Bank impersonation scams rise with advancing methods

Bank impersonation scams are rising, as the line between real and fake fraud alerts has become increasingly blurred.

Bank scams are no longer easy to detect simply with a close eye and skepticism; they look and sound nearly identical to legitimate alerts. Fraudsters target victims through email links, text messages and convincing phone calls. This has all been true for decades, but using AI and learnings from past schemes, some fraudsters have become almost impossible to detect. 

“All the language is that of an actual bank person,” said Jennifer Pitt, a senior analyst in Javelin’s fraud and security practice. “They’re very nice. They don’t sound like they’re from a foreign country, or any of the typical red flags that we would get from scams 10, 20 years ago, and I think consumers are getting really confused about what is legitimate and what is not.”

Multiple banks have warned their customers about impersonation scams over the last few months. The Wisconsin Bankers Association put out a press release last week after they noticed a rise in bank spoofing, a type of fraud that makes a call appear as if it were from the bank itself, urging customers to watch for red flags and write safer checks.

But Pitt said lenders are contributing to the confusion, prioritizing less friction in verification over fraud prevention.

“They’re also starting to ask people for one-time passcodes over the phone, even when that same financial institution says, ‘We will never do that,’ they actually are,” Pitt said. “Now victims and all consumers are sort of saying, ‘Well, that was legitimate, now I think these are all legitimate,’ and they’re sort of equating all those correspondences with legitimacy rather than second guessing them.”

Text message scams have become more common, as they provide less information and thus fraud is harder to detect, Pitt said. But the WBA specifically drew awareness to phone call scams, which can have the same caller ID as the customer’s bank.

Last year, a Bank of America customer fell victim to a text message that was immediately followed by a phone call. A Minnesota Vikings linebacker was also deceived by a phone call earlier this year, which resulted in a loss of $240,000. 

AI has aided in the rise of impersonation scams as well, with tools like ChatGPT being used to create more convincing attacks.

“There’s not going to be some of the same red flags that people used to see, like a weird email address, or a different phone number, or the tone is off, or grammar errors and things like that,” Pitt said. “We’re not seeing that. What we’re seeing is very polished correspondence.”

WBA President and CEO Rose Oswald Poels also expressed her concern with the use of deepfakes and voice cloning, which would make phone call scams even more convincing, but she has not seen much of it just yet.

Gasan Awad, the senior vice president of enterprise fraud product management at PNC Bank, Chris Briggs, the chief product officer at Mitek, and Jay Leal, the chief information officer at Vantage Bank, voiced their worries about AI on a panel hosted by American Banker last week as well.

“I think that the tools are going to get cheaper and faster and easier to use. And these fraudsters have these marketplaces where they can share successes and sell prompts and they can sell tools,” Leal said. “As we make decisions about future investments and future tools that we’re going to employ, we do look at stuff like this and say, ‘Can AI beat this? Is this tool that we’re going to implement already obsolete because of the things that AI can do?’…We’ve got to develop better defenses around being able to combat this type of fraud.”

While the amount banks are spending on fraud has been rising each year, the financial burden often still falls entirely on scam victims. Some victims are fortunate to see just a fraction of money lost recouped, while in other cases, bank personnel stop listening once ‘scam’ is mentioned because it implies the victim technically authorized the transaction, Pitt said.

Poels said banks should not entirely absorb the cost of a customer’s decision. Yet there has been an increase in civil lawsuits against financial institutions related to fraud and scams, and customers are now changing banks if they don’t receive help, which may lead to a framework shift, Pitt said. 

But Poels and Pitt both agree that the best way to avoid a scam is to never give out personal financial information over the phone.

“If people just sort of say, ‘No matter what anybody is trying to say to me, I’m never going to give this out,’ that’s really the best way to prevent fraud,” Poels said.