Highlights on Banking Scams: The Most Common Types & How They Function

Home » Funds Recovery Blog » Highlights on Banking Scams: The Most Common Types & How They Function

Have you ever been the victim of a banking scam? Perhaps while trying to connect and find love, buying a pet, or simply shopping online? Unfortunately, scamming is all around us in many banking forms, and scammers can use numerous methods to trick people into giving up sensitive information like bank account numbers and passwords in such scenarios. Thus, it is always recommended to do a reality check and watch out for bank fraud increasing now more than ever. Now, what exactly is a bank scam? Criminals frequently use bank frauds to gain access to our personal and financial information. It is described as a fraudulent attempt to access a customer’s finances and assets and is regarded as a criminal act in many jurisdictions. In simpler words, scams in the banking business occur when someone impersonates a bank official to obtain money or other assets from a financial institution or its customers.

Since when did banking become so toxic? Perhaps it is the result of the growing power of digitalization. As the real world approached more towards the digital world in the coronavirus pandemic, self-seeker hackers found a chance to conduct fraudulent activities like these. According to the Federal Trade Commission, In 2020, 2.1 million scam reports were reported by people. In fact, take the ever famous Madoff Scheme as an example; the largest documented Ponzi scheme in history and the first to be conducted on an international scale. The system ended up wiping out nearly $65 billion in fictitious wealth. It is said to be one of the most significant losses experienced by the bank market! Actually, Madoff was an American financier, known professionally as “Bernie,” who perpetrated the largest Ponzi scheme in history, scamming thousands of investors out of tens of billions of dollars for at least 17 years. 

He was skilled in electronic trading and served as chairman of the Nasdaq in the early 1990s, among other positions. Coming to the point, Bernie Madoff was a money manager who was implicated in one of the largest financial frauds in history, the Madoff Ponzi scheme. According to most estimates, as mentioned earlier, his Ponzi scheme defrauded thousands of investors out of tens of billions of dollars over decades. Many factors contributed to investors’ faith in Madoff, including his ability to present a credible front of respectability, his high but not astronomical returns, and his claim to be using a legitimate strategy. As of December 2018, the Madoff Victims Fund had distributed more than $2.7 billion to 37,011 Ponzi scheme victims throughout the United States and other parts of the world. Insane, right!?

We don’t want you or your loved ones to miss out on the countless benefits and conveniences that banks provide, but we want everyone to keep secure in this ever-changing technological environment. So, sit back, take a cup of coffee, and learn about the most prevalent bank frauds and the preventative actions you can take to avoid them. Happy Reading! 

guy on suit

A Rollercoaster Ride from Older Times to The Modern World: The Rise Of Banking Scams

Do you ever wonder how we got to this position when it comes to banking scams? Banks have been fighting these scams for almost a century, and the fight is still ongoing! In fact, it is rising now more than ever! Take Check scams as an example; they have existed for as long as there have been checks. Scammers fake checks, pose as account holders to cash checks, steal checks, trick individuals into providing them, and more. How clever!

MICR Intervention

What created another layer of the scam was Magnetic Ink Character Recognition (MICR) on the checks. What happened was that this ink made automatic sorting possible and decreased the amount of time needed for a check to clear. As it increased the popularity of checks to the highest levels, so did scams because scammers began buying MICR printers and became skilled in using them. 

ATMs Come Into Existence 

Apart from these, Automated teller machines (ATMs) scams have also become ubiquitous in recent decades, from bank lobbies to shopping malls to gas stations. As of 2022, there are more than 2.2 million ATMs worldwide. People use these virtual currency dispensers without thinking because of their widespread availability. They never consider the possibility of things going wrong. 

This is perhaps because, unfortunately, things are not always as they seem at the ATM. Criminals steal debit card information and personal identification numbers (PINs) from unwary ATM users in most ATM fraud. This confidence system comes in many forms, but they all rely on the uninformed participation of cardholders. One popular technique begins when a bank customer swipes their debit card in the device that opens the entrance to the ATM vestibule, which is commonly located in a bank’s inner doorway. Because most people are unaware of exactly what this magnetic reader should look like, fraudsters can detect a counterfeit device that scans and copies card information on the exterior door without being noticed by clients.

atm transaction

Even Donating Isn’t Safe!

