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Neil Kumar 125x175Do You Have a Special Someone?

By Neil Kumar, CAMS, CGSS*, Assistant Vice President, Compliance

February 11, 2021

When greeting cards, oversized teddy bears and heart-shaped boxes of candy fill the shelves, you know that question is coming… “Do you have a special someone?”

Whether you perceive Valentine’s Day as a romantic occasion or a commercial exploitation, this question is vital. While it may seem prying, rest assured, my intention is not to intrude upon the innerworkings of your personal life. I mean to say, does your financial institution have an Anti-Cupid? Also known as the opposite of a match-maker.

Every financial institution needs an Anti-Cupid that acts as an unbiased observer and fraud super sleuth. A person that can spot the signs of your member being taken advantage of by a romantic interest that he or she has never met in-person. A go-to party for asking questions. An individual who is actively searching for potential fraud to protect your members, even when it might be necessary to protect your member from him or herself.

Romance scams (aka online dating scams or confidence fraud) are a common fraud scheme that you likely have heard about. But what makes them so alluring to fraudsters is the lucrative payout with minimal effort needed. That “Criminal Cupid” only needs social media, a dating app or website profile, stock photos, text/email communications, and time.

I have worked on cases where the Criminal Cupid has spent up to a year working a victim to emotionally manipulate them to build confidence in the relationship before asking for money. Normally, the amount of funds requested is small but will gradually increase as the relationship continues.

Even once your Anti-Cupid has spotted the fraud and advises the member-victim, they might find the victim simply does not believe it. The Criminal Cupid has committed so much time cultivating the relationship, it can be difficult to recognize the relationship is a farse. Frequently, the victim struggles to understand that Criminal Cupids are not monogamous and typically manipulate dozens of victims simultaneously. With time and experience, the fraudsters fine-tune their communication strategies to improve their financial gains. For example, fraudsters will use common pet names (e.g., Baby, Angel, Pumpkin, etc.) for all the victims instead of an actual name, give reasons why they cannot visit, and avoid face-to-face communication – all of which helps them avert getting caught by the victim.

While men fall victim, historical fraud investigations have shown that women over the age of 50 are the most targeted victims of romance scams. As times change, however, so do fraudulent trends. The ongoing COVID-19 pandemic has triggered a loneliness epidemic, and these feelings of isolation present new opportunities for fraudsters. Emotional vulnerability is the key to a Criminal Cupid’s success. Recent widowers, divorcees, and others going through hardship (e.g., COVID-19 social isolation) are more susceptible to emotional manipulation. Therefore, COVID-19 has increased the likelihood of other less-common populations falling victim, including younger adults.
So, how can your financial institution protect your members from romantic fraud schemes?

Step 1: Know Your Members

Get familiar with your members’ banking habits at your institution. Becoming aware of their practices will help you more easily identify potential red flags of romance scams and know when to ask questions. These indicators alone may not be sufficient to suspect fraud, but as more red flags are identified, it increases the probability of fraud risk.

Step 2: Know the Red Flags

What are the allusive red flags of romance scams? Here are a few. They might not be as inconspicuous as you may think.

  • A sudden change in payment patterns – does not typically request to send wire transfers, make large-dollar check deposits, cash withdrawals, or ACH receipt credits, etc.
  • Large home equity line of credit (HELOC) draw – outgoing payment request is funded by a HELOC draw and being sent to a new unknown beneficiary.
  • Payment purposes – purposes listed indicating customs fees, visa, plane ticket, fiancé/fiancée, boyfriend/girlfriend, oil rig, help come home, etc.
  • Payment destination –
    • Domestic – sudden wires being sent to different beneficiaries located in different states (e.g., Joe Smith in TX, ABC Hair Salon in PA, and Mary Cotton in AL).
    • International – wire being sent to one of the following countries high-risk for fraud identified by Alloya: China, Ghana, Hong Kong, Mexico, Nigeria, South Africa, Turkey, United Arab Emirates, or the United Kingdom.
  • Involvement of unknown third-parties – your member indicates funds will be forwarded to a final beneficiary not listed in the wire instructions.
  • Unrelated geographic surnames between parties – for international wires (e.g., John Fitzgerald sending wire to Eweka Addoh).

Red flag indicators should prompt your institution’s Anti-Cupid to ask your member questions regarding the payment request. Without question, asking questions can feel intrusive and uncomfortable. However, allowing fraud to occur and benefit a criminal will only lead to higher amounts of fraud attempts among your members and the community you serve.

Step 3: Ask Questions

Below are questions you might ask to help determine if a romance scam is involved with a payment request. You will see references to a “listed beneficiary.” It is important to be specific when talking to your member to avoid any confusion in case you are dealing with a situation where funds are going to be forwarded to a final beneficiary not listed on the wire instructions.

