In her 2009 hit single, Lady Gaga sings about being “caught in a bad romance” with an irresistible lover. Not unlike the songstress, nearly 70,000 US singles were entangled in a bad romance of their own in 2022: a romance scam.

The Federal Trade Commission’s (FTC) latest data reveals a heart-stopping $1.3 billion swindled by romance scammers in 2022. As lovelorn hopefuls of all ages continue to go gaga for online fraudsters, how can banks and credit unions better protect their customers? The answer lies in helping inform customers of the dangers – and in making optimal use of technology to detect romance fraud before the money’s been transferred, never to be recovered.

Romance Scams 101

In online romance scams, fraudsters craft fake identities to gain people’s trust and, ultimately, convince them to send money. Popular dating apps give scammers easy access to singles looking for love. Per Pew Research, about half (52%) of online dating users believe they’ve interacted with a would-be scammer while using their dating apps of choice.

But, as in years past, social media has proven the most lucrative place for fraudsters to find love interests to exploit. Among those who lost money, the FTC found that 40% were first lured by private messages sent on social media platforms like Instagram or Facebook.

Whatever the app or platform, virtual communication allows scammers to cast a wide net, sending many such messages – and wooing several targets simultaneously. Once Cupid’s arrow hits its mark, the fraudster spins a web of lies for weeks, months or sometimes years, pretending to share goals and interests while lavishing their marks with attention.

If the relationship feels too good to be true to the object of the fraudster’s affections, that’s because it is – until the one indisputable tell of all romance scammers is revealed: the ask for money.

Topping the FTC’s 2022 list of ruses, a quarter (24%) of scammers fabricated an emergency, requesting money to help themselves or a loved one suddenly sick, hurt or in jail. Eager to assist their beloved, the victim wires funds, sends gift cards or transfers the requested cryptocurrency. Only when the promised repayment doesn’t materialize does the swindled sweetheart catch wise to the scheme.

Despicably, the more the poisonous paramours insinuate themselves into their victims’ lives, the higher their potential gains. The median reported loss topped $4,400 in 2022, per the FTC, a troubling all-time high. 

Having a heart-to-heart with the financial services industry

As SAS’ Thomas French outlined last year, financial services organizations have a considerable part to play in protecting customers from crooked Casanovas and duplicitous Delilahs. His advice on how financial firms can bolster their safeguards remains just as relevant today:

• Education and outreach. You’d implore a trusted friend or family member not to ignore relationship red flags. Financial institutions are in a relationship of similar trust with their customers and therefore well-suited to educate them on the hallmarks of fraudulent digital courtships – ideally before they’ve been manipulated to ignore the warning signs. Internal education of staff is also crucial for quick intervention. Tellers and customer service representatives trained to spot such scams can readily intervene to protect customers.
• Setting limits. According to the FTC, victims sent more money to romance scammers via bank wire and cryptocurrency last year than by any other method. That makes money transfer guidelines critically important. Banks typically establish thresholds for daily and weekly transactions, with most financial institutions’ caps ranging between $1,000 and $10,000 per day, often depending on an account’s age. Financial institutions should also automate monitoring for the number of transactions conducted per minute, per day or per week. Too many transactions could trigger a check-in that saves a customer money and embarrassment, if not heartbreak.
• Integrate advanced rules – and advanced analytics. Intermixing seemingly basic rules can yield complex rules that bolster detection rates (e.g., a recent password change + a new payment to a new payee combined to trigger an alert). Automation and advanced analytics like AI and machine learning are crucial to stopping increasingly sophisticated scammers. Fraud scoring engines, digital identity affirmation, and the automated ability to affirm or decline transactions in real-time are strategies that can deter fraud of all kinds.

Looking at the bigger picture, banks’ anti-fraud technology investments can fit into a broader customer decisioning strategy that integrates customer on-boarding, credit risk decisions, anti-money laundering compliance, marketing engagement and more – the entire customer journey managed in a single, cloud-based platform.

Breaking up romance scams

You can hardly open a business journal or news website these days without seeing a new headline about ChatGPT and other advanced, natural language processing (NLP)-driven chatbots. Anti-fraud professionals cannot help but ponder how scammers may exploit generative AI in the future. How will criminals use it to craft more compelling and realistic profiles and correspondence, improve phishing campaigns, or impersonate family, friends and partners? And, importantly, how might professional fraud fighters apply the same advanced technologies to detect the telltale signs and better protect the vulnerable?

The industry cannot afford to ignore these questions, particularly as regulators have begun to rethink liability for consumers’ fraud losses on payment apps like Zelle.

Financial firms are already finding themselves on the hook for reimbursing romance fraud, at least in part – through the UK’s voluntary Contingent Reimbursement Model for example. Also in the UK, the Payments Systems Regulator (PSR) has proposed mandatory reimbursement of authorized push payment (APP) scams.

Many victims are understandably quick to decry that banks aren’t doing enough – and certainly, financial institutions want to do more. The sophistication of today’s romance scammers, armed with AI, means even the savvy among us can be fooled. A bank that intervenes to foil a fraud no doubt earns greater loyalty from the intended victim. With latest anti-fraud technologies, watchful eyes, and proactive training and awareness campaigns, financial firms can help break up these bad romances – and save their customers and the industry billions in the process.