Banks ask for help protecting customers from online romance scams

The banking industry is seeking help from the federal government and the social media industry to stop an escalating crisis that’s costing Americans billions of dollars every year: online romance scams.

These digital crimes have proliferated since the pandemic, as criminals pose as attractive partners and reach out to lonely Americans on social media.

“We really need help,” Paul Benda, the executive vice president for risk, fraud and cybersecurity at the American Bankers Association, said in an interview with CNBC. “We need the social media companies to shut down these people that are putting these out there. We need law enforcement engaged to try and prosecute some of these folks. Unless you put a bad guy behind bars, that guy is gonna keep doing what he’s doing.”

Experts estimate that known instances of fraud amount to billions of dollars every year. Factoring in that many victims don’t report their losses to anyone, the overall losses could be in the tens of billions of dollars annually, they say.

The romance scams are run by organized criminal gangs, often based in Southeast Asia, that set up phony social media avatars and use those to connect to potential American victims. Their targets are male and female, old and young, highly educated and not, according to experts.

The common theme is loneliness and a willingness to engage online. Once a victim responds to the message, avatar operators launch into a lengthy campaign — often hours of texting each day — designed to persuade the victim that they have fallen in love with a real person. The psychological power of the relationship can take hold surprisingly quickly.

“Some people get hooked in within a matter of weeks,” Benda said. “It’s that really burning brightness of a relationship where the texts go on constantly, all day and all night and they get hooked into that.”

Once that psychological hook is set, the scammer turns the conversations to money. In some cases, they present the victim with a sure-fire-seeming investment opportunity, or they prey on the victim’s empathy and solicit money for an expensive but phony medical procedure.

“Some of the scams I’ve heard of, they literally have people draining their bank accounts, to send the scammer everything that they have,” Benda said. “They want to do anything for the person they love … And these are just evil people taking advantage of vulnerable people.”

The experts CNBC spoke with said social media companies should do more to throttle this kind of outreach over their platforms and do a better job of taking down the big perpetrators.

They also saw the value in regulatory changes that would allow financial institutions to talk to one other about customers who are at risk. Some victims may be draining a savings account with one institution to send funds to a fraudster, while the institution that services their 401(k) retirement account remains unaware.

Scammers will often coach the victim on how to access and transfer funds. And Benda noted…