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Financial fraud has evolved significantly in the last decade, with scams emerging as one of the most pervasive and financially devastating forms of financial crime today. Unlike traditional fraud, which often involves unauthorized transactions carried out without the victim’s knowledge, scams rely on deception, manipulation, and social engineering to convince victims to willingly hand over their money.
Scams vs. Fraud: Understanding the Key Differences
At their core, scams and fraud are both forms of financial crime, but their execution and impact differ.
- Fraud (Unauthorized Transactions): A fraudster steals credentials or hacks into an account to carry out unauthorized transactions. The victim is typically unaware until after the fraudulent activity has occurred.
- Scams (Authorized Transactions Through Deception): A scammer tricks the victim into authorizing a transaction through social engineering, impersonation, or psychological manipulation. Since the victim “approves” the payment, financial institutions and FinTechs struggle to be able to reverse or dispute the transaction.
Scams are particularly difficult to detect because they exploit human behavior rather than system vulnerabilities. Traditional fraud detection models—designed to catch unauthorized access, stolen credentials, or synthetic identity fraud—fall short when it comes to identifying scams before they happen.
The Hidden Costs of Scams for Financial Institutions
Scams are surging worldwide, creating growing financial losses and reputational risks for banks, fintechs, and credit unions. While regulations in markets like the UK are forcing financial institutions to reimburse scam victims, accountability remains unclear in the U.S.—leaving banks to navigate the delicate balance between fraud prevention and customer protection on their own. Regardless of regulatory mandates, financial institutions must take a proactive stance, ensuring that their customers aren’t left vulnerable to fraudsters exploiting gaps in scam detection.
The Rising Threat of Scams: Why Financial Institutions Need a New Approach
Scam tactics are evolving at an unprecedented pace, and financial institutions must act before they become the next major target.
- Scam losses surpassed $10 billion in 2023, reflecting a growing crisis in digital fraud. Real-time payment networks, including Zelle, Venmo, and ACH, have made transfers faster—but also easier for scammers to exploit.
- Authorized transactions remain a blind spot for fraud teams, as traditional fraud tools are designed to catch unauthorized access—not scams that manipulate victims into approving payments themselves. By the time fraud teams detect an issue, funds are often unrecoverable.
- Regulatory scrutiny is tightening, with mandates like the UK’s APP Fraud Reimbursement rule requiring banks to refund scam victims unless they prove due diligence. In the U.S., FinCEN and CFPB are actively exploring stricter reporting requirements, increasing the burden on compliance teams.
With financial institutions bearing more responsibility—whether by regulation or customer demand—the need for proactive scam detection has never been greater.
A Three-Pronged Approach to Fighting Scams
Scams are evolving rapidly, requiring a multi-layered defense strategy that combines detection, prevention, and intervention. Unit21’s Scams Solution takes a three-pronged approach by:
- Validating unusual transaction patterns and deviations from a customer’s typical behavior to flag potential scams during an investigation.
- Preventing fraudulent transactions by analyzing and blocking high-risk recipients, including mule accounts and known scam rings.
- Leveraging IP intelligence, adverse media screening, and external fraud signals to stop scams at their origin.
By combining these three layers of protection, financial institutions can proactively prevent scams before they impact their customers.
Introducing the Unit21 Scams Solution: A New Approach to Scam Prevention
At Unit21, we believe that financial institutions shouldn’t just detect scams after they happen—they should stop them before they even occur.
Our Scams Solution is designed to provide real-time scam prevention by:
- Identifying and validating fraudulent financial behavior—spot unusual transaction patterns that indicate potential scams.
- Preventing fraudulent accounts from receiving funds with Counterparty Risk Monitoring—block high-risk entities and mule networks at the source.
- Strengthening fraud defenses with enriched IP intelligence—detect suspicious logins from VPNs, proxies, or known fraud networks.
- Deploying battle-tested scam rules instantly—implement prebuilt scam detection models for social engineering, romance scams, investment fraud, and more.
By integrating these capabilities into fraud teams' workflows, Unit21 empowers financial institutions to proactively stop scams—before victims lose their money.
Next, let’s dive into real-world scam scenarios and how Unit21’s Scams Solution solves them.
