Elder abuse, AI deepfakes and TikToks: 2024's fraud trends

December 13, 2024 11:00 AM

TikTok users react to a trend that spun up on the platform over the weekend, with users claiming they got free money from Chase by depositing bad checks and withdrawing the money before the check bounced.

In 2024, the overall rate of fraud targeting both consumers and financial institutions decreased, but at least for consumers, these schemes became more costly. It's a continuation of trends from recent years in which fewer people and institutions suffer fraud losses, but the losses that do occur are more costly overall.

Beneath these top-line fraud figures, however, are more specific and troubling trends. For example, even as fraud has decreased overall, financial exploitation of seniors (including both fraud and theft) has gained salience with regulators and states that are looking to tamp down on it.

The past year also yielded some notable headlines featuring fraud and scams. In February, an inspector general report provided details about how a pig butchering scam hastened the failure of a regional bank. Then, in September, Chase found itself trending on TikTok as word of a supposed glitch allowed people to magically add money to their bank accounts — so long as they committed check fraud.

Here's a look back at the year in scams and fraud.

Chase coped with fraud going viral on TikTok

A form of check fraud known as check-kiting went viral on TikTok in early September, with JPMorgan Chase customers recording themselves writing a bad check, depositing it at an ATM, then withdrawing cash before the bank could bounce the check.

The scheme was portrayed as a glitch rather than a crime, creating the misunderstanding through seconds-long video clips that customers engaging in the practice would get to keep the money. Other videos showed lines at Chase ATMs of people supposedly looking to try the viral trend themselves.

The same week, Chase suggested it would start referring cases of check fraud to law enforcement, and in October, the bank sued at least four customers who had staged the largest heists while the trend was hot.

Regulators, banks continued focus on check fraud

Chase was far from the only bank that suffered from check fraud in 2024. In fact, a large share of check fraud is driven not by social media but by mail theft.

An analysis by the Financial Crimes Enforcement Network released in September indicated that, during a six-month period, banks reported 15,417 instances of mail theft-related check fraud, from 841 financial institutions, amounting to $688 million in reported suspicious activity.

CEOs and chief risk officers at small banks have been sounding the alarm for several years about rising check fraud and specifically a big jump in counterfeit checks. Losses from check fraud are approaching debit card levels, according to the Federal Reserve's annual risk officer survey, and the number of reports of check fraud nearly doubled from 2022 to 2023, according to Fincen data.

Last week, Federal Reserve Gov. Michelle Bowman concurred, saying at an executive leadership conference put on by the Missouri Bankers Association in Kansas City that regulators need to revisit some of their regulations covering check fraud, particularly as it concerns smaller banks being defrauded by checks that originate with larger institutions.

Elder fraud also became a focus

Mature woman feels confused experiencing difficulties with laptop usage

Regulators also sounded the alarm this year on elder financial exploitation, which includes both fraud committed against seniors and theft committed by family, friends or other loved ones against the elderly.

In April, Fincen released an analysis calling attention to a scourge of financial exploitation against elderly people after it received more than 155,000 suspicious activity reports on the matter over a one-year period.

The analysis follows up on a June 2022 advisory from the agency on what it calls elder financial exploitation, which is the illegal or improper use of the funds, property or assets of someone 60 years of age or older. In the year following that advisory, financial services companies (mainly banks, according to Fincen) reported $27 billion had been tied up in actual or attempted transfers relating to elder financial exploitation.

Some states have responded to the scourge by proposing or passing laws forcing banks to do more to help victims. These laws either permit or require financial institutions to report suspected fraud to adult protective services and law enforcement agencies, to hold or block transactions that appear to be part of an elder fraud scheme and to train employees and educate older customers about the signs of fraud.

This month, federal regulators issued their own reminder to banks about what they can do to fight elder fraud, emphasizing the multiple levels of scrutiny and accountability banks face on the matter.

Lawmakers took notice of pig butchering

A report released in February by the Office of Inspector General for the Federal Reserve and Consumer Financial Protection Bureau detailed how Shan Hanes, the CEO of Heartland Tri-State Bank, had fallen victim to a type of investment fraud known as pig butchering, which led his bank to fail during the summer of 2023.

American Banker detailed how these scams work. In summary, pig butchering scams are long cons in which a fraudster gradually builds the trust of a victim before introducing a fraudulent investment opportunity, which is often made through a fake cryptocurrency trading platform.

In September, a House subcommittee discussed the scam with expert witnesses during a hearing, at which lawmakers also pitched ideas for potential legislation to redress pig butchering and similar schemes. Some of the proposals would merely tweak existing laws; others would introduce significant changes in bank liability for fraud losses, mirroring new regulations being implemented in Europe

AI developments drove deepfake fraud

Face recognition with facial scan in phone. Identification and verification to unlock smartphone. Deep fake technology. Man using cellphone. AI mobile tech and biometric id authentication. Data access

AI continued to make headlines this year, and in November, Fincen issued an alert that deepfakes —images, videos and audio files that have been skillfully altered (often with the help of AI) to appear legitimate — were playing a larger role in fraud that targets banks and credit unions.

While no data exists to quantify the financial impact of deepfakes on U.S. banks and credit unions, anecdotal evidence and warnings from law enforcement suggest they pose a major threat. Last year, the FBI, the National Security Agency and the Cybersecurity and Infrastructure Agency released a joint report documenting the impacts deepfakes can have on various organizations.

Bad actors are actively exploiting deepfake technology to defraud U.S. businesses and consumers, according to Fincen Director Andrea Gacki.

Video games presented novel fraud risks

In April, the Consumer Financial Protection Bureau released a report on the inadequacies in consumer protections that video game makers provide to players, particularly against scams and account theft. The bureau also warned about data collection practices it says publishers can use to "take advantage of players' proclivities to entice more spending."

In the report, the bureau cited a 2019 paper that analyzed 13 patents about in-game purchases; the paper found the systems studied "optimize offers to incentivize continuous spending," potentially exploiting vulnerable players such as adolescents and problem gamers — without the promise of refund entitlements.

Lawmakers scrutinized banks over Zelle fraud

In August, Sen. Richard Blumenthal, D-Conn., Elizabeth Warren, D-Mass., and Rep. Maxine Waters, D-Calif., proposed legislation in the Senate and House that aimed to protect customers who are tricked into initiating a payment to a bad actor.

The month prior, Senate Democrats, in a report led by Blumenthal and in an accompanying hearing, argued that banks that own and operate peer-to-peer payment network Zelle should do more to help fraud and scam victims.

In October, American Banker published an analysis of fraud on payment apps like Zelle. While data comparing fraud on the major payment apps is scant, the data that is available suggests Zelle is a less popular target for scammers and fraudsters than competitors like Cash App, Apple Pay and the now-discontinued Google Pay.