Policy Brief | Organized Digital Payment Fraud

Payment scams have evolved into sophisticated, transnational criminal enterprises that leverage digital platforms and exploit human vulnerabilities at scale.

Policy Brief | Organized Digital Payment Fraud
Sheriff (Ret.) Currie Myers, PhD, MBA - Professional in Residence - Criminology Department - Benedictine College

Abstract

Payment fraud has rapidly ascended to become a leading form of organized criminal activity, inflicting over $12.5 billion in losses nationwide in 2024 (Federal Trade Commission [FTC], 2025). Main Street Americans—particularly elderly and vulnerable populations—are disproportionately targeted, enduring shattered retirements and emotional trauma. This policy brief examines the scope of payment scams, evaluates existing enforcement gaps, and analyzes the bipartisan Task Force for Recognizing and Averting Payment Scams (TRAPS) Act. We provide evidence-based recommendations for coordinated interagency response, industry partnerships, and resource allocation designed to shift from reactive to proactive disruption of digital fraud networks.

Keywords: payment scams, organized crime, TRAPS Act, interagency coordination, digital fraud, policy brief

Introduction

Organized crime evolves with technology, and in 2025, digital payment scams have supplanted traditional bank robberies as the most prolific threat to American households and small businesses. The FTC reported $12.5 billion in payment fraud losses nationwide in 2024—a 25% increase over the previous year—even a smaller, populated state like Kansas logged 15,000 reports and $59 million in losses (FTC, 2025). These figures underscore an urgent need for a comprehensive policy framework to empower law enforcement, regulators, and financial institutions to collaborate effectively against transnational scammers exploiting digital anonymity.

Background and Scope of the Problem

Digital payment fraud encompasses a range of illicit activities, including romance scams, investment fraud, business email compromise (BEC), and AI-generated impersonation scams (PWC, 2024). The demographic most affected is adults aged 65 and older, who accounted for 40% of fraud losses despite representing only 20% of the U.S. population (AARP, 2024). Scammers leverage social engineering tactics—exploiting loneliness, fear of emergencies, and financial aspirations—amplified by sophisticated AI tools that simulate voices and create deepfake videos (Smith & Jones, 2024).

Law enforcement agencies face jurisdictional and resource constraints when pursuing transnational fraudsters operating from overseas call centers and dark‑web marketplaces. State and local departments often lack the specialized cybercrime units and funding needed to investigate complex digital schemes (U.S. Department of Justice [DOJ], 2024). For example, in January 2023, the United States Secret Service and the U.S. Attorney’s Office for the District of Massachusetts investigated a business email compromise scheme that defrauded a Dorchester-based workers union of $6.4 million (U.S. Department of Justice, 2025). The union received a spoofed email appearing to originate from its investment manager, directing a wire transfer to an account controlled by scammers. Despite tracing funds through multiple intermediary accounts and international cryptocurrency exchanges, investigators faced delays obtaining mutual legal assistance from Hong Kong and Nigeria. Ultimately, much of the money remained unrecovered for months, demonstrating how local outreach—without robust international cooperation and specialized tracing capabilities—leaves significant gaps exploitable by transnational fraud networks (justice.gov). Federal regulators, meanwhile, manage fragmented responsibilities: the FTC addresses consumer reporting, the Federal Communications Commission (FCC) oversees telemarketing rules, and the Department of the Treasury handles sanctions—but coordination among these agencies has been limited (Treasury Office of Inspector General, 2023).

Overview of the TRAPS Act

The bipartisan Task Force for Recognizing and Averting Payment Scams (TRAPS) Act seeks to confront the digital fraud wave through five integrated objectives. First, the Act mandates an annual fraud trend analysis to ensure that law enforcement and regulators maintain real-time awareness of emerging payment scam tactics—from AI‑generated deepfakes to novel business email compromise schemes. Without this systematic review, authorities risk falling behind sophisticated fraudsters, resulting in mounting consumer losses and eroded public trust.

Second, TRAPS emphasizes interagency coordination by dismantling the silos that have long hindered information sharing among the Treasury Department, FTC, Department of Justice, and Federal Communications Commission. By unifying communication protocols and intelligence databases, the task force will enable seamless joint investigations and rapid disruption of transnational criminal networks. Failure to forge these interagency ties would allow scammers to exploit bureaucratic gaps, causing critical leads to slip through the cracks and prosecutions to stall.

Third, the TRAPS Act establishes an industry partnership framework through memoranda of understanding with banks, payment processors, and fintech firms. This framework creates clear legal pathways for real‑time sharing of suspicious transaction data while preserving consumer privacy under safe‑harbor provisions. Absent such cooperation, financial institutions may hesitate to flag anomalies, providing a window for fraud rings to conduct large‑scale thefts before regulators can intervene.

Fourth, the legislation introduces comprehensive victim support mechanisms to centralize reporting, restitution coordination, and educational resources in a single portal. Victims—particularly seniors and those with limited digital literacy—often face overwhelming complexity when seeking help from multiple agencies. Centralizing support not only improves recovery rates but also encourages timely reporting; otherwise, underreporting will persist, and scammers will continue to operate with near impunity.

