Banks seek assistance in combating online romance scams to protect victims from financial losses

• Organized criminal gangs operate romance scams by creating fake social media profiles and using them to target American victims.
• The scammer turns the conversation to money after a psychological hook is set.
• The American Bankers Association's Paul Benda urged CNBC to shut down social media companies that allow the spread of harmful content and to engage law enforcement to prosecute those responsible.

The government and social media industry are being sought out by the banking industry to address a growing issue that results in billions of dollars in losses annually for Americans: online romance scams.

Since the pandemic, the number of digital crimes has increased, with criminals using social media to pose as attractive partners and target lonely Americans.

Paul Benda, the executive vice president for risk, fraud and cybersecurity at the American Bankers Association, stated in an interview with CNBC that "we really need help" in shutting down individuals who spread false information on social media. He emphasized the need for social media companies to take action and for law enforcement to become involved in prosecuting these individuals. According to Benda, unless the individuals responsible for spreading false information are put behind bars, they will continue to engage in such behavior.

The estimated annual losses due to fraud could be in the tens of billions of dollars, with many victims not reporting their losses.

Experts reveal that organized criminal gangs, primarily located in Southeast Asia, operate romance scams using fake social media profiles to connect with American victims. These scams target both men and women of all ages and educational backgrounds.

Victims of online scams are often subjected to a lengthy campaign of texting from avatar operators, who aim to convince them that they have fallen in love with a real person. The psychological power of these relationships can take hold surprisingly quickly.

"Within weeks, some individuals become addicted to the intense intensity of a relationship where they are constantly texting each other day and night," Benda stated.

The scammer uses a psychological hook to turn conversations into a discussion about money. They may present an investment opportunity that seems too good to be true or exploit the victim's empathy by asking for money for a fake medical treatment.

Benda stated that some scams he has heard of involve draining people's bank accounts to send the scammer all their money. These scammers are willing to do anything for the person they love, but they are evil individuals taking advantage of vulnerable people.

Social media companies should take more action to limit this type of outreach and improve their efforts in removing major offenders, according to the experts CNBC interviewed.

Financial institutions can benefit from regulatory changes that enable them to share information about customers who are at risk of fraud, as some victims may drain their savings account with one institution while keeping their 401(k) retirement account with another.

Benda observed that banks face a dilemma when they suspect their customers are being defrauded, as scammers may instruct them on how to access and transfer funds.

"We are legally obligated to provide you access to your funds, and we cannot prevent you from withdrawing from your bank account, even if we believe it will harm your life," he stated.

Watching a scam unfold can be an emotional experience for both the victims and the bank employees who witness it.

Benda stated that they have heard tales of bank tellers who were in tears while conversing with longtime customers, pleading with them not to engage in such behavior, but ultimately, they were granted access to their funds.

Banks typically do not refund customers who have lost money due to romance scams, as the customer voluntarily transferred the funds, according to Benda. Reimbursing victims could potentially attract more scammers to the market.

In 2022, romance scams resulted in a loss of between $30 billion and $50 billion, according to Erin West, deputy district attorney in Santa Clara County, California.

She remarked that the figure was astonishing and huge, but acknowledged that estimating the number can be challenging due to victims' reluctance to disclose financial embarrassment.

The emotional wreckage resulting from these scams may be even more severe, according to West, a member of a national group of prosecutors working to expose the issue. These scams can result in lost marriages, lost careers, or a permanent change in financial position.

For 25 years, I've been in law enforcement and have dealt with sex crimes and homicide, but I've never experienced the depths of despair that come with realizing one's entire life has been lost, such as losing a marriage and all their money in one day.

Lonely individuals are more likely to fall for scams due to a human tendency.

This type of crime touches on the essence of what we desire in life. We yearn for love and companionship, even if it's through text messages, from someone who comprehends us, cherishes us, and thinks about us. And they deliver precisely that.

West stated that the dream they offer is not only attainable but also provides financial security beyond one's wildest imaginations. He added that it's easy to dismiss it as mere desire and avarice, but in reality, it offers comfort on both levels.

— CNBC’s Bria Cousins contributed to this report.