Today people usually donate around holidays which the scammers take advantage of. As it might be the holiday season, they pressure you to contribute, and if you don’t, you feel guilty. They may thank you for a donation in the past even if you don’t remember doing it to seem legit. However, please remember that real charities accept donations all year round, and if you don’t remember giving any, you probably have not. In addition to this, scammers may sometimes say they are collecting donations for your local firefighters, veterans, or police. They can emotionally trap you into believing that they are sending care packages to service members. Nevertheless, whatever the situation may be, do not just give; instead, call your local police or fire department and ask them if they are collecting money or not. In fact, the Ukraine war has led to so many banking scams! 

Lost money to online fraud? We will recover your funds !

You are just 2 steps away from a free case review !
Step 1 Step 2

    I can provide the documentation

    We only process cases of more than $5000

    The Pandemic Vs. Banking Scams

    It’s true that scammers adapt their techniques and find new ways to steal as the world evolves with advancements in technology. 

    The pandemic has offered excellent conditions for any banking scam to spread during the last two years. It could be the result of a shift in people’s everyday behavior, such as the shift to remote working, increased home deliveries in the world of e-commerce, and, most notably, the abrupt shift of banking transactions onto digital channels as branches closed and banks shifted their services to digital media. According to Synovus, social distancing has resulted in a massive growth in online buying, resulting in a $105 billion increase in consumer expenditure by 2020. Scammers took advantage of the situation and stole millions of dollars by making fraudulent purchases using bogus information, unapproved credit cards, gift cards, and digital wallets. Businesses were saddled with the bills when the payments were eventually rejected and returned.

    December 2020 stated that 80% of respondents had witnessed increased fraud. They were either victims or knew someone who had been a victim. 90% of respondents predicted a rise in the future year. As a result, by the end of 2021, bank scams had increased by 72 percent. Although the global banking system is currently facing several issues, maybe due to the emergence of the Covid 19 pandemic, the problem of expanding internet scams began long before that. These issues have only worsened, and history shows that scams spike during major economic downturns.

    Continue reading to learn about the most common banking scams and what you can do to protect yourself and avoid them from occurring in the first place.

    Skimming Scams

    When devices unlawfully installed on ATMs, POS terminals, or fuel pumps collect data or record cardholders’ PINs, this is known as skimming. The information is used by criminals to generate phony debit or credit cards, which they then use to steal from victims’ accounts. Annually, skimming costs financial institutions and consumers more than $1 billion. Unbelievable! 


    How do they work?

    Skimming is the illegal reproduction of data from a credit card’s magnetic strip. When a debit or credit card is stolen or lost, the fraudster can read the information on the magnetic strip or use the card online by entering the data. Scammers cannot withdraw cash without the card pin, but they can use the card to make contactless payments if the function is enabled. An RFID scanner may also scan contactless cards through bags in busy areas like cities and public transportation. Additionally, certain stores and merchants have been accused of exploiting customer bank information by copying credentials when completing a purchase.

    Anyone who uses their credit or debit card at ATMs, petrol stations, restaurants, or retail outlets is vulnerable to card skimming. A skimmer is a device that gathers card numbers and is mounted on card readers. Scammers will eventually recover this information and use it to make false purchases. Before swiping or inserting a card, you may typically detect skimmers by doing a short visual or physical inspection.

    Thus, skimmers are most commonly found in ATMs and gas stations; however, they can also be found in retail stores or restaurants. A small camera is sometimes placed in an ATM to record cardholders entering their PIN. Fake keypads installed over a real ATM keypad can also be used to steal PINs.

    Types of Skimming Scams

    ATM – The Simplest Of All

    Fraudsters gain a person’s debit card number by putting an illicit card reading device on the ATM. Furthermore, thieves employ a camera to record the individual’s PINs.

