Banks ask for help protecting customers from online romance scams

Banks ask for help protecting customers from online romance scams

The banking industry is asking the federal government and the social media industry for help to stop an escalating crisis that is costing Americans billions of dollars each year: online romance scams.

These digital crimes have increased since the pandemic as criminals pose as attractive partners and contact lonely Americans via social media.

“We really need help,” said Paul Benda, executive vice president of risk, fraud and cybersecurity at the American Bankers Association, in an interview with CNBC. “We need the social media companies to take down these people who are posting these things. We need law enforcement to try to prosecute some of these people. If you don't put a bad guy behind bars, that guy is going to keep doing what he's doing.”

Experts estimate that known cases of fraud amount to billions of dollars each year. Considering that many victims don't report their losses to anyone, the total damage could run into tens of billions of dollars a year, they say.

The romance scams are run by organized criminal gangs, often based in Southeast Asia, who set up fake social media avatars and use them to contact potential American victims. According to experts, their targets are male and female, old and young, highly educated and not.

The common theme is loneliness and a willingness to engage online. Once a victim responds to the message, the avatar operators begin a lengthy campaign – often hours of texting per day – to convince the victim that they have fallen in love with a real person. The psychological power of the relationship can unfold surprisingly quickly.

“Some people are addicted within a few weeks,” Benda said. “It's the real burning brightness of a relationship where the texting goes on constantly, all day and all night and they get into it.”

Once this psychological hook is set, the scammer turns the conversations into money. In some cases, they offer the victim a seemingly safe investment opportunity, or they prey on the victim's empathy and ask for money for an expensive but bogus medical procedure.

“Some scams I've heard about involve people literally raiding their bank accounts to send everything they have to the scammer,” Benda said. “They want to do anything for the person they love… And these are just evil people who take advantage of vulnerable people.”

The experts CNBC spoke to said social media companies should do more to throttle this kind of reach across their platforms and do a better job of taking down the big perpetrators.

They also recognized the value of regulatory changes that would allow financial institutions to talk to each other about vulnerable customers. Some victims may drain an institutional savings account to send money to a scammer, while the institution that manages their 401(k) retirement account is unaware.

Scammers often train the victim on how to obtain and transfer funds. And Benda noted that banks find themselves in a difficult position even if they suspect their customers are being defrauded.

“We have a legal obligation to give you access to your money, period. Therefore, we cannot prevent you from withdrawing money from your bank account. Not even if we believe that… it will destroy your life,” he said.

The experience can be emotional even for the bank employees who witness the fraud.

“We've heard stories where we met a bank teller who was sobbing… talking to a long-time customer, begging him not to do something like that, and in the end – no, we have to give him access to his money.” Benda said.

Banks generally do not reimburse a customer for romance fraud losses, Benda explained, because the customer transferred the money of his own free will. And compensating victims would likely just create a market that would attract more scammers.

Erin West, assistant district attorney in Santa Clara County, California, estimates that between $30 billion and $50 billion was lost to romance scams in 2022.

“That is an astonishing number. It’s huge,” she said, adding the caveat that coming up with an estimate may require some guesswork because victims may be hesitant to report the details of their own financial humiliation.

But West, who is part of a nationwide group of prosecutors trying to shed light on the problem, said the level of emotional devastation could be even worse. Discovering these scams can lead to loss of marriages, loss of careers, or a permanent change in financial situation.

“I have been in law enforcement for 25 years, committing sex crimes and committing murder, and I have never experienced the depth of despair that one feels when someone realizes that the life they had hoped for is over. “It's completely gone,” she said. “One day losing a marriage and every penny it has is traumatic for people.”

West explained that there is a very human reason why lonely people fall for these scams.

“This type of crime goes to the core of what we want in life. We want to feel loved,” she said. “And we want to have someone to come home to, even via text message, who loves us, understands us and thinks about us. And that’s exactly what they offer.”

“And then they give you the dream of not only being loved, but also feeling more financially comfortable than you ever imagined,” West said. “It’s easy to call it lust and greed, but what it really is is comfort on both levels.”

—CNBC's Bria Cousins ​​contributed to this report.