Finally, the TRAPS Act directs targeted enforcement resource allocation by boosting funding for state and local cybercrime units, forensic tools, and specialized training. These resources will empower jurisdictions at all levels to investigate and prosecute sophisticated digital schemes effectively. Without this investment, under‑resourced agencies will remain on the back foot, allowing fraud networks to flourish while federal case backlogs grow, and overall prosecution rates stagnate.

Collectively, these five objectives drive TRAPS’s mission to shift the national posture from reactive to proactive. By integrating trend analysis, coordination, industry engagement, victim support, and resource enhancement, the Act lays the foundation for a cohesive, modern defense against organized payment fraud.

Analysis of Enforcement Gaps

Despite existing laws like the Telemarketing Sales Rule (FCC, 2023) and the BEC enforcement guidelines of the DOJ (2023), scammers continually adapt to evade detection by exploiting cross-jurisdictional loopholes. The absence of a unified intelligence repository hampers rapid identification of new tactics, while victims often navigate a labyrinth of agencies—FTC, local police, state attorneys general, and banking fraud units—to seek restitution (FTC, 2025).

Moreover, federal grants for cybercrime task forces total less than $50 million annually, insufficient to equip the over 3,000 state and local agencies grappling with high-tech fraud (Bureau of Justice Assistance [BJA], 2024). The digital sophistication of modern payment scams demands proportional investment in forensics, AI-enabled detection tools, and specialized personnel.

Policy Recommendations

1. Fully Fund the TRAPS Task Force: Allocate $200 million annually, combining Treasury appropriations and private-sector matching grants, to support intelligence-sharing platforms, training programs, and victim recovery services.

2. Expand Federal Grant Programs: Increase BJA cybercrime grants by 50% to enhance state and local law enforcement capabilities in digital investigation and prosecution.

3. Mandate Real-Time Data Sharing: Require banks and payment processors to implement standardized fraud-flagging protocols, with immediate alerts to the TRAPS intelligence center under safe-harbor provisions for privacy compliance.

4. Establish a Centralized Reporting Portal: Develop an integrated online platform—hosted by the FTC—to consolidate consumer complaints, streamline referrals to appropriate agencies, and track restitution outcomes.

5. Enhance Public Awareness Campaigns: Collaborate with AARP and financial institutions to launch national multimedia campaigns targeting high-risk demographics on recognizing and reporting scams (AARP, 2024).

Implementation Strategy

Phase I: Task Force Stand-Up (Months 1–6)

· Issue executive order to formalize TRAPS membership and governance structure.

· Launch intelligence-sharing database and secure communication channels.

· Deploy pilot real-time alert systems with three major banks.

Phase II: Capacity Building (Months 6–18)

· Roll out BJA grant expansion to fund 100 new state/local cybercrime units.

· Conduct biannual joint training and red-team exercises simulating emergent scams.

Phase III: Public Outreach and Continuous Improvement (Months 18–36)

· Launch national awareness campaign aligned with Consumer Protection Week.

· Publish first Annual Fraud Trend Report with actionable recommendations.

· Refine data-sharing protocols and update technical standards.

Conclusion

Payment scams have evolved into sophisticated, transnational criminal enterprises that leverage digital platforms and exploit human vulnerabilities at scale. The TRAPS Act presents an opportunity for rigorous, evidence-based framework designed to fortify interagency collaboration, optimize resource allocation, and integrate private‑sector capabilities—all within a fiscally responsible model that upholds principles of accountability and stewardship of public funds. By consolidating federal regulators, state and local law enforcement entities, and industry stakeholders under a unified strategy, the Act should deliver measurable reductions in monetary losses, enhance victim restitution, and dismantle organized fraud networks. Implementing a coordinated, proactive posture is essential to safeguarding consumer confidence and financial integrity across the United States.

References
AARP. (2024). Fraud in Focus: The Impact on Older Americans. AARP Public Policy Institute.

Bureau of Justice Assistance. (2024). State and Local Cybercrime Grant Programs. U.S. Department of Justice.

Federal Trade Commission. (2025). Consumer Sentinel Network Data Book 2024. FTC.

Treasury Office of Inspector General. (2023). Audit of the Financial Crimes Enforcement Network’s Anti-Money Laundering Operations (OIG-23-045). U.S. Department of the Treasury.

PWC. (2024). Global Economic Crime and Fraud Survey. PricewaterhouseCoopers.

Smith, L., & Jones, R. (2024). AI-Driven Fraud: Challenges and Responses. Journal of Digital Crime Prevention, 12(3), 45–62.

U.S. Department of Justice. (2023). Business Email Compromise Enforcement Guidelines. DOJ.

Federal Communications Commission. (2023). Telemarketing Sales Rule Implementation Report. FCC.

U.S. Department of Justice. (2025). Justice Department secures forfeiture over $5 million in funds traceable to business email compromise. U.S. Attorney’s Office, District of Massachusetts.