Canadians lose hundreds of millions to fraudsters each year — Can a new bank alliance prevent that?

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Jan Martin always thought she was “careful enough” in handling potential scammers. The project manager in her mid-30s frequently changed her passwords and rarely picked up calls from unknown numbers. But her confidence levels took a hit last summer when she lost $3,000 to fraudsters in the space of just a few minutes.

Martin (her name has been changed to protect her identity) used her credit card to purchase flight tickets online for her mother one afternoon. An hour later, she received a text with a verification code from what she thought was her bank. That was immediately followed by an automated call that said the bank had “an important message” about her purchase and she needed to type in the verification code to listen to it.

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She initially ignored the call and went back to work, but the phone wouldn’t stop ringing. After it rang for the fourth time, she excused herself from a meeting and answered the call because she was worried her bank hadn’t processed the transaction. After thinking about it for a while, she decided to follow the call’s instructions and type in the verification code.

“That was the mistake,” she said. “Usually, scam calls come once a day and I don’t pick up and that’s it. But they were repeatedly calling me, which made me think maybe there’s an issue with my purchase. Also, the calls and the text arrived after I bought the flight tickets; I thought this was a verification process. I was also in a hurry because I had to get back to my meeting.”

With the help of the verification code, the scammers, who somehow already had her card’s details, logged in to her account and stole $3,000. While she got her money back from the bank, she was astonished at how “convincing and powerful” scammers could be.

Canadians have lost at least $530 million to fraud in 2022, according to the Canadian Anti-Fraud Centre (CAFC), a group jointly run by the Royal Canadian Mounted Police, Competition Bureau Canada and Ontario Provincial Police. That’s a 40 per cent increase from the $383 million stolen in 2021 and a 221 per cent jump from $165 million in 2020.

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These are the reported figures, so the actual loss is likely a lot higher since only five per cent to 10 per cent of all fraudulent activities are reported, according to the CAFC. The Canadian Bankers Association (CBA), which represents about 60 banking institutions in Canada, estimates the actual annual impact to be around $11 billion, or 0.53 per cent of the country’s gross domestic product.

The steep increase in losses since 2020 compelled the CBA to organize a roundtable with 71 leaders from different sectors in July, which led to the creation of an anti-scam alliance that includes organizations from both the public and private sectors.

Most banks and telecom companies have their own methods of preventing fraud, but they have all worked in “silos,” Nathalie Bergeron, the CBA’s spokesperson, said, so the goal is for companies to “share technology and data so that we can better coordinate our efforts.”

The alliance, which includes law enforcement as well, had a meeting in July and is exploring ways to stop scammers.

For example, one of its goals is to figure out if a particular sector has effectively tackled fraud and if its approach can be expanded across other sectors. Since a lot of fraud originates on digital platforms, the alliance is also exploring how other sectors can support these platforms to prevent scams by taking down false advertisements, among other actions.

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The CAFC is also exploring ways to better educate Canadians and spread awareness about the issue, and potentially find a way to amplify messages linked to frauds across sectors.

Spreading awareness could be crucial since the CAFC said scammers are now targeting all age groups, which is a significant change from the past.

In 2021, CAFC said fraud reports from individuals aged 60 and above outnumbered all others. But there was a “drastic shift” in 2022. That year, reports by individuals aged 20 to 49 outweighed reports by those 50 to 89.

“Fraud operations are developing capacity to target all internet users with creative forms of fraud,” the CAFC’s annual report for 2022 said. “Since younger age demographics are most likely to be engaged online … they become a primary target for internet-based fraud operations.”

The banks have spent about $120 billion fighting cybercrime and other security-related measures, the CBA said. Some banks, such as Royal Bank of Canada, provide scam alerts to inform customers about current activities.

For example, RBC in July provided details of a “card pick-up scam” in which individuals, especially older adults, receive phone calls from a fraudster pretending to be a bank employee.

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The caller tells people that their account and cards will have to be cancelled because there’s been some kind of fraudulent activity. They are then instructed to put their cards and PIN in an envelope and hand them over to a courier service arriving at their doorstep.

To gain the person’s trust, the caller will sometimes ask the individual to cut the card into pieces, but leave the chip on the card intact. Once the scammers receive the card pieces, they can tape them back together and use the card for purchases, RBC said.

Similarly, RBC in June described how scammers targeted commercial clients through counterfeit cheques delivered to RBC branches. These cheques come with instructions to deposit funds into the commercial client’s account.

Once the deposit is made, the fraudster pretends to be a legitimate customer and tells the client he accidentally made a payment in excess of an agreed-upon price. The victim is then asked to wire the difference to a different account. The victim loses money when the counterfeit cheque is returned.

Rumana Fayed (also not her real name), a newcomer who came to Canada in 2022, encountered something similar. She was hired by a fake florist as an online assistant back then and was asked to write random letters to clients for a couple of hours.

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By the end of the day, she was told to buy gift cards for the clients from a nearby store. She was told she would be emailed a cheque for $300 to cover the cost of the gift cards.

Unfamiliar with emailed cheques, Fayed had her doubts and called her bank, which told her that this is a method often used by scammers. Sure enough, her employer stopped replying when she asked them to pay cash.

While Fayed didn’t get defrauded, the data suggest many Canadians are increasingly getting duped. Bergeron at the CBA hopes the new alliance can bring a change.

“The key message is that we want to better protect Canadians,” she said. “To do that, we need to increase reporting so that we can better detect patterns.”

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