Fraud in Canada is reaching levels never seen before with millions lost every year to scams, from investment frauds to impersonation schemes. While financial institutions and law enforcement agencies warn consumers to remain vigilant, the impact on Canadians is devastating.
In Canada, consumers reported losing $638 million to fraud, up 10% year over year. Industry observers know that this figure is dramatically under-reported as often people are ashamed to admit to being scammed or believe reporting to be futile. In fact, a 2023 State of Scams in Canada report conducted by the Global Anti-Scam Alliance (GASA) reported a staggering $13 billion in losses over the previous 12 months which equates to 0.5% of Canada’s GDP that year.
With the financial services industry investing continually, one wonders how this trend continues to grow. The fact is that with strengthened authentication measures and more advanced fraud detection using machine learning & AI, the fraudsters are having a harder time penetrating the armour at big financial institutions. They’ve instead turned to the weakest link in the payments chain – the consumer.
You see a story in the news nearly every day:
• In Halifax, a man was scammed out of $400,000 after being convinced by a woman on social media to invest in what appeared to be a legitimate cryptocurrency platform. Fraudsters used a fake investment app to gain his trust, only for him to later discover his funds had disappeared entirely.
• In Ontario, over 126 victims lost approximately $739,000 due to a “grandparent scam” targeting seniors – posing as police officers and lawyers. 15 of the victims were scammed multiple times. Thankfully at this point, police have arrested 14 suspects linked to this case.
In my experience as a practitioner, I learned scam victims come from all walks of life. It may start simple. First you are interrupted by someone saying they are from your bank, your accounts are being attacked and your life savings are at risk. They seem to know a lot about you – things only a bank should know. You are now focused on that call. You may be in a state of shock. The person on the phone says not to worry, they will help you, but you must act fast to keep your money safe. Before you know it, you are under their spell and start to follow their instructions; log in, receive and enter one-time-passcodes, or send money to a fraud email address to ensure your limits are reached and the fraudsters can’t take any more from you that day.
Maybe you think it wouldn’t happen to you. But could it happen to your parent, your grandparent, your friend? $13 billion of fraud losses says it does.
The fraudsters are organized, professional, and frankly very skilled at separating Canadians from their hard-earned money. That $13 billion, that 0.5% of GDP, should be going to support our families, our future, and grow our economy, not to fraudsters.
What’s worse is that because Canadians are being duped into sending the money directly, they will quickly learn that they are liable for those losses.
Globally, there is a movement towards protecting consumers from those scam losses. In the UK, regulatory pressure has come to bear after significant consumer outrage and in Australia, a broad collaboration among industry players is bringing reform and shared accountability.
Momentum for legislative response in Canada is most certainly paused with attention focused on the changing political landscape as well as economic threats from abroad; but focus is sure to return as consumers demand help from their elected officials. There is an opportunity now for financial institutions to set the agenda and aggressively reduce consumer losses to scams before being legislated to do so.
Where can we start?
1. Banks must continue to push for cross-industry collaboration among social media, telecom, and financial services to secure the end-to-end ecosystem.
2. Meanwhile, in the near term, financial services firms know their clients and how they behave. Banks must leverage AI, machine learning models, and behavioural biometric information to help detect scams and protect consumers that are under the influence of fraudsters in real-time.
3. Further, banks must monitor financial inflows, not just outflows to identify and disable mule accounts. This will disrupt the flow of illicit funds and increase the friction in money movement for fraudsters.
Strengthening fraud controls at banks has resulted in fraudsters preying directly on consumers who are often ill-equipped to identify and prevent themselves from becoming victims. The losses are still hitting Canadians, just more directly. The war against fraud will not be won through incremental detection and response and relying on liability shift to consumers. In fact, it will only increase the odds of a reactive legislative response.
Join the discussion
Kevin Purkiss, former Vice President, Fraud Management, at Royal Bank of Canada will join us on Thursday, March 20 at BioCatch Threat Talk Live in Toronto to share his perspectives on the growing threat landscape in Canada and the need for change. Learn more about the event today!
