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Government imposter scams continue to be costly

Government imposter scams continue to be costly.
Published: Jun. 8, 2022 at 11:20 AM CDT
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WICHITA, Kan. (KWCH) - Government impostor scams continue to be costly, new BBB research shows

The COVID-19 pandemic saw a rise in reports of scammers pretending to be from government agencies. While reports slowed since peaking in early 2021, victims lost more than twice as much money, according to new research by Better Business Bureau® (BBB®). BBB warns people to use caution if they are contacted by a government agency demanding money or offering a government grant for a fee.

After BBB published an in-depth study in 2020 to educate the public about how to detect Government Impostor Scams, reports to the Federal Trade Commission (FTC) soared. In 2021, consumers reported losses of more than $445 million in government impostor and government grant scams, up from $175.4 million reported in 2020.

Likewise, BBB Scam Tracker data showed victims of government grant scams lost more money in 2021 than in the previous year. The median loss in government grant scams rose from $800 to $1,000, making it one of the more expensive and eighth riskiest scam reported to Scam Tracker in 2021, according to BBB Institute for Marketplace Trust’s 2021 BBB Scam Tracker Risk Report. Scam Tracker reports also showed government impostor scams as the second-most reported scams by businesses in 2021.

How do I know if I’m being scammed?

In government impostor schemes, scammers may spoof a legitimate government agency phone number to call a potential victim. The scammer threatens arrest if the consumer fails to comply with their requests. Scammers typically ask for payment in gift cards to rectify the problem. Social Security Administration (SSA) impersonators warn the targeted individual that their identity has been stolen and ask them to verify their social security number and other personal information. Ironically, the individual may then actually become a victim of identity theft. Fake Internal Revenue Service (IRS) callers threaten arrest unless back taxes are paid.

In government grant fraud, scammers contact the consumer using an acquaintance’s hacked social media account. The consumer is told about a lucrative grant program that only costs a small fee to receive. Once the first payment is sent, the scammer continues to add various fees. The consumer never receives the grant and loses whatever money and personal information they sent to the scammers.

While gift cards are still the method of payment of choice for scammers, more are beginning to turn to cryptocurrency. The FTC reported 1,392 complaints in 2021 about cryptocurrency use in government impostor scams, with losses of more than $22 million. For more about cryptocurrency scams, read BBB’s study on the topic.

2021 FTC statistics show that people young and old can fall prey to government impostors or grant scams, but the amount of loss increases with age.

Social Security scams are the most reported, most expensive

When it comes to government impostor scams, no agency is more popular than the SSA. More than two-thirds of the government impostor scams reported to BBB Scam Tracker in 2021 mentioned Social Security. Consumers who reported to Scam Tracker in 2021 lost nearly $500,000 in these SSA scams.

Social Security scams also topped the Federal Trade Commission’s (FTC) Consumer Sentinel Database listing of government impostor scams for three years running, starting in 2019. SSA impersonation scams are also the most-reported scam so far in 2022, according to FTC statistics. Nearly a half million such scams have been reported to the FTC since 2019, totaling more than $209 million in losses. Of those reports to the FTC in 2021, 5.9 percent reported losing money, an increase from the 3.5 percent who reported losses in similar scams in 2019.

After a dip in Social Security scam reports in 2020, the scam dominated the statistics last year with more than 217,000 reports and nearly $150 million in reported losses. The median loss for Social Security scams dipped to $1,200, which is $300 less than it was in 2019.

Reports show the most common Social Security-related scam involves arrest threats. Posing as law enforcement, the scammer calls and threatens the intended victim with immediate arrest if they do not comply with the scammer’s requests. The scammer may claim that the victim’s Social Security number has been compromised and used in a crime.

In September 2021, an Alaska woman told BBB someone claiming to be a Social Security employee contacted her, claiming her name was associated with a criminal case with a warrant out for her arrest in Texas. Another scammer, speaking as if he were a law enforcement officer, said she would be given a new Social Security number to protect her identity and that all her assets would be seized and put on hold by the government.