    Due to the difficulty of getting inside ATMs, ATM skimmers are occasionally used to cover existing card readers. In most cases, the attackers also install a concealed camera in the area to record personal identification numbers or PINs used to access accounts. The camera might be hidden inside the card reader, on top of the ATM, or even in the ceiling. Some crooks go so far as to place phony PIN pads over actual keyboards to capture the PIN without the need for a camera.

    debit cards
    Credit Card

    Credit card skimming allows fraudsters to make minor changes that go unnoticed by the cardholder. When paying for a meal at a restaurant, for example, a staff may obtain your credit card number and use it to make a series of small charges from the restaurant and withdraw cash from the till, all of which will go unnoticed by management.

    Red Flags to Watch Out for When it Comes To Skimming Scams 

    Although skimming devices might be difficult to detect, a visual and physical investigation can help you identify one. Check for alignment concerns between the card reader and the panel beneath it before using an ATM or gas pump. Skimmers are frequently used to cover arrows in panels or to place on top of the actual card reader, making it stand out at an awkward angle. Look for variations between the card reader and those at a nearby ATM or petrol station.

    A security tape or sticker should be applied to the cabinet panel of gas pumps. Don’t use the card reader if the tape appears to be ripped or damaged because it could have been tampered with. Moreover, look inside the card reader to determine if something has already been entered; if so, it could be a tiny plastic circuit board that can steal card data. A physical examination of a card reader and keypad can frequently detect counterfeit equipment. Feel the area around the reader and wriggle it to determine whether it can easily fall out of place. The Federal Trade Commission provides a photo of a card skimming device on its website.

    Authentic card readers are built to last; therefore, if any portion of the reader can move around quickly, it was most likely placed illegally by a thief. If the buttons on an ATM’s keypad are too difficult to press, don’t use them; find another. Lastly, be cautious when paying for gas with a credit card or taking cash from an ATM. Pay for gas inside with the cashier and let them know there may be a skimmer installed at the pump if any portion of the card reader seems suspect. Avoid using ATMs not affiliated with a bank, such as those situated in convenience stores or pubs. Cover fingers with the other hand to block potential cameras while inputting a pin. Never hand over your card to a credit card cleaner which promises to be able to clean the magnetic stripe or chip to make it simpler to read. Scams designed to steal credit card information are shared.

    It’s nearly impossible for ordinary people to go a day without swiping, inputting, or purchasing something online. Because there are so many electronic transactions, it’s critical to guard against identity theft frauds like phishing and skimming because your credit or debit card information can be taken everywhere, from gas stations to ATMs to internet shopping! 

    money transfer

    Card Not Received Scams

    When a bank sends a customer a new or replacement card, it is intercepted somewhere along the road. It is prevalent in shared residences when the post is not securely secure upon delivery (when you share a mailbox). 

    If the card issued is new, the PIN code should be sent separately, but this will not prevent a scammer from using the card for contactless or internet payments. Card not received fraud is more difficult to detect because the victim may not realize the card is gone at first.

    How do ‘Card Not Received’ scams work?

    Card-Not-Received Scam is a type of credit card fraud in which the consumer does not physically present their credit card to the retailer during the fraudulent transaction. It can happen when you purchase online or over the phone. Because the merchant cannot directly examine the credit card for evidence of possible fraud, such as a missing hologram or an altered account number, it is theoretically more difficult to prevent the scam.

    When a scammer acquires a cardholder’s name, billing address, account number, three-digit security code, and card expiration date, they are likely to commit Card-Not-Received Scam. Without obtaining the physical card, these details can be stolen online. Credit card data is most typically stolen in card-not-present fabrication through online phishing or dishonest staff stealing a business’s customers’ credit card information. It also happens less frequently as a result of merchant database hacks.

    The merchant bears the loss when card-not-present fraud happens. This form of fraud can significantly impact a merchant’s bottom line, especially in retail settings, where profit margins are typically low. However, in card-present fraud, the credit card issuer frequently bears the loss rather than the merchant. According to credit card terms and conditions, the cardholder is not liable for any fraudulent charges incurred through card-present or card-not-present fraud.

