What are recovery scams?

Posing as law firms, government agencies or self-proclaimed “fraud recovery specialists”, criminals contact victims with an offer to help them reclaim stolen funds. However, there’s a catch: the victim must first pay a fee.

The prevalence of recovery scams in Australia is on the rise. According to the ACCC, 158 incidents were reported in the first half of 2024, representing a 129% increase over the previous six-month period.

How do recovery scams work?

Recovery scams tend to follow a predictable series of steps.

Let’s take a look at how they play out in practice.

Step 1 – Victim information

The process starts when a scammer acquires the details of individuals previously involved in a scam.

These details are found on victim lists that contain their name, income, occupation, address, email and financial information.

Fraudsters may have the details of certain individuals from previous scams they have conducted. Others may purchase victim lists on the dark web.

Step 2 – Victim contact

The criminal then contacts the intended victim, pretending to be someone from law enforcement, government, consumer advocacy or asset recovery services.

Using high-pressure tactics, they emphasize that immediate action is essential to recover the lost money.

Step 3 – Upfront fee request

In step three, the scammer claims that a fee must be paid before the fund recovery process can begin. These are often described as service fees, legal costs, administrative fees or processing fees.

The presence of an upfront fee is a telltale sign of a recovery scam because legitimate services do not demand payment upfront.

Step 4 – Gaining trust

To increase their credibility, scammers may use fake credentials, websites (complete with five-star reviews) or documentation that appear to be official.

Some will even use the details from a prior scam to build trust.

Step 5 – Sensitive information request

Once the upfront fee has been collected, scammers will often ask for a bank account number to deposit the recovered funds.

The funds never land in the victim’s bank account, and other sensitive information they provide may be used by the scammer to steal their identity.

How to spot recovery scams

There are numerous ways to spot a recovery scam before it has a chance to cause harm.

Here are a few points to consider if you suspect you’ve been targeted:

• You’re a previous scam victim.
• You’re contacted out of the blue (via phone, email or social media) and pressured to pay an upfront fee.
• You’re asked to pay with cash, cryptocurrency, gift cards, payment apps or wire transfer services like Western Union.
• You’re contacted by someone claiming to represent a private or public organisation. Legitimate organisations never ask for money to help process a refund, nor do they ask for financial information or guarantee a refund in the first instance.
• The scammer claims to have inside information.
• The scammer demands that the details of the process be kept secret from your bank.

What are the different types of recovery scams?

To conclude, we’ll take a brief look at the various ways fraudsters attempt to scam victims out of their money.

Cryptocurrency recovery scams

Crypto scams are prevalent. In a crypto recovery scam, the scammer offers to recover stolen cryptocurrency and asks for access to the victim’s wallet. Some ask for an upfront fee and then vanish, while others obtain details that allow them to drain the victim’s funds.

Consumers in the U.S. lost $5.6 billion to crypto scams in 2023 (up 45% over 2022), and the scale with which cryptocurrency fraud is committed provides ample opportunity for recovery scams.

Stolen car recovery scams

In this context, scammers scan social media for mentions of stolen cars. They then contact the victim and claim to have recovered the vehicle.

Typically, the victim is asked to pay an upfront fee to cover the cost of a tow truck. Once the money is transferred, the scammer vanishes.

Tax refund recovery scams

Here, fraudsters pose as tax authorities and claim they can recover unpaid tax refunds for a fee.

Victims are asked to pay a fee or provide sensitive information, but once they comply, the scammer disappears. Victims are left without a refund and potentially exposed to identity theft.

Summary:

• A recovery scam is a fraudulent scheme that targets victims of previous scams. Criminals pose as law enforcement officials, lawyers or recovery specialists and offer to help recover lost money for a fee.
• Victims of previous scams should be extra wary of recovery scams. Other potential signs include upfront requests for money, pressure tactics and a request that details be kept secret from the victim’s bank.
• Cryptocurrency recovery scams exploit the rising prevalence of fraud in the crypto space. Other recovery scam types involve stolen cars and tax refunds.