Understanding Financial Scams: Common Fraud Tactics and How to Avoid Them

October is National Cybersecurity Awareness Month, an opportunity to strengthen your awareness of the threats that can put your personal and financial information at risk. While scammers continue to find new ways to target consumers, many of their strategies rely on the same approach: influencing emotions to encourage quick decisions.

According to the Federal Trade Commission (FTC), Americans reported losing a record $15.9 billion to fraud in 2025, an increase of nearly 430% since 2020. These rising losses highlight how fraudsters have become increasingly effective at exploiting fear, creating urgency and establishing false trust.

Recognizing how scammers operate is an important step toward protecting your financial well-being. This Cybersecurity Awareness Month, take a closer look at four common fraud tactics and the precautions you can take to avoid them.

1. Creating a False Sense of Urgency

Scammers frequently use time-sensitive warnings to pressure individuals into acting before verifying the facts. An unexpected text might claim you have an overdue toll payment, while a phone call could warn that your financial accounts are at risk. These situations are designed to create anxiety and encourage immediate action.

According to the FTC, government imposter scams increased by 40% in 2025, with fraudulent toll payment messages contributing to the rise.

Fraud prevention tip: Be skeptical of messages demanding immediate payment or sensitive information. Rather than responding directly, independently verify the request through an official website or trusted contact number.

2. Impersonating Reputable Organizations

A familiar name or recognizable phone number can make a fraudulent request seem convincing. Scammers often pose as financial institutions, government agencies or established companies to gain access to personal information or money.

They may use spoofed phone numbers, realistic branding or details about recent transactions to appear credible.

Imposter scams have remained the most frequently reported category of fraud for nine consecutive years. In 2025, consumers submitted more than 1 million reports, resulting in $3.5 billion in reported losses.

Fraud prevention tip: Don't rely on caller ID or the appearance of an email to confirm someone's identity. If you receive an unexpected request, end the communication and contact the organization using a phone number you've independently verified.

3. Establishing Trust Through Online Relationships

Some financial scams unfold gradually, with criminals spending considerable time building relationships before introducing a financial request.

One example is a scheme commonly referred to as "pig butchering." According to the Department of Financial Protection and Innovation, these investment scams involve fraudsters developing false friendships or romantic connections before directing victims toward fraudulent cryptocurrency investments or other deceptive financial opportunities.

An interaction may begin with an innocent-looking message and develop into weeks of conversation before an investment opportunity is introduced.

The FBI reported $7.2 billion in cryptocurrency investment fraud losses in 2025, demonstrating the significant financial impact of these schemes.

Fraud prevention tip: Exercise caution when an online acquaintance encourages you to invest, transfer funds or pursue an opportunity promising unusually high returns. Verify investments through independent, reputable sources before making financial commitments.

4. Targeting Consumers Through Social Media

Social media platforms have become a common starting point for financial fraud. Scammers create convincing advertisements, fraudulent shopping websites and misleading promotions that can be difficult to distinguish from legitimate offers.

According to the FTC, consumers reported greater financial losses from scams originating on social media than from those beginning through text messages or emails in 2025. Shopping-related scams were among the most commonly reported, and more than 40% of individuals who lost money to social media scams had purchased a product featured in an advertisement.

Fraud prevention tip: Research unfamiliar retailers before completing a purchase. Review independent customer feedback, confirm the business has legitimate contact information and search for reports of potential fraud. Avoid providing payment details until you're confident the website is trustworthy.

Strengthen Your Defense Against Financial Fraud

Although scammers often depend on emotional manipulation, maintaining strong cybersecurity practices remains an essential part of protecting your information.

Simple precautions, including creating unique passwords for each account, enabling multifactor authentication, installing device updates and regularly reviewing financial transactions, can help reduce your exposure to fraud.

During National Cybersecurity Awareness Month and throughout the year, remember that awareness is one of your strongest defenses. Taking a few extra moments to evaluate unexpected messages, confirm identities and question suspicious requests can help safeguard your personal information and financial security.

These tips are provided by the Iowa Bankers Association.