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Fraud is a deliberate deception intended for financial gain. Here we are only covering consumer fraud and not corporate fraud. We are covering fraud in the digital economy and not old school face to face fraud.

Scams are a subtype of fraud that typically target individuals through deception or manipulation, often relying on human psychology (fear, greed, urgency, or trust).

Fraud has become a trillion-dollar global problem, accelerated by digital transformation, mobile banking, and social media and has become the most common form of financial crime worldwide.

Fraud in the world (to insert image, By Volume and $ loss, SG and world)

Types of fraud & their modus operandi 

Online fraud vs Cards fraud – Fraud is classified as online vs cards fraud based on how the fraud transaction happens i.e. via online banking transfer vs cards transaction 

Authorised vs Unauthorised fraud – When the victim is the one transferring the funds to the scammer (knowing or unknowingly) it is authorised fraud. Unauthorised fraud is when the victim is unaware of the fraud transaction. He/she may have lost/unknowingly shared/ knowingly given their online credentials or authentication details (eg. SMS OTP) which are then used by the scammer to transfer funds.

Common types of authorised fraud 

1. Impersonation scam – This involves fraudster pretending to be someone authoritative (eg. Government official or Bank official) or someone familiar to the victim, in order to defraud them. The authoritative person will intimidate victims with fake investigations or threats, then instruct them to transfer money for “verification” or as bail.
2. Internet Love scam – You “fall in love” on the internet, you transfer money for your lover’s needs, the “lover” disappears 
3. Job scam – Scammers prey on people looking for side income or remote work, offering “easy online jobs” with lucrative pay. Victims are usually recruited via Telegram, WhatsApp, or social media to perform simple tasks (e.g. liking posts, reviewing products, or making small purchases) for commissions. Early on, victims receive some payments (to build trust), then are asked to pay upfront “fees” or larger sums for bigger commissions – eventually losing those funds when the scammer disappears 
4. Investment scam – These scams entice victims with promises of high returns – including fake stock tips, cryptocurrency schemes, or Ponzi-like “investment programs”. The victim may download an “investment” app and can even see their portfolio grow. It’s when they try to withdraw the money that they realise that it was a fake app. Love scam combined with Investment scam is often called pig butchering scam
5. E-Commerce scam – This has been a mainstay fraud category, consistently ranking among the top scam types by number of reports. These involve fraudulent online sellers who collect payment for goods or services but never deliver them. Common scenarios include fake listings on marketplaces (Carousell, Facebook Marketplace), online ticket scams, rental deposit scams, or sellers of discounted electronics who vanish after payment.

Common types of unauthorised fraud

1. Phishing – This involve fraudsters posing as trusted entities (banks, government agencies, service providers) via emails, SMS, or calls to trick victims into divulging login credentials or one-time passwords. The key difference from Impersonation scam is that, once victim divulge the login credentials, it’s the fraudster who performs the transfer. On the other hand, in Impersonation scam, the victim is instructed to transfer the money themselves 
2. Malware – This targets primarily Android smartphone users. In these schemes, victims are tricked into installing malicious mobile apps (often presented as legitimate services like job apps, loan apps, or utility tools) outside of official app stores. Once installed, the malware can take control of the device, steal banking login credentials, intercept SMS OTPs, and even initiate fraudulent transactions.

Fraud volume & losses by fraud type (Insert image)

As can be seen above, authorised fraud make the largest share of fraud

Root causes of fraud

The root cause of unauthorised fraud is usually lack of security features (eg. Continued reliance on SMS OTP for transaction authorisation) combined with users not paying attention eg. Entering banking credentials on Phishing website

Root causes of authorised fraud are  base human frailties  – greed, lust, fear. This is why these types of frauds are hard to contain. Firstly it’s the victim who is transferring the money and secondly the underlying reasons are what makes us humans. 

Fraud is an also cross-national crime, the scammers are mostly operating from other countries where enforcement is not strong, usually from developing countries. In many cases the scammers themselves have been scammed to come to these countries in search of normal job opportunities and have then been human trafficked. 

What countries are doing to fight fraud & scams

Fraud perpetration involves multiple elements of the digital ecosystem – from social media to tele communication channels (eg. SMS, WhatsApp, Phone calls), online/digital banking and ofcourse people themselves. The best way to fight scams is to take a whole of society approach. 

Another facilitator of fraud are Mule accounts – People allowing fraudsters to use their banking account or their IDs (to open banking accounts). These accounts are used to transfer the fraud money and layer them across the banking/financial systems to make it hard to trace or retrieve back (esp. once it leaves a country’s jurisdiction)

Singapore’s whole of society approach to fight fraud & scam (insert image)

Future of fraud 

1. Use of Deepfake AI in impersonation scam – Eg. Fake friend scam
2. Use of Generative AI – The pig butchering scam or love scam involves a scammer constantly engaging a victim over chats to develop trust. This can potentially be outsourced to AI avatars which can do this engagement tirelessly without the need for any human intervention.