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May 2025

Confidence Scams: What They Are and How to Protect Your Customers
by Steve Jones, Risk Specialist, Supervision and Risk Management, Federal Reserve Bank of Kansas City, and Alinda Murphy, Former Lead Examiner, Federal Reserve Bank of Kansas City*

Financial risks related to confidence scams are growing, and scammers are taking advantage of newer technologies that increase risks. Confidence scams involve bad actors who engage in fraudulent activities that are designed to take advantage of a person’s trust. Technology makes it easier for bad actors to impersonate trusted sources, and digital currencies and prepaid cards allow scammers to mask the movement of stolen funds, making it more difficult for victims’ funds to be retrieved. This article discusses ways to increase community bankers’ awareness of the various types of confidence scams and provides resources for bank staff and customers dealing with the consequences of such scams.

Impact of Confidence Scams

There are multiple databases that maintain information on confidence scams (see Common Types of Confidence Scams). Several federal government agencies maintain databases on consumer fraud, such as the Federal Trade Commission (FTC) Consumer Sentinel Network Data Book (Sentinel Data Book) and the Federal Bureau of Investigation (FBI) Internet Crime Complaint Center (IC3). The Consumer Financial Protection Bureau (CFPB) also collects information on incidents of fraud that shows a greater and increasing number of reported fraud cases, including confidence scams.

According to the Sentinel Data Book, the FTC received over 2.5 million reports of consumer fraud in 2023. Imposter scams, which include confidence scams, were the second most prevalent category behind identity theft and had more than 853,000 reported incidents. As a result of imposter scams, consumers lost about $2.7 billion that year.¹ Bank transfers or payments of $1.8 billion were the largest dollar volumes of reported fraud payment methods, followed by cryptocurrency transactions ($1.4 billion).

The IC3 reported that the FBI received approximately 880,000 fraud-related complaints in 2023, with total losses exceeding $10 billion.² Compared with 2022, those figures represent a 10 percent increase in IC3 complaints and a 22 percent increase in losses. According to the IC3, investment scams resulted in the costliest losses in 2023 ($4.57 billion, representing a 38 percent increase from 2022).

Of the nearly 22,000 complaints that the CFPB received related to money services in 2023, the most common issue was frauds/scams (5,200; 39 percent),³ and the monthly average volume of complaints related to frauds/scams had increased 11 percent over the prior two years. Complaints resulted from a variety of scams, including scammers posing as representatives of investment firms, financial institutions, or companies offering debt relief. As prevalent as these fraud cases are, they likely underestimate the number of actual scams because these figures only represent incidents in which a victim reported the scam.

How to Identify a Confidence Scam

Confidence scams include a variety of fraudulent activities that generally fall under the relationships and trust scam category within the Federal Reserve’s ScamClassifier model.⁴ With these types of fraud, scammers attempt to influence or deceive individuals into divulging personal or financial information through social engineering, whereby scammers build relationships with individuals to gain control over their bank funds or other financial assets. To help legitimize their requests, criminals are increasingly leveraging deepfake media as a way of impersonating individuals or organizations that victims may trust, as highlighted in a 2024 FinCEN Alert.⁵

How Confidence Scams Work

The time it takes to perpetrate a scam varies by the type of scam involved and how quickly a scammer can gain the confidence of a targeted individual. Some scams are executed in a matter of minutes, while others, such as romance and investment scams, may continue over several days or months. Confidence scams often follow a three-stage strategy.

Stage One: Trust

During the first stage, the scammer contacts an individual through a variety of communication platforms. Once the communication channel is established, the scammer begins to gain the individual’s trust. Communication may be initiated on the pretense of a mistaken contact, such as a wrong telephone number or misdirected text, or it may be a seemingly random contact with a stranger in a public place. Some initial contacts are based on the scammer’s awareness of a financial or technological problem that the individual might have, such as a computer virus. Scammers may use information from public data, social media, or dark web sources to tailor the initial contact to a personal event or situation, such as the recent death of a family member, a medical condition, or a criminal record. Some scammers use fake call centers and websites to boost the credibility of their claims. Confidence scams rely on an individual’s willingness to continue the communication, in hopes of deepening the individual’s trust.

