Home » News & Events » Here’s Why You Are Constantly Fighting Off Scammers
Freakonomics Radio podcast by Stephen J. Dubner
For those who want to take a deeper dive into the behavioral economics of scams.
Transcript excerpt:
Let’s hear from someone at the F.T.C.
DAFFAN: My name is Kati Daffan, and I’m an Assistant Director at the F.T.C.’s Division of Marketing Practices, which is where we really run the fraud program at the Federal Trade Commission.
In the 1990s, as part of what was called Project Telesweep, the F.T.C. started collecting data on telemarketing fraud. Today, it collects data on scams of all types, and works with other government agencies to find and prosecute scammers. Last year, there was a 25 percent increase in scam theft compared to the year before.
DAFFAN: We are seeing such large increases in reported consumer losses to fraud. And the primary driver of that is with investment, romance, and imposter scams.
So how much money is being scammed? The F.T.C. compiles a variety of data sets — from complaints they receive directly; also from the Better Business Bureau, and from state attorneys general, and so on. They also try to account for underreporting. And so, Daffan estimates, in 2024, in the U.S.:
DAFFAN: Between $31.3 billion and $195.9 billion was lost to fraud. If we make a really conservative assumption, we get $10.1 billion lost by older adults and $31.3 billion overall. But if we assume instead that what we’re seeing in our database only reflects 2 percent of losses from consumers who lost under $1,000 and 6.7 percent of losses for consumers who lost $1,000 or more, that’s when you get the estimated loss of $195.9 billion. It’s really astronomical.
And here’s Marti DeLiema [professor at Minnesota’s School of Social Work] again.
DeLIEMA: Scams absolutely ruin the lives of millions of people. They also erode our trust. They erode our trust in legitimate communication, in systems that we need to rely on, and in each other. DUBNER: I’m really glad you bring that up. That was something that drew me to this idea in the first place. ‘Cause my feeling is that if you have to read every single email you get — or answer every phone call or judge any in-person meeting — through this filter of, I may be being taken advantage of in some way, I mean, my reaction is just to say, well, I don’t want to read any emails or get any phone calls or meet anybody. And when we look at the data in the U.S. in what’s called social trust over the past 40 or 50 years, it really has declined a great deal. And I do wonder if there’s any way to connect the loss of social trust to the amount of scammery, whether it’s the newer, digital versions or the older in-person. DeLIEMA: People have done surveys on people who have experienced fraud and do find that there’s a diminishment in social trust and interpersonal trust. The issue is that it’s hard to know the timing. Were these people entered into this survey as being not as trusting to begin with, or did the scam actually cause them to lose their trust? And that’s hard to separate without good longitudinal data. DUBNER: So what share of financial fraud committed against Americans is done by overseas perpetrators. DeLIEMA: I don’t have numbers on the exact proportion, but the vast majority of scams are perpetrated by transnational criminal organizations. DeLIEMA: The romance-to-crypto scam is often, unfortunately, called the pig-butchering scam. DUBNER: Ah yes, pig butchering. DeLIEMA: What happens is a person might get a random text message like, hey, how’s it going? Or are you coming to the barbecue this weekend? And some of us — again, not most of us, but some of us — might say, Oh, I think you have the wrong number. Who is this? And then it might lead into just some interaction, very friendly. Then maybe after quite a few text messages — these are long cons, right, these don’t happen overnight — the criminal might say, oh, by the way, my uncle is trading in this new cryptocurrency. He’s let me bring in a few friends. Do you want to get in on it? I can help you download this app. And these scam centers also have app developers. So they can make really legitimate-looking investment apps that make it look like your crypto investment is going up and up and up. And it’s when you actually try to take out that cash you realize that it’s all smoke and mirrors, and the money is gone. The other troubling thing is many of these scammers come back at their target pretending to help them recover their funds. So they might pretend that they’re a local law firm or that they are a federal government agency. DUBNER: Oh, I have to say it, that’s a really clever thing to do. DeLIEMA: One thing we can’t forget is how much capital these criminal organizations have amassed. So they do have funds to pay marketing teams and to do A-B testing on messages. It’s more sophisticated than most people know. I mean, these scam organizations have attorneys, they have H.R. departments. The scammers have to meet quotas. It is organized like a legitimate business. They use mass marketing tactics. But I think it’s getting more and more tailored. With the tools that A.I. affords us, and scammers, they can do more kind of background research, especially on high-value targets. DUBNER: On individuals, you’re saying. DeLIEMA: On individuals. DUBNER: When someone gets scammed, is it inevitably, to some degree, their fault? I’m not a victim-blamer, but I’m just curious whether some of the scamming is so good that literally anyone — vigilant, smart, disciplined — etc., could still fall prey. DeLIEMA: There are scams that are literally so good that they could fool any of us. DUBNER: What are the best? DeLIEMA: Some of the best take advantage of existing problems with our slow bureaucracies, poor customer service. Let’s say you get a text from your bank that says, did you make this purchase? It says you bought an Apple computer or something. So, of course, a wise, scam-literate person would say, “I’m pretty sure I didn’t purchase an Apple computer, and this is probably a scam, but let me call my financial institution. And I’m not going to be foolish and click the number that appeared in the text message, I’m going to go on the website and I’m going to call their actual number.” So here’s the thing. Bank call centers are so busy that you often hear a message that, “We will save your place in line, just click 1, record your name, and we’ll call you back when it’s your turn.” Scammers know this. So what will they do? They’ll wait 30 minutes after they sent that text message, and call you. And they will have faked the caller ID. So it will say Chase Bank, U.S. Bank, Bank of America — whatever the bank that they initially pretended to be. And ask you questions and confirm your identity. They’ll probably have information about you already. They might have your full Social Security number, your name, your date of birth. And it works. And that would work for many of us. DUBNER: Once again, I am not unimpressed. I mean, it’s a business and they can be pretty good at the business, plainly, yeah? DeLIEMA: Yes. And privacy is a myth. Our information is out there and it is available to the highest bidder. So we should expect that criminals will know our names, they’ll know our Social Security numbers, they’ll know our addresses, they’ll know our mother’s maiden names. And it just makes it so difficult to be able to parse what is real and what is fake.
