Consumer Bulletin: Sometimes fraudsters are people we know

March 25, 2021

Canadians have good reason to fear getting scammed.

Nearly a quarter of the banking cases OBSI received in 2020 were related to fraud, making it the most reported banking issue of the year. According to the Canadian Anti-fraud Centre, fraud is on the rise. In 2020, Canadians lost $106.4 million to fraud compared to $96 million in 2019.

Many of these frauds and scams are perpetrated by criminals hiding behind false identities on the internet, and it seems these fraudsters are always figuring out new ways to steal people’s money. But what if the fraudster is a familiar face? What if they live with you or are your neighbour? It’s a disturbing thought. Unfortunately, too frequently we see cases that involve people who have had their money stolen by their family or friends. This is known as familiar fraud.

Familiar fraud victims lose more than money

Familiar fraud is especially difficult to deal with because its consequences include not just the loss of money, but also disappointment, betrayal and heartache. Often the victim is not aware of the fraud right away, and when they find out, they don’t even consider that someone they are close to has stolen from them. When they notify their bank about missing funds, the bank will investigate the situation and share their conclusions. When the bank’s evidence shows that the victim was targeted by someone they trust, the victim usually feels embarrassed and fears what might happen if the authorities get involved.

What does familiar fraud look like?

Familiar fraud usually involves trust between the fraudster and their victim. The fraudster often uses a family member or friend’s banking information, and sometimes access to their phone or physical mail, to gain control of their account. The victim may not know they’ve been targeted until much later. Here are some real-life cases that we have seen that show familiar fraud can happen to anyone.

Case 1 – The adult children
Mr. B had a credit card, debit card and investment account at his bank. When he spoke to a bank representative over the phone, he learned that $24,700 was missing from his accounts. The bank’s investigation showed that the missing funds had been withdrawn from an ABM (automated banking machine) using Mr. B’s debit card and PIN, that funds were accessed from Mr. B’s investment account using his personal information, and that purchases were completed online and over the phone using Mr. B’s credit card account details. The evidence indicated that Mr. B’s debit card and credit card were used by someone several times and then returned to his wallet. Mr. B’s adult children lived with him. They also had access to the bank cards, records, and mail in Mr. B’s house.

Following its investigation, Mr. B’s bank reimbursed him for purchases that were made without proof that his credit card was present at the time of the transactions. However, the bank would not reimburse him for the transactions that required his bank cards, PINs and personal information because they had followed their standard policies for confirming Mr. B’s identity. Our investigation showed that the bank could not have protected Mr. B from this fraud because the transactions appeared to be coming from Mr. B, and required information, such as his PIN, that should have been kept confidential. The next step Mr. B could take was to file a police report, but he did not want to do this.

Case 2 – The teenage son
Ms. W received a replacement credit card in the mail. She left the new card in her desk and did not activate it right away. Months later, she found out that her teenage son had activated her card, changed the PIN, and used it to make $6,000 in purchases. She notified her bank. She also complained that the bank’s process had allowed her son to use the card without her knowledge or permission.

The bank told Ms. W that they had followed their regular process, which required the consumer to correctly answer security questions based on personal information, account details and a verification code on the credit card. The bank also reminded Ms. W that she had agreed to certain conditions when she opened her credit card account, including her responsibility to keep her personal and account information confidential. The bank informed Ms. W that unless she reported the theft of her card to the police, the bank would consider her responsible for the $6,000 credit card debt. Ms. W refused to involve the authorities. Our investigation confirmed that the bank had acted reasonably in the circumstances of the case.

Case 3 – The trusted friend
Mr. O and his friend went to a nightclub. He put his wallet, containing his credit card, on the table and left to go to the washroom. When Mr. O came back, his wallet was gone, but he did not notice. He did not realize it was missing until the next morning. He notified the bank and the police that his wallet had been stolen. The bank cancelled Mr. O’s debit card, but $800 had already been withdrawn.

During its investigation, Mr. O’s bank showed him photos taken by the security camera at the ABM to see if he knew the thief. He recognized his friend from the nightclub. As part of their investigation, the bank contacted Mr. O’s friend for more details. The friend told the bank that Mr. O had shared his PIN and said he had lots of money in his bank account, so it seemed okay to withdraw some. Mr. O denied sharing his PIN, but he admitted to drinking too much that night. The bank refused to reimburse Mr. O because it concluded that he had not protected his PIN. Our investigation showed that Mr. O had not followed his cardholder agreement when he shared confidential account information with his friend.

What you can do to avoid these situations

Everyone can protect themselves from the emotional and financial pain of familiar fraud by following these simple tips.

Keep it confidential
Never share your personal or account information with anyone, even family, friends, or someone who lives with you. This includes any details you use to access your account, such as your:

bank cards
account numbers
PIN (personal identification number)
passwords
answers to your security questions

Also, remember to shred or securely store all documents that include confidential information. The account agreement you sign for your debit or credit card comes with conditions. One of them is to protect the personal information and passwords that are used to access your account. You may be held responsible if fraud occurs because you did not safeguard your card or account details.

Change your PINs and passwords regularly
Over time, it’s possible that people you are close to will see, hear, or figure out your PIN or passwords or security questions. To preserve the confidentiality of this important information, make a habit of changing it regularly.

Avoid taking risks
While it may seem convenient to trust someone close to you with confidential information, it is wisest not to take chances. If you need help with your bills or shopping, consider setting up a separate joint bank account for these items, separate from your main bank account, so that your trusted helper can have their own card that only has access to the account you want them to access. Your bank can help you set up an automatic transfer into this account each month in an amount that makes sense for your needs.

Add an alert
Many banks now offer text message or email alerts to let you know when withdrawals are made. These alerts are a great way to stay aware of what is happening in your account. Alerts are sent out as soon as a transaction is completed, so you do not have to wait for your monthly statement to arrive. Alerts can minimize your financial loss to fraud.

Set a limit on your cards
Keep your bank card limits low for purchases and withdrawals. Limits can be set for different types of transactions, such as:

transactions made through the ABM
purchases that require a PIN when a debit or credit card is used
“card-not-present” purchases that are made online or over the phone
e-transfers (or e-mail transfers) that allow funds to be transferred out of an account and sent to someone else
credit card purchases

Make sure to protect yourself from fraud. If no one can access your personal information, account details and/or PIN, they will not be able to use them. However, when frauds occur, there are usually warning signs. If you see transactions in your account that are not yours, contact your bank right away. All banks have time limits for notifying them, and the faster they are aware, the faster they can take action to protect your accounts.