Holiday fraud (and a new year), how can we prepare?

As the holiday season kicks into high gear, it’s not just shoppers and families preparing for festivities—fraudsters are ramping up their efforts too. 

In the latest episode of Good Question, we sit down with fraud prevention experts Dustin Eaton, a financial crimes professional at Seis who recently published an article with ACAMS titled “Holiday Scams to Watch Out for in 2024,” and Daragh McMeel, risk operations manager at Inscribe AI, to discuss seasonal fraud trends, scams to watch out for, and how businesses and consumers can protect themselves.

As many fraud fighters already know, the holiday season sees a significant spike in fraudulent activity: 

• During the 2022 holiday shopping season, nearly 12,000 victims lost over $73 million to scams like non-payment and non-delivery.
• An AARP report revealed that 80% of U.S. consumers encountered some form of fraud in 2023, with a major uptick during the holidays.
• TransUnion found that suspected digital fraud attempts surged 82% globally between Thanksgiving and Cyber Monday last year.

Why the increase? As Dustin put it: “Consumers are busy and distracted, making them prime targets for fraudsters who know how to exploit the seasonal rush.”

Top Holiday Fraud Tactics to Watch For This Season

From fake charities to account takeovers, Dustin and Daragh outlined some of the most common fraud tactics targeting businesses and consumers:

1. Account Takeover (ATO) Fraud:With higher volumes of online shopping, fraudsters are impersonating banks or companies to trick consumers into sharing sensitive information like security codes. Dustin emphasized: “Always double-check before sharing information—legitimate companies will never ask for sensitive data over the phone.”
2. First-Party Fraud: During the holidays, financial pressures lead to scams like chargeback fraud, loan stacking, and misuse of “buy now, pay later” services, where individuals exploit systems without intent to repay. “These schemes not only strain financial institutions but also make fraud harder to detect amidst the seasonal surge in transactions,” said Daragh. 
3. Holiday Sale and Shipping Scams: Fake e-commerce sites offering “too good to be true” deals or falsely advertising holiday sales are rampant. Daragh advised: “Check the URL carefully and stick to trusted retailers. Scammers can create incredibly realistic websites that are almost impossible to distinguish from the real thing.”
4. Gift Card Fraud: Fraudsters use stolen credit cards to purchase gift cards, draining their value before unsuspecting consumers can use them.
5. Fake Charities: Fraudsters tug on heartstrings with AI-generated websites and emails that mimic legitimate charities. Always verify organizations through trusted platforms like Charity Navigator or Charity Watch before donating.

Tips to Protect Yourself and Your Business

For consumers:

• Trust but verify: If something feels off, pause and confirm its legitimacy through official channels.
• Use secure payment methods like credit cards, which offer better fraud protection than debit cards.
• Strengthen passwords and enable multi-factor authentication (MFA).

For businesses:

• Invest in advanced fraud detection systems, such as AI-driven tools like Inscribe, which can detect unusual patterns in real time.
• Enhance phishing education for employees to reduce the risk of internal breaches.
• Tighten vendor verification processes—ensure data processors are ISO 270001 certified and AI vendors are ISO 420001 certified.

As Dustin succinctly put it: “Staying vigilant can save you a lot of money and heartache during the holiday season.”

The episode also touched on preparing for 2025’s regulatory changes. From stricter data privacy rules to increased oversight of digital payment providers, Dustin and Daragh urged businesses to invest in compliance training and proactive monitoring of legislative updates.

Want to dive deeper into these insights? Listen to the full episode of Good Question! 

P.S. Listen to the end of the podcast to hear our favorite holiday movies and the episode’s bloopers!

Sources cited: 

• Holiday Scams to Watch Out for in 2024
• FBI Warns the Public of Holiday Scam Trends
• Suspected Digital Holiday Shopping Fraud in U.S. Increases 127% Compared to Rest of 2022
• Report: AARP Warns Consumers that Holiday Shopping is Increasingly Riddled with Fraud