fake social media accounts – Some scammers may create fake social media accounts using photos and information taken from real accounts in order to pose as someone else. They then use these fake accounts to engage with victims (who believe they’re interacting with someone they know) in an attempt to carry out their intended scam.
The list of types of scams is in no way exhaustive. Scammers are constantly coming up with new and creative ways to impersonate legitimate people and institutions, so constant vigilance is absolutely imperative.
As the accompanying chart shows, scams affect people across all age groups. While older adults may experience larger average losses in certain scams, younger and middle-aged individuals are often targeted more frequently, particularly through digital channels such as email, text messages, social media, and online platforms. The data reinforces an important takeaway: scams are not limited to any single demographic, and awareness is essential at every stage of life.
Source: https://www.johnmarshallbank.com/resources/security-center/fraud-facts-and-statistics/
Sense of Urgency
Once a scammer has gained the trust of a victim through successful impersonation, the scam will typically progress to creating a sense of urgency. Usually, the scammer will attempt to elicit a strong emotional response from the victim. Set forth below are some examples of ways in which scammers may try to create this sense of emotional urgency.
- Many scams prey on victims’ fear or alarm. Scammers may pose as law enforcement officers or representatives of government or financial institutions (such as the IRS or a bank) to scare victims with threats of legal actions or financial penalties for failure to take some action.
- Some scams focus on victims’ feelings of empathy or desire to help others. In such a case, a scammer might pose as a charitable organization soliciting donations or as an individual who has encountered a difficult situation and needs financial assistance.
- Scammers may attempt to exploit a victim’s romantic feelings by posing as a potential love interest.
- Many common scams seek to use a victim’s concern for the wellbeing of friends or family members to prod victims into action.
Regardless of the specific tactics used, the scammer’s intention is always to use the victim’s emotional response to make the victim believe that he or she should take some action. This leads to the next step in the scam: pressure to act quickly.
Pressure to Act Quickly
It is well understood that we tend to make suboptimal decisions when we are under duress and must act quickly. The stress that we feel in these situations clouds our judgment and can lead to decisions that we later regret. This is precisely what scammers rely upon to successfully execute their scams. They make victims believe that urgent action is necessary in order to avoid some adverse outcome. This pressure may come in many forms, but in nearly all cases, the intent is to put the victim in a state of panic which reduces his or her ability to think clearly about the actions he or she is being asked to take.
Importantly, this pressure to act quickly is a major red flag that can help would-be victims identify a scam before it causes significant damage. It is exceedingly rare that a legitimate institution or authority figure would ask someone to make a major decision (to execute a financial transaction, divulge sensitive personal information, etc.) on a moment’s notice. When this apparent pressure is applied, it is almost always part of a scam.
Specific Demand
The final piece in the anatomy of a scam is a specific demand. In many cases, the demand is a transfer of money or something else of value, though many scams may be designed to extract certain sensitive information instead, as that information may then be used to carry out other nefarious actions (often involving money!). All of the previously discussed elements of a scam are designed to increase the odds of a victim following through with the specific action requested. The more a victim trusts that he or she is dealing with a legitimate institution or someone he or she knows, the more likely it is that the victim will carry out the demanded action. Similarly, the stronger the sense of urgency or the more pressure a victim feels, the higher the probability that the victim agrees to the demand. Ultimately, a scam is of no value to a scammer without the specific demand being met. Thus, a scam can be shut down and the potential damage minimized at any point prior to the action being executed.
The Importance of Understanding the Anatomy of a Scam
Why do we care about how a scam is structured? There is great value in understanding how scammers go about executing their scams because it provides reference points for potential victims to identify and interrupt the scam. It is far more difficult for a scammer to successfully impersonate an institution or another person when potential victims are aware of the impersonation tools that a scammer may employ. And when a scammer applies pressure to a victim and tries to create a sense of urgency, this obvious signal can be a major red flag that helps the victim realize he or she is being scammed. Having a clear framework for how scams are executed is the best defense against becoming the victim of a scam.
Additional Scam Tools and Tactics
We have discussed the basic structure of a typical scam, and we’ve described some of the tools and tactics that are often used in scams. However, scammers unfortunately have many other arrows in their quivers. Some other tools and strategies that scammers may employ to carry out their misdeeds are provided below.
- Phishing
Phishing is a type of cyberattack in which a scammer attempts to impersonate another person or an institution using email, text, or other electronic messaging platforms. Typically, the scammer’s goal is to deceive the victim into divulging sensitive information or to entice the victim to click on a malicious link or download a malicious file that will allow the scammer to steal sensitive information.
