CeFPro Connect

Romance scams: The need for education, collaboration, & innovation
Romance scammers will wholly dedicate themselves to gaining a victim’s trust and abuse it for financial gain. Colin Parsons, Nasdaq Verafin’s Head of Fraud Product Strategy, explores the true human impact of romance scams and the need for education, collaboration, and innovation for effective prevention.
Colin Parsons
Colin Parsons, Associate Vice President — Head of Fraud Product Strategy, Nasdaq Verafin
Romance scams: The need for education, collaboration, & innovation

  • Romance scams and confidence schemes caused $3.8 billion in global losses last year.

  • Victims suffer immense emotional and psychological consequences, including mental anguish, grief, and social stigma.

  • Scammers use online platforms to establish false connections and manipulate victims into sending money.

  • Victims often believe in the genuineness of their relationships, making intervention difficult, and may unknowingly act as money mules.

  • Reporting these scams is challenging for victims due to feelings of violation, self-blame, and social stigma.

  • Financial institutions are crucial in preventing and identifying romance scams through vigilance and tactful inquiry.

  • Indicators of romance scams include unusual financial behavior and large, uncharacteristic transactions, especially via wire or cryptocurrency.

  • Implementing real-time analysis and consortium analytics can help detect and stop suspicious payments before funds are transferred.

  • Collaboration and shared intelligence among financial institutions are essential for effectively combating romance scams.

  • A unified approach and standardized data help institutions gain comprehensive insight into customer activity and develop robust anti-fraud measures.

  • Education, collaboration, and innovation are key to preventing and mitigating the effects of romance scams, and protecting potential victims.

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Romance scams and confidence schemes accounted for a staggering $3.8 billion in global losses last year. From my time working side-by-side with survivor and advocate Debby Montgomery Johnson, it is evident that the human toll inflicted by romance scams is equally immense — no statistics can capture the mental anguish and emotional consequences felt by its victims. Prevention starts with understanding the scale of the challenge and is driven by our industry’s collective action through education, collaboration, and innovation.

Unmeasurable: The human impact of romance scams

Romance scammers employ elaborate tactics, starting by establishing false connections with their victims through online platforms such as online dating sites or social media. What begins as an emotional bond soon spirals into a cycle of deceitful requests for funds, resulting in significant monetary losses and profound heartbreak for the victim. These scams often undermine a victim’s entire support system, as they may be wholly convinced that their relationship with the fraudster is genuine, making intervention highly challenging. In some cases, they act as unwitting money mules, moving funds for the fraudsters — without realizing they are laundering the profits of other crimes.

After discovering the relationship was a deception, people may struggle to come forward due to grief, social stigma, and feelings of violation and self-blame that are common among victims of fraud. The aftermath can result in severe psychological distress and even physical harm. 

The Need for education, collaboration, & innovation

“Talk to them if you get a gut feeling that something is not right. Don’t confront them, because that’ll shut down a victim so fast, they will walk out. They’ll go to another bank. Develop a relationship with them…  Have those open-ended questions where you start a dialogue.”

 – Debby Montgomery Johnson, Romance Scam Survivor
Working directly with customers, financial institutions are a crucial frontline defense against romance scams and other fraud schemes. The impacts of romance scams are significant, and your institution can play a key role in prevention. 

Learn to practice vigilance & tactful inquiry
Monitoring for signs that a customer is under the influence of a romance scammer can help uncover instances of potential exploitation at the earliest opportunity, leading to intervention that may be essential in protecting victims. These signs can be behavioral, such as a customer mentioning an overseas relationship with an individual they have never met, or financial, such as a client uncharacteristically using lines of credit or pulling from investments. Victims may also attempt to send large payments using wires or cryptocurrency — transaction channels that are often irrevocable and favored in romance scams. Tactful inquiry and open questioning are crucial, as victims may be reluctant to cooperate due to social stigma and manipulation by the fraudster.

Implement effective fraud controls
An effective financial crime management solution is paramount to prevent the financial and emotional consequences of romance scams. Romance scams are a type of Authorized Push Payment (APP) Fraud, whereby a legitimate customer is manipulated into transferring funds to a fraudster, who is posing as a genuine payee.

By deploying a solution that combines real-time analysis with consortium analytics to profile the sending and receiving accounts, financial institutions can interdict to stop suspicious payments before the funds are sent. 

Collaborate for action
Financial professionals are often the last line of defense against romance scams, one of the world’s fastest growing frauds — yet criminals leverage siloes within an institution’s walls, as well as between institutions to evade detection and proliferate their tactics.

Collaborative frameworks enable financial institutions to deploy solutions that leverage consortium data, shared intelligence, or responsible information sharing technology in concert to optimize their anti-financial crime efforts and gain comprehensive insight into customer activity. To stop romance fraudsters, financial institutions should embrace a unified approach that enables collective intelligence using standardized, consortium-level data to develop anti-financial crime analytics that provides a more complete picture of risk across transactions. Institutions should also consider regularly maintained adverse incident data sets that enable analysis and alerting on high-risk incidents, as well as messaging services that allow for secure private-private information sharing; Personally Identifiable Information related to financial crimes may be shared in jurisdictions where a regulatory safe harbor exists.

Education, collaboration, and innovation are crucial to prevent romance scams at the outset, halt ill-gotten gains, and safeguard the lives of potential victims. To learn more about the scope, scale, and impacts of this grievous crime, and why financial institutions and technology are crucial in uncovering romance scams, watch my discussion with Debby here.

Colin Parsons Bio

Colin Parsons spearheads the strategic development of technology solutions to combat fraud at Nasdaq Verafin. Throughout his time with the company, Colin has worked as a development team lead, software developer and in product marketing. Applying the knowledge gained through his roles and experiences, Colin is focused on using technology to solve the hard problems that are persistent within the fraud space.

Colin Parsons