Detecting Social Engineering Scams: Protecting Customers from Fake Bank Calls
Scenario: Laura, a 67-year-old retiree, receives a frantic call from someone claiming to be her bank’s fraud department. The caller, using a spoofed number that looks identical to her bank’s, warns her of unauthorized withdrawals and tells her to move her savings into a "secure account." Panicked, Laura wires $15,000—only to realize later it was a scam.
How Unit21 can prevent this scenario.
- AI Agent identifies unusual behavior manifested in sudden wire transfers, flagging Laura’s transaction during the investigation process.
- High-Risk Transaction Alerts notify fraud teams of out-of-pattern behavior.
- IP Data Enrichment verifies if login attempts were made from a high-risk or foreign location before the transfer.
By catching unusual behavior in real-time, Unit21 prevents social engineering scams from devastating victims like Laura.
Preventing Fake Business Accounts: Stopping Lending/Investing Companies in their Tracks
Scenario: "FutureTech Solutions" is a fraudulent business disguised as a legitimate company, created to deceive financial institutions. The scammer opens a merchant account and uses it to carry out lending fraud schemes.
How Unit21 can prevent this scenario.
- Counterparty Risk verifies a business's legitimacy before onboarding by providing signals on known bad bank accounts.
- Adverse Media Screening flags businesses associated with fraud or suspicious activity.
- Ongoing Risk Monitoring continuously analyzes the business’s transactions, ensuring fraudulent activity is flagged even post-onboarding.
By identifying fake entities early, Unit21 helps financial institutions prevent fraud before it spreads.
Detecting Romance Scams: Stopping Emotional Exploitation Before It’s Too Late
Scenario:Emma, a single mother, meets “Mark” on a dating app. Over several months, Mark builds trust, claiming to be working overseas and needing financial help. Eventually, Emma sends him $20,000, believing they’re in love—only to discover he’s a scammer who has disappeared with her money.
How Unit21 can prevent this scenario.
- AI Agent spots suspicious, large-sum transactions to new recipients.
- Counterparty Risk identifies scammer-linked recipients, stopping romance fraud at its root.
Unit21 protects customers from emotional and financial devastation.
Stopping Pig Butchering Scams: Preventing Investment Fraud at Scale
Scenario:Michael is approached on social media by an “investment expert” who introduces him to an exclusive crypto trading platform. Encouraged by fake success stories, Michael deposits $50,000—but when he tries to withdraw his earnings, the site disappears overnight.
How Unit21 can prevent this scenario.
- IP Data Enrichment helps identify logins from known fraud rings, facilitating in the mitigation of fake investment scams.
- Transaction Monitoring identifies suspicious deposits without corresponding withdrawals.
- Counterparty Risk flags fraudulent bank accounts, preventing funds from reaching scam operators.
Unit21 empowers fraud teams to detect scam patterns early and stop bad actors before victims lose everything.
Why Unit21’s Scams Solution Stands Out
Unlike traditional fraud detection tools that rely on reactive investigations, Unit21’s Scams Solution is built for real-time prevention—stopping scammers before they succeed.
- AI-Powered Scam Investigation – Automatically uncovers unusual financial patterns that take significant effort for human agents to detect.
- Counterparty Risk & Data Enrichment – Flags known scam accounts and high-risk IPs before funds leave the system.
- Customizable Scam Rules – Deploy prebuilt or custom rules tailored to your institution’s risk appetite.
- Seamless Integration – Manage scam prevention alongside check fraud, ACH fraud, and other financial crime risks—all in one platform.
With fraud and scam management unified in a single system, teams can respond faster, minimize operational silos, and eliminate blind spots across all fraud vectors.
The surge in scams is a clear call to action—financial institutions and FinTechs need proactive, AI-powered defenses to stay ahead of fraudsters. With Unit21’s Scams Solution, fraud teams gain real-time detection, automated risk assessment, and seamless prevention tools to stop scams before they cause financial or reputational damage.
Want to dive deeper into how fraudsters operate and how you can stop them? Join us for our upcoming webinars:
- 🔍 How to Think Like a Scam Artist: Tackle the Rampant Surge Head-On – Gain insight into scammer tactics and how to outmaneuver them.
- 🛡️ Outsmart Scammers with Unit21’s Proactive Detection – Learn how Unit21’s Scams Solution can safeguard your institution and customers.
Don’t just detect scams—stop them before they happen. Register now and stay one step ahead!
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