The National Fraud and Scam Strategy Must Include Buy-In from All Major Players

During last week’s House Financial Services Committee hearing, “Fraud in Focus: Exposing Financial Threats to American Families,” a variety of expert witnesses testified to the complex nature of fraud and scams and the degree to which they are harming American citizens. According to testimony from Kate Griffin, Director of the Aspen Institute’s National Task Force on Fraud and Scam Prevention, “Every week, more than $2 billion is flowing out of American pocketbooks and into the hands of foreign criminal enterprises who use those funds to fuel other illicit crimes, including drug and human trafficking.”

While the Federal Trade Commission reports total annual fraud losses of $12.5 billion for 2024, this number is likely a severe underestimation. The lack of a tracking mechanism is just one part of the issue in our national approach to combating fraud and scams. As a report from the Government Accountability Office notes, “[t]here is no government-wide estimate of the money lost to scams, no common definition of scams, and no national strategy for combating them.”

Indeed, the approach is extremely fragmented. Not only do we lack a clear strategy, there is no clear path of assistance or resolution for the millions of Americans affected each year. A forthcoming R Street Institute paper on reform measures for the Consumer Financial Protection Bureau will explore its potential as a consumer reporting and resolution hub.

Fraud and scam threats come from nearly every direction, whether that be social media ads, spam text messages, or spoofed calls. The issue is international in nature, originating largely in Southeast Asia, where hundreds of thousands of individuals are forced to place phone calls and send text messages against their will. Most “sextortion” scams originate in African countries, while lottery scams primarily come from Jamaica.

Other well-known scams include fake toll violation notices; artificial intelligence (AI)-generated voice calls claiming to be family members in need of large sums of money; long, drawn-out pig butchering scams; and romance scams. Massive and rapidly growing, the online scam industry is alleged to be even larger than the global illicit drug trade.

Both the hearing and R Street’s research into the issue make it clear that a national strategy is required to properly combat financial fraud and scams. Considering the industry’s complex nature, that strategy must include buy-in from a broad collection of industry and government stakeholders, including:

• Social media companies
• Telecommunication companies
• Financial institutions
• Emerging technology players (including those involved in AI)
• Law enforcement
• Federal government agencies
• Members of the legislative and executive branches of federal government

Witness Ian Bednowitz, General Manager of Identity and Privacy at LifeLock, testified that “artificial intelligence is allowing [fraudsters and scammers] to industrialize fraud,” and acknowledged the importance of AI in fighting it. Other witnesses echoed this statement, noting the importance of having the best tools at our disposal rather than being hamstrung by burdensome AI regulations.

Finally, it is imperative that financial institutions be given the legal cover they need to share relevant data on fraud and scams (including attempts) with law enforcement and other relevant players. This requires a balanced approach with consumer privacy; however, current regulations do not properly protect financial institutions seeking to share this data.

These are a few small but meaningful ways in which the United States can begin to shape a national strategy against international fraud and scam rings. But in order to effectively combat the issue, a combination of deregulatory approaches and public-private partnership—including properly incentivizing key players to join the fight—is vital.