    Many cases of attempted Card-Not-Received scams can be detected with sophisticated technology. Credit card firms, for example, have procedures for detecting fraudulent credit card purchases based on the account holder’s usual card activity. However, a sort of card-not-present fraud known as online shoplifting or friendly fraud is difficult to detect. In this situation, the criminal will purchase online or over the phone, receive the goods, and then submit a dispute with the credit card company, claiming that the goods are defective or never arrived. The merchant must repay the dishonest customer after the issuer initiates a chargeback.

    checking the market price

    E-commerce Causing a Surge In Card-Not-Received Scam

    The advent and expansion of internet purchasing have been blamed for the surge in this particular scam. We agree that online purchases are a convenient way to shop. However, this convenience comes with significant risk as it becomes confusing to determine the identity and genuineness of the person you are dealing with. 

    Card not received and e-commerce is also linked with another type of bank fraud known as an overpayment scam. Basically, you are likely to become a victim of an overpayment scam if you provide services or sell things online. With the growing influence and power of e-commerce, people have been attracted to the trend of online shopping and payment on the internet market. Unfortunately, in an attempt to be the best and to achieve instant success and popularity, companies tend to become non other than what is known as; scammers. One should understand that online shopping comes with benefits but at the same time with a significant risk of forgery and scamming. Such scamming has a brutal impact on the victim and almost always has to do with placing the victim at a financial disadvantage.

    How to protect yourself from these scams?

    To ensure you don’t fall into the trap of such scams, report them as soon as possible. Also, one of the most effective ways of avoiding having your bank account or other personal information compromised is to be proactive in controlling who has access to your information. Even though the potential scams described here are particular to banking, they are part of a more significant phenomenon known as identity theft. Because your bank accounts serve as the conduit via which you access and interact with so many elements of your financial life, scammers are ready to take advantage of any opportunities to exploit any vulnerabilities associated with your financial transactions.

    Scammers are getting more skilled every day as the world evolves to get hands-on your dollars. Follow steps like shopping on secure websites and shopping with honest customers, avoiding public WiFi, and using strong passwords to prevent them from happening in the first place!

    Phone Bank Fraud

    This sort of financial fraud, like online banking fraud, tries to persuade the victim to give over personal information or transfer money to another account. The fraudster would usually try to convince the victim that they need to relocate money to protect their possessions. They may even invent fictitious offenses and demand that the target pay fines for them. Scams involving telephone banking are getting increasingly popular. The con artists do not defraud their victims online, but rather over the phone.

    man with phone

    Is It Really Your Bank Calling?

    Scammers will pretend to be your bank, a store, a utility provider, the police, or even the government to gain your trust. Scammers can readily clone a bank’s phone number using number spoofing technologies, so you can’t rely on caller ID alone. They frequently obtain background information about you from social media, data breaches, or phishing messages to make the conversation more convincing. Apart from this, you get a call from someone claiming to be from a reputable organization, such as your bank or the police. They warn you that your bank account or payment cards have safety or security issues. You must take immediate preventative action, which usually entails confirming your personal login information. However, the person on the other end of the line is a fraudster, not your bank or card issuer. You may also be asked to hand your cards to a ‘bank’ or ‘police’ courier to ensure they have been stopped or provided evidence. 

    The Online World & Phone Bank Scams

    Phone Bank Scams may target you if you sell something online, as a business, or through classified advertisements. In most cases, the fraudster will contact you, make you an offer that is frequently reasonably attractive, and then demand money via credit card or check. They will be for a sum more considerable than the price that has been agreed upon. The fraudster will contact you to express regret for the overpayment and provide a fictitious explanation. You can be told that the additional money was provided to pay the agent’s fees or extra shipping expenses by the con artist. Alternatively, they might claim they made a clerical error when writing the cheque. The fraudster will then ask you to refund the excess amount, or they will ask you to transfer the sum to a third-party account on your behalf. They will ask for this in the form of an online banking transfer, a preloaded money card, or a wire transfer such as one made through Western Union. When you check their bank account, you learn that their cheque has bounced or their credit card stolen or forged. 