DeLIEMA: Scams absolutely ruin the lives of millions of people. They also erode our trust. They erode our trust in legitimate communication, in systems that we need to rely on, and in each other.
DUBNER: I’m really glad you bring that up. That was something that drew me to this idea in the first place. ‘Cause my feeling is that if you have to read every single email you get — or answer every phone call or judge any in-person meeting — through this filter of, I may be being taken advantage of in some way, I mean, my reaction is just to say, well, I don’t want to read any emails or get any phone calls or meet anybody. And when we look at the data in the U.S. in what’s called social trust over the past 40 or 50 years, it really has declined a great deal. And I do wonder if there’s any way to connect the loss of social trust to the amount of scammery, whether it’s the newer, digital versions or the older in-person.
DeLIEMA: People have done surveys on people who have experienced fraud and do find that there’s a diminishment in social trust and interpersonal trust. The issue is that it’s hard to know the timing. Were these people entered into this survey as being not as trusting to begin with, or did the scam actually cause them to lose their trust? And that’s hard to separate without good longitudinal data.
DUBNER: So what share of financial fraud committed against Americans is done by overseas perpetrators.
DeLIEMA: I don’t have numbers on the exact proportion, but the vast majority of scams are perpetrated by transnational criminal organizations.
DeLIEMA: The romance-to-crypto scam is often, unfortunately, called the pig-butchering scam.
DUBNER: Ah yes, pig butchering.
DeLIEMA: What happens is a person might get a random text message like, hey, how’s it going? Or are you coming to the barbecue this weekend? And some of us — again, not most of us, but some of us — might say, Oh, I think you have the wrong number. Who is this? And then it might lead into just some interaction, very friendly. Then maybe after quite a few text messages — these are long cons, right, these don’t happen overnight — the criminal might say, oh, by the way, my uncle is trading in this new cryptocurrency. He’s let me bring in a few friends. Do you want to get in on it? I can help you download this app. And these scam centers also have app developers. So they can make really legitimate-looking investment apps that make it look like your crypto investment is going up and up and up. And it’s when you actually try to take out that cash you realize that it’s all smoke and mirrors, and the money is gone. The other troubling thing is many of these scammers come back at their target pretending to help them recover their funds. So they might pretend that they’re a local law firm or that they are a federal government agency.
DUBNER: Oh, I have to say it, that’s a really clever thing to do.
DeLIEMA: One thing we can’t forget is how much capital these criminal organizations have amassed. So they do have funds to pay marketing teams and to do A-B testing on messages. It’s more sophisticated than most people know. I mean, these scam organizations have attorneys, they have H.R. departments. The scammers have to meet quotas. It is organized like a legitimate business. They use mass marketing tactics. But I think it’s getting more and more tailored. With the tools that A.I. affords us, and scammers, they can do more kind of background research, especially on high-value targets.
DUBNER: On individuals, you’re saying.
DeLIEMA: On individuals.
DUBNER: When someone gets scammed, is it inevitably, to some degree, their fault? I’m not a victim-blamer, but I’m just curious whether some of the scamming is so good that literally anyone — vigilant, smart, disciplined — etc., could still fall prey.
DeLIEMA: There are scams that are literally so good that they could fool any of us.
DUBNER: What are the best?
DeLIEMA: Some of the best take advantage of existing problems with our slow bureaucracies, poor customer service. Let’s say you get a text from your bank that says, did you make this purchase? It says you bought an Apple computer or something. So, of course, a wise, scam-literate person would say, “I’m pretty sure I didn’t purchase an Apple computer, and this is probably a scam, but let me call my financial institution. And I’m not going to be foolish and click the number that appeared in the text message, I’m going to go on the website and I’m going to call their actual number.” So here’s the thing. Bank call centers are so busy that you often hear a message that, “We will save your place in line, just click 1, record your name, and we’ll call you back when it’s your turn.” Scammers know this. So what will they do? They’ll wait 30 minutes after they sent that text message, and call you. And they will have faked the caller ID. So it will say Chase Bank, U.S. Bank, Bank of America — whatever the bank that they initially pretended to be. And ask you questions and confirm your identity. They’ll probably have information about you already. They might have your full Social Security number, your name, your date of birth. And it works. And that would work for many of us.
DUBNER: Once again, I am not unimpressed. I mean, it’s a business and they can be pretty good at the business, plainly, yeah?
DeLIEMA: Yes. And privacy is a myth. Our information is out there and it is available to the highest bidder. So we should expect that criminals will know our names, they’ll know our Social Security numbers, they’ll know our addresses, they’ll know our mother’s maiden names. And it just makes it so difficult to be able to parse what is real and what is fake.
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