The scammer told the woman her money needed to be put into government bonds. To buy the bonds, she had to go buy gift cards in $500 increments. She was told not to tell anyone about what was happening to her. Scammers instructed her to send photos of the gift cards and PIN numbers to the “US Department of Treasure” and then officers would meet with her the next day to cancel the arrest warrant and give her a new Social Security number.

The woman said she suspected fraud when the scammers asked her to take out money on her credit cards. She failed to recoup the $4,200 in gift cards she purchased.

“I was so shocked, devastated and exhausted,” the woman wrote. “I could not believe I fell for this scam. Everything seemed to make sense up until the last moment when it was already too late and it seems like there is no way out of this situation.”

Stop and think when you are called in the name of the law

Almost all government impostor scams use a law enforcement angle with some impersonating law enforcement agencies directly. In these cases, they have a fairly high success rate. FTC statistics show that more than one in five people who reported a law enforcement impostor scam lost money, with a median loss of $3,000 last year.

A California woman’s story shows how devastating falling victim to this scam can be. She reported to BBB Scam Tracker in September 2020 that someone acting as if they were with the Alameda County Sheriff’s Office contacted her by phone. The caller claimed there was a warrant out for her arrest because she had missed a federal court hearing after being subpoenaed.

The scammer told her that she had to prove she did not receive the subpoena by paying a $4,000 bail that would be returned to her. If she failed to produce the bail money, she was threatened with arrest and told she would pay higher criminal fines. She also was told that she was under a gag order and could not discuss her situation with anyone.

The woman said she was in the middle of paying off the bail in $500 increments through MoneyPak when she finally called 911 to report the scam. She lost $2,550.

“I lost hours at work and had trouble focusing on my job as I was traumatized by the violations, which ultimately led to getting written up,” said the woman, who eventually had to switch jobs. “I still have negative memories of this experience and feel idiotic and ashamed for falling for this. While I have not been targeted since, it has left permanent emotional scars.”

Victims learn there is no such thing as easy grant money

With the federal government issuing billions of dollars in relief funding during the pandemic, scammers took full advantage by making up various grant programs. While the number of grant scams reported is down, those victimized are losing more money than they did prior to the pandemic.

Government grant scams reported to FTC fell 43 percent from 2019 through 2021. However, the median loss increased from $500 to $700 from the same period. And more than a quarter of people who reported a government grant scam in 2021 lost money, up five percent from the 2019 numbers.

One of the most-read articles published by BBB in 2020 alerts consumers to watch out for Facebook “friends” pushing phony COVID grants.

An Arnold, Missouri, man reported to BBB Scam Tracker in February 2022 that he had lost more than $40,000 while he was ensnared in a grant scam for a year. The man said he heard about the $150,000 grant program from a Facebook friend. He was told that to receive the grant, he had to pay $1,500 in fees through gift cards. The man said scammers used the name of a legitimate grant program to dupe him. The man said the scammers continued to ask him to pay them more money for various fees. All the fees were paid through gift cards, he said.

“Money was tight and I thought the grant would help me pay bills,” said the victim, who is disabled and lives on a fixed income. “I should have known better. They’ve taken my whole life’s savings. It has become a nightmare.

The man said he had to go to places all over the greater St. Louis area to purchase the gift cards.

“They quit selling gift cards to me at some places because they knew I was being scammed,” the man said. “But I was so deep into it, I couldn’t quit. I’m so far in debt now that I can’t see straight.”

“This has totally destroyed my life,” he added.

A South Dakota woman reported to BBB Scam Tracker in April 2022 that she was contacted by a friend through Facebook and was told she was approved for a grant worth $15,900. The woman said she was asked for her Facebook password and was told she had to pay $1,200 in fees to get the grant. She said she paid the fee through gift cards. She said the scammers told her they needed her Facebook password so that they could send her the money through Facebook.

The scammers took over the woman’s Facebook page and began to use her profile to target her friends, she said.

“These people scammed me and just got one of my friends,” the woman said. “They are determined to scam people.”