Stage Two: Control and Liquidation

By increasing an individual’s trust, the scammer tries to isolate the individual from friends, family, and other trusted sources to prevent the individual from getting conflicting information or being alerted to the fact that they are being scammed. This isolation step is generally followed by the scammer insisting on some urgent action, usually claiming the action is necessary to protect the individual’s financial interests or to continue their relationship. The scammer may tell the individual the steps to take to resolve the fictitious issue or problem, while the scammer continues to gather additional personal information regarding the individual’s assets and resources. The scammer may ask for more personal information, more money, or more control of the individual’s assets. In elder fraud cases, this may involve the individual signing a power of attorney or other legal documentation that gives the scammer control of the individual’s real property and other assets (e.g., bank accounts or investments). Some investment scam victims are tricked into making payments to scammers and are then pressured to continue making payments to try to recover their losses. By the end of this stage — and unless the victim has caught on to the scam and sought help — the victim may have given the scammer all or a substantial part of their funds or assets during the scam.

Stage Three: Desertion

After the scammer has succeeded in gaining control of the individual’s funds/assets or realizes that no additional funds are forthcoming, the scam and the relationship end. In most cases, even if the victim has the scammer’s contact information, that contact information no longer works. Fear, denial, or shame may prevent the victim from reporting the fraud immediately, which can hinder a bank from helping the customer recover lost funds or assets and law enforcement from pursuing criminal charges against the scammer.

Developing an Action Plan

Community banks can consider the following steps to help prevent or remediate confidence scams against their customers.

• Ensure that effective board and senior management governance is in place for detecting, monitoring, and addressing fraud in a timely manner.⁶
• Ensure that bank systems are equipped to detect unusual or suspicious account activity and file suspicious activity reports (SARs).⁷
• Train frontline staff to recognize and respond when customer interactions suggest that a customer may be reacting to potential fraud, including how to alert the customer to a potential scam, when to escalate the issue at the bank for further investigation, and when to follow up with a potential report to law enforcement.
• Ensure board, senior management, and frontline staff are aware of elder financial exploitation, any state and local reporting requirements, and available resources⁸ because senior citizens are often the target of confidence scams.
• Educate bank customers and their caregivers on detecting confidence scams, verifying the legitimacy of contacts, and expeditiously reporting suspicious activity to the bank and law enforcement when fraud is suspected or has been committed.⁹ Additionally, reporting suspected scams and fraud to the FTC database can help law enforcement identify trends, educate the public, and bring cases against scammers.

Conclusion

Banks are on the front line in encountering confidence scams, which often result in their customers suffering significant financial losses. Everyday bank staff interactions with customers, strong customer relationships, and effective oversight and implementation of fraud mitigation controls can help community banks identify fraud attempts early and help protect their customers from fraud.

Common Types of Confidence Scams

• Charity lotteries and sweepstakes — A scammer contacts an individual with the news that the person has won money or property and must submit personal information or money to receive the winnings.
• Cryptocurrency scams — Scammers use cryptocurrency as the form of payment and the exchange of funds.^a This type of fraud can take many forms; for example, scammers may threaten to expose harmful or embarrassing information unless an individual pays a ransom. This type of scam is often referred to as “pig butchering,”^b referring to the way in which a pig is fattened before slaughter, and it is associated with romance and investment scams.
• Elder financial exploitation scams — A scammer contacts an older individual and pretends to be the victim’s grandchild or other relative who needs financial assistance; the scammer convinces the victim to remit funds to the scammer to provide that assistance.
• Government and financial institution impersonation scams — A scammer claims to be affiliated with a government agency or financial institution in order to obtain an individual’s passwords or credentials to gain access to the individual’s computer or bank account.
• Investment scams — A scammer convinces an individual that they have privileged financial knowledge that will produce profitable investments, often with the promise of unusually high returns, and convinces the victim to remit funds or provide access to the individual’s bank and investment accounts.
• Online shopping scams — A scammer uses a fake website to make an individual believe that they are buying merchandise from a legitimate merchant in order to obtain the victim’s debit and credit card payment information.
• Romance scams — A scammer feigns admiration for a potential victim to gain access to the individual’s personal information or to induce the individual to give funds to the scammer.
• Tech support scams — A scammer uses fake caller ID numbers, pop-up messages, or email to contact an individual, telling the individual that the technology company has detected a hardware or software problem and that the individual needs to provide the scammer with passwords, access credentials, or other personal information to allow tech support to correct the problem.

