Romance scams, particularly in the form of sextortion, have experienced a sharp increase, with Moody’s identifying 1,193 new entities and individuals globally with potential connections to these types of frauds in 2024, marking a six-year high.
These scams have become an increasing concern for financial institutions, as criminals often attempt to launder the funds generated through such fraudulent activities via the traditional financial system, putting banks at risk of reputational damage and substantial fines.
The data shows a 14% rise in new romance scam profiles compared to 2023, emphasising the growing scale of the issue. This follows a surge in scam activity during the global lockdowns of 2020, with profiles increasing by 57% in 2021. The United States remains the largest contributor, accounting for 38% of new scam profiles, followed by Nigeria, India, and the UK.
Richard Graham, director in Moody’s Compliance & Third-Party Risk Management team, commented on the dangers posed by romance scams, stating, “Romance scams often use shell companies so that it doesn’t look like money is going overseas.”
He added that, “Heightened risk requires heightened scrutiny. To help protect customers from losing money to sophisticated romance scams like sextortion or financial grooming scams, banks have several mitigation strategies such as understanding their customer and their transactional behaviour, especially if the funds are potentially going to a shell company.”
Moody’s helps financial institutions combat this growing issue by providing crucial data that includes negative news stories, sanctions, government watchlists, and politically exposed persons (PEPs). Financial institutions can use this information to enhance their due diligence processes and ensure compliance with anti-money laundering (AML) and combating the financing of terrorism (Moody’s, romance scams, FinTech, sextortion, banks, financial risk, money laundering, 2024, risk profiles, anti-money laundering, AML, reputation riskCFT) regulations.
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