No agency is safe from being impersonated

The second most popular target of scammers is Medicare. While there are many reports of these scams, people rarely fall victim to them. In 2021, there were nearly 30,000 Medicare scams reported to the FTC, but just 0.6 percent of respondents reported being victimized.

The IRS used to be a favorite target of scammers, but has diminished in recent years. Now most reports to BBB Scam Tracker are from people who lost money while filing for an Employee Identification Number from websites that looked like they were official.

The U.S. Department of Treasury, FTC and U.S. Postal Inspection Service are mimicked by scammers to a lesser extent, according to FTC statistics.

Law enforcement making inroads

The biggest hurdle for those trying to prosecute these scammers is that most of the perpetrators live overseas. BBB’s initial study on this topic showed many of these government-related scams originated in India.

Scammers buy lead lists with names, phone numbers and other information about their targets before using Voice over Internet Protocol (VoIP) systems to make their calls. The scammers can spoof numbers, making it appear as if they are calling from a government agency. In November 2020, the U.S. Department of Justice (USDOJ) indicted an India-based VoIP provider. In January 2021, the USDOJ got a conviction in a robocall scam case.

In April 2022, Walmart reported it had developed technology that helped it freeze more than $4 million in gift cards that had been purchased as part of scam attempts. The USDOJ seized the money and is in the process of returning funds to victims.

AJ Monaco, the special agent in charge of the major case unit for the Social Security Administration’s Office of Inspector General, believes the educational efforts made by the office are paying off in more awareness of the scam, and saving more people from being victimized.

Monaco said that scammers are switching up who they impersonate. While Social Security scams are still popular with scammers, he notes impersonation of popular businesses like Amazon are on the rise. Monaco suspects that scammers realize that they are less likely to be investigated if they mimic a business rather than a government agency.

Consumers can protect themselves against scammers by “developing a security mindset,” Monaco said. He advises people to use caution when receiving any unsolicited calls, texts, emails or letters, and to investigate the legitimacy of the offer or claim before acting on it.

Tips to avoid government impostor or government grant scams

  • Will a federal agent call you? Government agencies like the Social Security Administration, IRS or FBI do not call people with threats or promises of money.
  • Do not trust your caller ID, as scammers can spoof legitimate numbers. If you receive a phone call, check with the real agency by going to the agency’s website directly, then click contact us to find out how to connect. Do not trust numbers that may be included in emails or text messages.
  • Do not click on links inside a text message or email purporting to be from a government agency.
  • Social Security numbers are never “suspended.” The Social Security Administration will never threaten to arrest you because of an identity theft problem.
  • Never provide your bank account or other personal information to anyone who calls you claiming to be associated with the IRS. The IRS generally makes its first contact with people by regular mail – not by phone – about taxes.
  • Never pay with a gift card, wire transfer or cryptocurrency. No government agency will take those forms of payment.
  • Don’t pay for a “free” government grant. If you must pay money for a “free” grant, it isn’t free. Go to Grants.gov and Financial Consumer Agency of Canada for lists of official grants.

How do you report a suspicious email or call?

  • Better Business Bureau – File a report with BBB Scam Tracker.
  • Social Security – The Social Security Administration Inspector General has its own online form for complaints about frauds impersonating the SSA.
  • IRS – The IRS advises people to fill out the “IRS Impersonation Scam” form on TIGTA’s website, tigta.gov, or call TIGTA at 1-800-366-4484.
  • Canadian Anti-Fraud Centre – In Canada, contact CAFC about all government impersonation scams at 1-888-495-8501 or online.
  • Federal Trade Commission – 877-FTC-HELP or www.ftc.gov.
  • FBI’s Internet Crime Complaint Center – Online at www.ic3.gov.
  • Your cellphone carrier – Carriers may offer free services such as scam call identifications and blocking, ID monitoring, a second phone number to give out to businesses so that you can use your main number for close friends, or a new number if you get too many spam calls.
  • Facebook – click on the three dots at the top right on any post. Select “Find support or report post” to report a scam.

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