    Online sales, mainly through classified websites, are a contemporary twist on this scam. The fraudster appears to have received payment for a more extensive amount than agreed upon by issuing a bogus receipt of payment through services such as PayPal. The scammer will claim that the money is being kept until you send in the additional funds that have been requested. If you send any money, you will not be reimbursed. Even if you have already sent the ‘sold’ item, you will be unable to retrieve it. A minimum of the scammer’s actions will have been to waste your time and prevent you from accepting any legitimate offers on your property for sale.

    For example, in the all-too-popular secret shopper scam, the artist convinces someone that they have been hired to be a personal shopper for a bank. Here, the scam artists instruct the victim to send money through that institution, and if they do this, they will be compensated for the money they sent us, a ‘secret shopper’. However, after they wire the funds, the other part disappears, and the victim never gets their money back. Consumers have suffered mentally, physically, and emotionally due to banking scams. Devastating!

    Banking Scam

    Red Flags & Steps to Stay Away from Phone Bank Scams

    • The caller does not give you enough time to think, tries to interrupt your conversation with a family member or acquaintance, or is persistent and makes you feel uncomfortable.
    • For fraud reasons, the caller requests that you move money to a new account.
    • They call to inquire about your 4-digit card PIN or online banking password. This is a fraud, even if they want you to provide it to them by touching the phone keyboard rather than stating the digits out loud.
    • They want you to withdraw money and give it to them to keep safe.
    • They may claim you are a victim of fraud and send a courier to your house to retrieve your cash, PIN, payment card, or checkbook.
    • A bank or credit card firm will never urge you to transfer money from one account to another unfamiliar, so hang up right away.
    • If you believe the call is genuine and want to contact your bank or card issuer, call the number listed on your bank statement or other bank documents – or on the back of your card – NOT the number provided by the caller or the one you were contacted from.
    • Never provide a caller your money or personal information; instead, call back on a number you know is legitimate. Many scammers might counterfeit real phone numbers to deceive you into thinking they are genuine.

    Online Banking Scams

    According to the Financial Times, 7 out of 10 people now use internet banking, which they attribute to a spike in mobile banking and a tripling of online bankers in the last decade. This trend explains the increased chances for internet banking frauds, which is why they are so frequent today. Online banking fraud takes many forms, including phishing, virus attacks, catfish schemes, and clone websites. Given how much banking is done online, it’s hardly surprising that this is a common type of bank fraud. Convincing emails and websites are becoming increasingly common, making it more difficult for victims to defend themselves. In an online bank fraud example, a fraudster posing as a bank employee can inform the victim that their account has been compromised and that money must be transferred to another account. Posing as official bank workers, scammers may urge victims to ‘confirm’ their PIN, account password, or other information by email. If you are a victim of a banking scam platform and need help in getting your money back then please reach out to us to help you!

    What’s the History?

    Even though internet banking has been around since 1981, online banking scams didn’t fully take hold until around 2004. In the late 1990s and early 2000s, internet banking became popular. With more people using online banking, there are more prospects for internet banking scams. Apart from this, we have learned that there are several forms of banking scams. If we talk about phishing mainly, according to internet records, the first time it was recorded was on January 02, 1996. It occurred in a USENET newsgroup called AOhell. Gradually, with their random credit card number generating racket shut down, phishers did what they were experts at. They would send messages to users that would request to verify their accounts and give access to their billing information. Then, the problem intensified when AIM accounts came into existence through the internet, and then later came the concept of online payment systems. The first attack on online payment systems occurred in June 2001 on E-Gold. However, it was successful, and in late 2003 phishers registered numerous domains that matched legitimate sites such as Amazon and eBay. They used email worm programs to send spoofed emails to the customers where they were asked to visit scam websites and update their credit card information. Insane, we know! If you talk about email phishing, it took place in the 1970s and became standard in the 1990s. Since then, scammers have found many ways to steal people in the online world, such as through fake email addresses and data breaches. The highest amount lost was $47 million. However, online scamming didn’t end with email phishing and online payments; they included phone scams too, which originated in the 1980s. Along with these website hacks, password theft, spyware, and other similar scams on the internet increased at an alarming rate.

    digital wallet

    How Phishing Gets You Hooked Into An Online Banking Scam?

