Client‑Initiated Scam Transactions: When Safeguards Fail

Financial cybercrimes and internet scams are on the increase. Moreover, the tax code imposes additional penalties on victims of financial scams. Clients engaged in fraudulent financial scams are often in a psychological state that encourages them to lie or misrep‑ resent financial transactions and not even recognize obvious indicators that they are being scammed. Existing safeguards are insufficient for protecting clients from financial cyber‑ crimes in which the client or customer initiates scam transactions. Interventions are required beyond the requirements of current law, regulations, and practices. Banks, brokers, and financial advisors are best placed to interrupt financial cybercrimes involving client‑initiated transactions. This article reviews the cases of two scam victims to illustrate the nature of these crimes. Then, it explores the major laws and regulations for their inadequacy to deal with client‑initiated scam transactions, concluding with practical recommendations for meeting the current challenge.

Duke Scholars

Author Douglas Alan Brook Sanford School of Public Policy