Blog Post

The FTC’s Battle Against Impersonation Fraud in the Digital Age

Laura Harris, CFE

ACFE Research Specialist

The days of the funny prank phone calls are over. Yes, our refrigerators are running. No, we do not need to catch them. Lately, we are more concerned about robocalls impersonating President Biden, or other government officials, sowing bad advice and/or attempting to scam any earnest listeners.  

In February, the Federal Trade Commission (FTC) stated that it is “committed to using all of its tools to detect, deter and halt impersonation fraud” and opened up for commentary on a Supplemental Notice of Proposed Rulemaking (SNPR). The proposed supplements would allow the FTC to more effectively and efficiently right consumers harmed by impersonation schemes and more effectively address the types of unlawful impersonation affecting consumers. Such changes would impact the finalized proposal to change the rules regarding government and business impersonation (entitled the Rule on Impersonation of Government and Businesses or Impersonation Rule). The SNPR proposal seeks to “add a prohibition on the impersonation of individuals and extend liability for violations of the Rule to parties who provide goods and services with knowledge or reason to know that those goods or services will be used in impersonations of the kind that are themselves unlawful under the Rule.”  

This comes at a time when the FTC reports fraud losses topping $10 billion in 2023, more than a 14% increase from 2022, and receiving more than 2.6 million fraud reports from consumers. The FTC’s Consumer Sentinel Network, which receives reports directly from consumers, all levels of law enforcement agencies, the Better Business Bureau, industry members and non-profit organizations received 5.4 million reports in 2023. (A full breakdown of reports received in 2023 is available on the FTC’s data analysis site.) 

The overwhelming number of complaints begs the attention of the FTC, which promotes a mission to protect the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research and education. The swiftly developing nature of artificial intelligence (AI) is a concern for consumers and businesses alike, as it is easily manipulated for fraudulent purposes. From deepfakes, voice-cloning, chatbots and mimicked writing styles, AI-supported scams are growing at an exponential rate. 

The finalized amendments to the Impersonation Rule state: 

  • It is a violation of this part, and an unfair or deceptive act or practice to:  

    • (a) materially and falsely pose as, directly or by implication, a government entity or officer thereof, in or affecting commerce as commerce is defined in the Federal Trade Commission Act (15 U.S.C. 44); or 

    •  (b) materially misrepresent, directly or by implication, affiliation with, including endorsement or sponsorship by, a government entity or officer thereof, in or affecting commerce as commerce is defined in the Federal Trade Commission Act (15 U.S.C. 44). 

And 

  • It is a violation of this part, and an unfair or deceptive act or practice to:  

    • (a) materially and falsely pose as, directly or by implication, a business or officer thereof, in or affecting commerce as commerce is defined in the Federal Trade Commission Act (15 U.S.C. 44); or  

    • (b) materially misrepresent, directly or by implication, affiliation with, including endorsement or sponsorship by, a business or officer thereof, in or affecting commerce as commerce is defined in the Federal Trade Commission Act (15 U.S.C. 44). 

For example, the above enables the FTC to directly seek monetary relief in federal court from scammers that: 

  • Use government seals or business logos in communications with consumers by mail or online. 

  • Spoof government and business emails and web addresses, including mimicking “.gov” email addresses or using similar email addresses or websites that rely on misspellings of a company’s name. 

  • Falsely imply government or business affiliation by using terms that are known to be affiliated with a government agency or business (e.g., stating “I’m calling from the Clerk’s Office” to falsely imply affiliation with a court of law). 

However, several comments on the Impersonation Rule addressed the pervasive threat of individual impersonation, which led to the SNPR. The proposed amendment would prohibit not just impersonation of government entities and businesses, but also the impersonation of individuals. Additionally, it establishes third-party liability for companies and developers that know or have reason to know their technology is being used to defraud consumers through impersonation and misuse of their resources. By expanding the Impersonation Rule to include the impersonation of impersonation other than government entities and businesses, the FTC is able to pursue perpetrators of other impersonation schemes, such as romance frauds or grandparent schemes. 

SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners

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