OPINION — A new Gallup poll combined with a new Federal Trade Commission (FTC) estimate of fraud losses show that criminals are stealing tens or hundreds of billion dollars from 21 million Americans annually. The perpetrators are mainly foreign organized crime gangs. The rate of fraud is skyrocketing, according to US government statistics.
A whole-of-government campaign to combat the scourge of scams targeting consumers can turn the tide. A potential model is the comprehensive strategy announced by the UK in May 2023. The problem is multifaceted and requires cooperation from many US government agencies, so the White House should lead a coordinated effort to coordinate government, regulators, and industry players–including tech firms, telecom companies, and banks. The Intelligence Community has a vital role to play against this foreign threat. The proceeds from scams are being used to fuel transnational organized crime, including modern slavery, human trafficking, drugs, and terrorism. And artificial intelligence could soon “turbocharge” fraud and scams, in the words of FTC Chair Lina Khan.
Up to now, most commentators have described the number of US scam victims as being perhaps 600,000 to 800,000 annually, since those were the number of people who reported dollar losses to the FTC and FBI, respectively, in 2022. The question has always been: how to count those who don’t report?
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Stop Scams Alliance, a nonprofit dedicated to combating scams, worked with Gallup to conduct the first Gallup poll to address scams. The October 2023 poll of 1,009 Americans revealed that 8% of those polled said that they had been scammed in the last year, which translates to roughly 21 million US adults. In other words, roughly 57,500 Americans a day are losing money to criminal scammers, and only about 3-4% of victims report to the government.
What about losses due to scams?
An October 2023 FTC report used two methodologies to account for the widely known problem of under-reporting of scam losses. It concludes the actual total of fraud losses ranges from what the FTC called a “very conservative” $20.5 billion estimate to as high as $137.4 billion. (The lower figure assumed 100 percent of people who experienced losses of $10,000 or more reported their loss, which is almost certainly not true given the new data from Gallup.)
Losses in the $100 billion range would mean that consumer scam losses are equal to the annual revenue of companies like UPS, Citigroup, or Bank of America. And losses are skyrocketing—the FBI says that reported fraud losses have increased nearly four-fold since 2018.
Who are the perpetrators?
Tech-based scams are mainly perpetrated by foreign organized crime gangs. According to British government research, most fraud has an international component, and organized crime plays a significant role. “There is… evidence showing direct links between fraud and other organized crime, such as modern slavery, human trafficking, and drugs.” The proceeds from this criminal enterprise have also been used to fund terrorist activity, according to the Royal United Services Institute.
At least some fraud is being conducted by state-backed hackers. The FBI has seen North Korea’s state-backed hackers attempt to acquire cryptocurrency through fraud and cyber crime.
According to law enforcement agencies, scammers are located in countries such as:
India. “Call center” and “tech support” scams primarily emanate from call centers in South Asia, mainly India, according to the FBI.
West Africa, especially Nigeria. Interpol in 2023 said that the Nigerian Black Axe crime syndicate and similar groups are responsible for the majority of the world’s cyber-enabled financial fraud. According to statements from the FBI and Department of Homeland Security, Nigerian criminals also are engaged in the growing wave of “sextortion” scams that target teens in the US.
Jamaica. The FBI participated in closing down several multi-million-dollar fraud rings in Jamaica last year, but many more remain in operation.
Southeast Asia. According to the UN High Commissioner for Human Rights, criminal gangs have forced hundreds of thousands of people in Southeast Asia into participating in scams. At least 120,000 people in Myanmar and roughly 100,000 in Cambodia “may be held in situations where they are forced to carry out online scams.” Laos, the Philippines, and Thailand were also cited among the countries of destination or transit for tens of thousands of human trafficking victims.
China. Many of the gangs in the lawless corners of Southeast Asia are controlled by Chinese crime bosses. According to the Myanmar country director for the United States Institute of Peace, “These are largely Chinese crime groups which China, for years, did very little to check.”
In June 2023, Interpol issued a global warning on human trafficking-fueled fraud, saying scams are now a “global human trafficking crisis.” Interpol said that human trafficking to fuel scam operations was especially prevalent in Southeast Asia and is now being seen in West Africa. Interpol issued an Orange Notice–a global warning of a serious and imminent threat to public safety.
Scams a national security threat?
In view of the new data that shows foreign organized crime gangs have hijacked our technology and are now defrauding Americans at industrial scale, the US should follow the lead of the British government, which has declared: “The volume of fraud, its capacity to undermine public confidence in the rule of law, and its potential negative effect on the UK’s financial reputation, means it should be considered a national security threat.”
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There are many national security threats, so why should scam attacks on US consumers be elevated to that level? Because such designations are important for focusing bureaucratic attention. The White House’s National Cybersecurity Strategy appropriately calls ransomware attacks a national security threat, for example, because of the foreign origin and the “billions” in losses that they cause.
We need a similar White House-level strategy to combat the rising tide of tech-based fraud that is being perpetrated mainly by foreign organized crime, costing our economy tens or hundreds of billions. The new strategy should include clear authorities, enhanced public-private partnership, enhanced inter-government cooperation, broader information sharing, and sufficient resources to tackle the problem.
Today, cyberattacks on consumers receive little attention from the US government. The US government does not measure the extent of scams in its crime surveys, for example, something the British government has done since 2018. And, unlike countries like Australia and the UK, the US lacks a centralized database of fraud reports, so the government does not know how many reports it receives from victims. In the words of Peter Drucker, “You can’t manage what you can’t measure.”
The US Intelligence Community has an important role to play. The British strategy emphasizes a massive enforcement and intelligence push. The UK is launching a new National Fraud Squad with over 400 new specialist investigators, making fraud a priority for the police, and deploying “the UK Intelligence Community…to relentlessly pursue fraudsters wherever they are in the world.” The goal: to move from reactive law enforcement to proactive “intelligence-led disruption” of organized fraud gangs.
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