    In its literal meaning, phishing is an example of social engineering attack often used to steal user data such as login credentials and credit card numbers. The scammer often masquerades themselves as a trusted entity and traps the victim into opening an email or a text. Phishers frequently use emotions like fear, urgency, and curiosity and are constantly innovating to seem more sophisticated than ever,

    According to the FBI’s Internet Crime Complaint Center Report, phishing is an ongoing fraud that caused victims more than $48 million in losses in 2018. 

    Now, how does it work? Basically, the scammer will send you an email message that appears to be from a reputable source, such as a bank, social networking site, or online store, for example. You should not respond to the email message. The communication attempts to trick you into disclosing important and sensitive personal data, such as passwords, credit card numbers, and bank account information, to the message’s sender. For example, you can be sent to a website that appears to be authentic but was created solely to collect your personal information. Fake emails are frequently written in a hurry and with a sense of urgency. Watch out for red flags such as misspelled words, poor grammar, urgent requests, threatening financial consequences, and logos that don’t seem right. To determine if an email is authentic, open a new tab and navigate directly to the company’s official website; without clicking on any of the links contained within the suspected email. As a general rule, never click on links in these emails, react to them, seek to unsubscribe from them, and never provide personal information.

    Online Banking Frauds In 2022

    Scammers are continuously taking advantage of the rise of technology and ease of access to private information using social media and other methods to identify their targets. They can quickly get to know their victim’s relatives’ names, birth dates, addresses, phone numbers, and locations and use this information to develop a detailed, personalized phishing scam. Recently, a madison couple lost $80,000 to a scammer who pretended to be their grandson. Technology allows these scammers to “spoof” their phone calls to their intended victims. You may be wondering what spoofing is? It is when the number that appears on caller ID is not valid. For example, if a scammer knows your phone number, they can make a call to your family member or friend that appears to be coming from your number.

    Another common way to phish friends and family members is to use social media. According to the Better Business Bureau, scammers have turned to Facebook Messenger as a means of contact. They are hacking people’s accounts on Facebook and scamming their family members and friends for money, usually via prepaid gift cards or wire transfers. In 2018, there was a case of a woman who became a victim of a Facebook grant scam and lost $8,000. In this scam, the hacker claimed to be the victim’s wife and told her that she was eligible for a grant of $120,000 but would have to pay an amount of $8,000 in advance through a gift card. After the verification via a channel other than Facebook, she found that her wife knew nothing about this, and the whole story was a scam.

    Along with this, scammers call their victims, impersonate their family and friends, and say they are in trouble that requires money to fix. For example, flat tires, legal risk, requesting bail money, or medical emergencies. The victim is then asked to send cash, money orders, or is sent to purchase gift cards and provide the serial numbers to the scammer. This process happens very quickly, not giving the victim time to think through what is happening. Usually, the money is already gone when the victim realizes something is wrong. Even worse, victims are often too embarrassed to tell anyone what has happened. However, this should never be the case, and you should report and take action as soon as possible!

    mobile banking

    Protect Yourself From These Dangerous Types Of Banking Scams!

    You should be aware of the various types of payment scams and how to prevent being a victim by now. If you or a loved one is ever a victim of such a scam, contact a recovery agency as soon as possible. Please don’t be discouraged; they can also advise you on protecting yourself against fraud and what steps to take. Please don’t be too hard on yourself; your mental health should be your top priority. You are deserving of the finest!

    If you have encountered a banking scam and are worrisome about what to do? Reach out to the Global Payback expert team of recovery specialists and we will aid you in recovering your stolen wealth from scammers. 

    Lost money to online fraud? We will recover your funds !

    You are just 2 steps away from a free case review !
    Step 1 Step 2

      I can provide the documentation

      We only process cases of more than $5000

      We do understand that you’ve already been scammed online and that you’re naturally afraid of paying online. This is why we do offer a free case review, and won’t charge anything if your case isn’t qualified. Please do your part of the deal, and submit your case only if you truly intend to proceed with the recovery process.

      Get a free consultation!