  • What is the detailed purpose for sending the wire? – Ask this question if the detailed purpose has not already been collected. In some cases, you might consider requesting supporting documentation for the purpose. Sometimes your member is instructed to not reveal the actual purpose for a wire. This can make it difficult to identify a romance scam red flag at first, but as the wire requests continue, you will notice inconsistences.
  • What is the specific relationship with the listed beneficiary? – This one is straightforward. Understanding the specific relationship helps a ton. You may find out that the beneficiary is a family member (e.g., a cousin, aunt, uncle, etc.), which is less risk for a romance scam.
  • How did you initially meet the listed beneficiary? – Criminal Cupids will typically find their victims from a dating website, app, or social media platform, then will move the communication away from the platform to email, text, etc.
  • How do you currently communicate with the listed beneficiary? – This would be a follow-up question to how they initially met. A transition to a different communication method is another red flag.
  • Have you ever met the listed beneficiary in-person? – If your member has never met the listed beneficiary face-to-face (physically, not via FaceTime or another virtual communication tool), there is a higher risk for a romance scam.
  • Does the wire involve any additional parties not listed in the wiring instructions (e.g., funds are being forwarded to another person)? – In past experiences with fraud cases, the involvement of an additional unknown party has typically resulted in identifying a fraud scheme. However, besides the fraud risk, you should consider rejecting the payment request due to potential sanctions risk involving the Office of Foreign Assets Control (OFAC). OFAC violations are strict liability, meaning regardless of fault or evasion an organization releasing funds involving a restricted party is liable to civil and/or criminal penalties. Therefore, you need to ensure you know who ultimately is going to benefit from a wire transfer.
  • What is your connection to [specific country]? – This is a question to ask when dealing with an international wire request, especially when there is a disparity between geographic surnames.

Asking a few questions can be very revealing and important, especially since most victims disguise the true reason for sending funds. Spotting a romance scam on an initial wire request can be difficult for that reason, but by collecting additional information from the outset, you will likely catch on much sooner to the fraudulent motives.

Real-Life Examples

Here are a few examples of additional information collected related to real fraud cases. This seemingly extraneous information is what enabled us to connect the dots to identify that a romance scam was involved.

  • An international wire was being sent to South Africa for a member with no history of sending wires. She was 72 years old and sending funds with a purpose of “money to boyfriend.” Through questioning, it was learned that she met the boyfriend online over a year ago. She said the boyfriend is in South Africa and trying to get home, but there is an issue with Customs. Customs will not let him board the plane without paying $7,000. The member refused to believe that this could be a romance scam.
  • With an initial wire request, the member stated the beneficiary was her daughter. After she successfully sent a second wire, we asked questions and discovered the money was being sent to her online “Army Boyfriend” and the funds were for his portfolio (assuming investments). He became unresponsive to her attempts at contact once the money was sent. The member misled the credit union, resulting in both wires being sent.
  • The member met a girl on an online dating site and after 4-5 months of emailing each other, he sent her money to travel to the U.S., pay for her VISA, and ship gold bars to him as a gift. China’s Customs stopped the woman from traveling with the gold, and the member sent more money to pay for her fines for trying to leave the country with the gold.
  • The member met a woman on a dating website. She is a surgeon in the military stationed in Afghanistan. He has been sending money to her and was told that she would send him a share of $5 million that she got from a king of a small country for helping save the life of one of his family members. He did not believe it was a fraudulent scam because she sent him pictures of herself in uniform.

The examples may seem a bit ridiculous. However, when emotional manipulation is involved, logic and reason begin to fade. Alloya has been tracking fraud attempts with wire transfers for over six years and at least 15% of fraud identified has involved romance scams. I say “at least” because there is a known correlation between age, median-dollar amount of fraud, and number of fraud loss reported. In other words, older victims tend to have high median-dollar fraud losses and are less likely to report a fraud incident. The Federal Trade Commission (FTC) provides an interactive dashboard titled Explore Age & Fraud Loss, using data collected from all fraud incidents reported to the agency.

Alloya has successfully prevented and recovered some fraudulent funds (29% of $5.2 million) for romance scams over the past years. As an aggregator of payments, Alloya has seen a wide variety of romance scam attempts, ranging from $100 to $500,000. However, to truly optimize fraud prevention and protect consumers, it requires active participation at every financial institution. Every proactive measure is worthwhile – whether through technology, staff and member training, or simple disclosures like, “If someone has advised you not to reveal the reason of your request and provide false information, there is a high chance that fraud may be involved.” Every bit of effort helps protect consumers and the community your institution serves. Finally, always keep in mind that Alloya is available to assist. You always have your members’ backs, and we’ll always have yours.

Neil Kumar can be contacted at neil.kumar@alloyacorp.org.

*CAMS: Certified Anti-Money Laundering Specialist
*CGSS: Certified Global Sanctions Specialist