NetSafe reports 'drastic' jump in online fraud losses

Tuesday, 2 April 2019

It can be awkward when you try out a phone scam, only to realise you have called the police by mistake. (Video first published August 29, 2018)

The amount of money that Kiwis reported losing through online scams tripled to $33 million last year, cyber safety organisation NetSafe has reported.

Executive director Martin Cocker suspected the losses that were reported to NetSafe were only a fraction of people's total losses, because some victims would be too embarrassed or would see no point in saying they had been scammed.

The figure reversed a trend that had seen reported losses drift down from just over $13m in 2015 to $10m in 2017.

Cocker said NetSafe had seen 'waves of successful scams hitting the country', with fake 'sextortion' scams being the most recent trend.

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The big rise in reported fraud losses in 2018 followed two years of slight progress.

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Fake sextortion scams involve scammers falsely claiming that they have obtained video footage of people watching pornography that they will release unless a ransom is paid.

The most common scams were 'tech support' phone scams believed to be mostly run out of call centres in India.

But the mostly costly scams for victims continue to be romance and investment scams, where victims are duped into sending large amounts of money overseas.

A total of 13,000 'successful' scams and scam attempts were reported to NetSafe, up from 8100 in 2017.

Efforts to reduce losses to online scams have almost exclusively focussed on education, but Cocker said the 'drastic' increase in reported fraud losses showed a new approach was needed.

'There is no coordinated national effort to disrupt scams locally. New Zealand needs a national response centre to provide real-time scam-trend analysis, information sharing, nationwide alert systems and dedicated support,' he said.

'More needs to be done or we will continue to see large numbers of New Zealanders suffering financial and psychological harm.'

NetSafe's report follows claims from some technologists that concerns over the broader issue of cybersecurity have been blown up out of proportion.

Australian telecommunications analyst Paul Budde argued in a blog last month that while 'hacks, identity theft, populism, cyberbullying, and cybercrime' were problems, the positives of ICT technology far outweighed the negatives.

'Yet in recent years cybersecurity has achieved political importance that greatly exceeds its actual threat,' he said.

Romance scams net a relatively small number of victims but average losses can be huge, making them among the most costly.

'The ICT world with all its 'goods and bads' reflects our messy society and it is that same society that has led us to where we are now. In many cases our progress has been based on muddling on, with the occasional star burst.'

That view – which runs counter to most of the narrative on cybersecurity in recent years – followed the publication of a widely-reported essay by Michigan University computer professor Andrew Odlyzko, titled 'Cybersecuriity is (not) very important'.

Odlyzko argued that there was a 'rising tide of hysteria' over data breaches and the 'deficient state of our information infrastructure'.

'Yet the world is doing remarkably well overall and has not suffered any of the oft-threatened giant digital catastrophes,' he said.

Ransomware, identity theft and other cybercrime had to be kept in perspective, he also argued.

'Bank robbers went after banks because that is where the money was. But now the money is in cyberspace. So that is where criminals are moving.

'And that is also where security resources are being redirected. Completely natural and expected, and happening at a measured pace.'

But Cocker said scam victims experienced losses that were more than financial.

'Many scam and fraud victims report feeling frustrated and embarrassed, or having lost confidence in using digital technology to make payments or connect with others,' he said.