- Malware and keyloggers
Often used in conjunction with phishing attacks, malware and keyloggers are tools that allow scammers to extract sensitive electronic data. Malware (short for malicious software) is harmful code that is designed to disrupt, damage, or gain unauthorized access to computer systems in order to steal data. Keyloggers (short for keystroke loggers) are a type of software designed to record every keystroke that a user makes on a keyboard, typically without the user’s knowledge. This type of software can allow scammers to steal passwords, usernames, banking information, or other sensitive information.
- Remote computer access
Also often used in phishing attacks, remote computer access can give scammers the ability to actually control a victim’s computer or phone remotely. This can allow scammers to access sensitive files or other information on the victim’s phone or computer, as well as to track the victim’s activity, impersonate the victim electronically, and even record photos or videos of the victim. - AI chatbots
Scammers can use AI chatbots to convincingly impersonate customer service agents, romantic interests, or company executives. These chatbots can be designed to mimic the tone and branding of legitimate institutions such as banks, government agencies, or retailers, making them very difficult to identify as part of a scam. They also allow scammers to scale the size of their schemes by minimizing the need for human involvement in the scam. - Deepfakes
Deepfakes are synthetic media (e.g., videos, images, audio) that use AI to swap faces, alter expressions, or modify speech to create the false impression that a person said or did something they did not. While many deepfakes are generally harmless and are created purely for entertainment purposes, technology can be used by scammers to enhance their impersonations and increase the effectiveness of their scams. - Forged documents
Electronic imaging and design tools have made it very easy for scammers to create highly convincing forged documents (such as IDs, business licenses, government documents, invoices, etc.) that lend credibility to their impersonation attempts. These forgeries can be highly sophisticated and therefore extremely difficult to identify. - Cryptocurrency and mixers
Many scams involve the use of cryptocurrencies in order to make it more difficult to track the scammer’s ill-gotten gains. While cryptocurrency transactions are recorded on the blockchain and are therefore publicly viewable, these records use pseudonyms that disguise the actual identity of the parties involved. Crypto mixers further obfuscate the details of cryptocurrency transactions by commingling funds from various sources and effectively eliminating any traces of individual activity. - Money transfer services and gift cards
While less sophisticated than cryptocurrency transactions, scammers often utilize traditional money transfer services such as Western Union and MoneyGram to help them anonymously extract money from victims and make it very difficult for law enforcement to trace their transactions. Scammers also frequently demand payment from victims via gift cards, due to their anonymity and irreversibility.
Clearly, scammers have a powerful array of tools at their disposal when executing their schemes. Technology, combined with a keen understanding of human nature, has given scammers the ability to inflict enormous damage on the unsuspecting public, to the tune of tens or even hundreds of billions of dollars each year, just in the United States alone.1 Thus, it is more important than ever to be on one’s guard at all times to avoid becoming a victim of a scam. Below are some tips and strategies that you can use to help you identify and steer clear of scams before they wreak havoc in your life.
- First and foremost, always be skeptical. Know that you are constantly at risk of becoming a victim of a scam, and approach any unsolicited email, text, or phone call with wariness.
- Be wary of any unexpected requests, especially those asking for immediate payment or personal information.
- Never click on links or download attachments from suspicious emails or texts.
- Use strong, unique passwords and multi-factor authentication.
- Be mindful of the information you post on social media and other online platforms, as it could be used to help scammers target you more effectively.
- Verify requests by contacting people or institutions directly through official channels, rather than using numbers or email addresses provided by a caller/sender.
- Be especially skeptical of any request to pay for anything using gift cards, cryptocurrency, gold, or prepaid debit cards.
- Resist the pressure to act quickly. Legitimate businesses or governmental entities will give you time to make a decision. Take your time, think critically, and consider discussing the situation with people you trust.
- If you do fall victim to a scam, report it to the FTC and local law enforcement.
Scams are unfortunately a part of everyday life, and they are becoming increasingly sophisticated with the help of technological developments. However, by being aware of the risks that scams pose and understanding how many scams are conducted, we can significantly reduce the chances of being victimized by this scourge. Please be vigilant, and remember that you are always a target!
1 In 2024, $16 billion of losses were reported to the FBI due to internet scams, while $12.5 billion in losses were reported to the FTC. The FTC estimates that total losses attributable to scams, including unreported crimes, may have been as high as $158 billion in 2024.
https://www.fbi.gov/news/press-releases/fbi-releases-annual-internet-crime-report
This article is prepared by Pekin Hardy Strauss, Inc. (“Pekin Hardy”, dba Pekin Hardy Strauss Wealth Management) for informational purposes only and is not intended as an offer or solicitation for business. The information and data in this article does not constitute legal, tax, accounting, investment or other professional advice. The views expressed are those of the author(s) as of the date of publication of this report, and are subject to change at any time.