• ^a For more information on cryptocurrency scams, see Anthony DeVita, “Crypto Scams and Related Fraud,” Community Banking Connections, Sixth Release 2024, available at www.cbcfrs.org/Articles/2024/R6/crypto-scams-and-related-fraud.
• ^b Because pig butchering is increasingly common, there are several resources dedicated to informing consumers and businesses about the risks, such as the Federal Deposit Insurance Corporation Office of the Inspector General Pig Butchering Scams page, available at www.fdicoig.gov/pig-butchering-scams.

• *Alinda Murphy, a former lead examiner, retired from the Federal Reserve Bank of Kansas City in January 2025.
• ¹ See the 2023 Consumer Sentinel Network Data Book, available at www.ftc.gov/system/files/ftc_gov/pdf/CSN-Annual-Data-Book-2023.pdf.
• ² See the Internet Crime Complaint Center 2023 Internet Crime Report, available at www.ic3.gov/Media/PDF/AnnualReport/2023_IC3Report.pdf.
• ³ See the 2023 Consumer Response Annual Report, available at https://files.consumerfinance.gov/f/documents/cfpb_cr-annual-report_2023-03.pdf.
• ⁴ See the Federal Reserve’s ScamClassifier model, available at https://fedpaymentsimprovement.org/strategic-initiatives/payments-security/scams/scamclassifier-model/.
• ⁵ See FIN-2024-Alert004, FinCEN Alert on Fraud Schemes Involving Deepfake Media Targeting Financial Institutions, November 13, 2024, available at www.fincen.gov/sites/default/files/shared/FinCEN-Alert-DeepFakes-Alert508FINAL.pdf.
• ⁶ See Julie Williams, “Fraud Risk Management for the Ever-Present and Evolving Threat to the Payment Systems,” Community Banking Connections, First Issue 2021, available at www.cbcfrs.org/Articles/2021/I1/vftd-fraud-risk-management.
• ⁷ See FIN-2023-Alert005, FinCEN Alert on Prevalent Virtual Currency Investment Scam Commonly Known as “Pig Butchering,” September 8, 2023, available at www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf.
• ⁸ See Jeanne Rentezelas and Larry Santucci, “Prepare Your Community Bank to Surf the Silver Tsunami,” Community Banking Connections, First Issue 2020, available at www.cbcfrs.org/Articles/2020/I1/prepare-your-community-bank; Laura Gleason and Emily Rosenblum, “Combating Elder Financial Abuse,” Consumer Compliance Outlook, First Issue 2017, available at www.consumercomplianceoutlook.org/2017/first-issue/combating-elder-financial-abuse/; FIN-2022-A002, FinCEN’s Advisory on Elder Financial Exploitation, June 15, 2022, available at www.fincen.gov/sites/default/files/advisory/2022-06-15/FinCEN%20Advisory%20Elder%20Financial%20Exploitation%20FINAL%20508.pdf; and Supervision and Regulation letter 24-08/Consumer Affairs letter 24-06, “Interagency Statement on Elder Financial Exploitation,” available at www.federalreserve.gov/supervisionreg/srletters/sr2408.htm.
• ⁹ The CFPB site on fraud and scams contains educational resources that can help bank staff, customers, and caregivers. For more information, visit www.consumerfinance.gov/consumer-tools/fraud/.