Online Banking Scams: 4 Common Threats and How to Protect Your Accounts

Online banking scams and financial schemes are hard to spot, and the financial losses they create are even harder to recover from.

According to the Canadian Anti-Fraud Centre, Canadians continue to lose hundreds of millions of dollars to fraud each year, with annual reported losses in recent years exceeding half a billion dollars.

As more Canadians shop, do business and communicate online, cybercriminals are seizing the opportunity to do harm. Armed with artificial intelligence (AI) tools, scammers are getting more sophisticated, faster and more difficult to trace, experts say.

Scammers adapt quickly because fraud pays. Digital tools, automation and social engineering allow criminals to scale attacks at minimal cost. Understanding how scams evolve can make it easier to spot patterns instead of focusing on individual schemes.

Here’s a look at some common financial scams and risky behaviors, and how to avoid becoming a victim.

1. Phishing

Phishing scams use emails or fake websites pretending to be from a reputable institution. The goal of a phishing scam is to get you to click on a link or attachment, and enter in personal and/or financial information so the scammer can access your accounts and steal your money.

Phishing doesn’t just happen over email. Scammers also use text messages (sometimes called “smishing”) and direct messages on social media to impersonate banks, delivery companies or payment apps. They may claim there’s suspicious activity on your account and urge you to click a link or verify your information.

Phishing messages used to be rife with grammatical and spelling errors, but AI has changed the game, says Preet Banerjee, a London-based wealth management consultant and finance expert who works with clients in Canada and the United States.

Banerjee points out that tools like ChatGPT help criminals produce formal, grammatically sound content in seconds, making it harder to detect the fraudulent messages.

How to protect yourself

Avoid clicking on any links or attachments received via email or text, especially in messages demanding urgent action. Take the extra step of calling your financial institution using the number on the back of your card or from a recent bank statement and ask if the communication is legitimate, Banerjee says. “An ounce of prevention is worth a pound of cure,” he adds.

2. Spoofing

Spoofing is when a scammer contacts you via a fake email address, phone number, text message or website that looks legit at first glance.

By changing a single letter, number or symbol within the communication, criminals masquerade as legitimate financial institutions in a way that’s easy to miss. The spoofed communication is usually used to phish for your personal or financial account information and/or to steal your identity.

Protect your identity

Look closely at email addresses and link URLs to ensure there are no misspellings or typos in the domain names. Double check phone numbers against those that are listed publicly on a bank or card issuer’s website before calling. Know that most institutions won’t email, call or text you asking for personal information or account details out of the blue.

3. Password cracking/hacking

With generative-AI tools, cybercriminals can quickly test hundreds or even thousands of passwords on financial websites and social media networks to hack into your accounts, Banerjee says. If your password is easy to guess or you don’t have two-step verification enabled, it’s only a matter of time before a hacker breaks into your account.

The Canadian Anti-Fraud Centre also recommends choosing strong and unique passwords for all online accounts, including social media networks, email accounts, financial websites and other online accounts. Additionally, the Centre advises consumers to set up multi-factor authentication on all accounts where possible.

Consider using a password manager to generate and store unique passwords securely. Long passphrases — combinations of unrelated words — can also be easier to remember and harder to crack.

Strengthen your passwords

Create a hard-to-guess password, ideally 16 to 25 characters long, with a combination of upper and lowercase letters, numbers and symbols, says Terry Cutler, CEO and founder of Montreal-based Cyology Labs, a cybersecurity consulting firm. Longer, more complex passwords take longer for hackers to crack, he adds. It’s also best to avoid using the same password across multiple accounts, Cutler says.

4. Unsecured Wi-Fi

Accessing your bank account or paying a credit card bill while connected to a public Wi-Fi network may be convenient, but it’s also extremely risky. Public Wi-Fi is often less secure, making it easier for criminals to spy on your activity and copy account information, such as bank account and routing numbers, security PINs, and passwords.

Your home internet connection can be also vulnerable if not properly password-protected. Scammers can connect to the devices on your home network to access sensitive data, such as passports, tax returns, photos and financial documents, then lock you out of the devices, Cutler says.

When accessing sensitive accounts or work systems, use a Virtual Private Network (VPN), if you can. A VPN is a program or app that funnels your internet activity through a secure, third-party service provider that’s not part of the public Wi-Fi connection. This encrypts your web browsing and email communications, keeping them private and away from the potential prying eyes of a criminal.

Additionally, make sure your home wireless network is protected by a strong password and isn’t accessible by neighbors or the public. Backup all of your important information to an external hard drive and store it in a safe place (but don’t keep it connected to your on-network devices), Cutler advises.

Secure your connection

Don’t use a public Wi-Fi network to log into any financial institution, and make sure to regularly update all of your devices’ operating systems and third-party apps, suggests the Royal Bank of Canada.

What to do if you’ve been scammed

Cybercriminals are honing their craft, using more sophisticated tools and finding sneakier ways to exploit consumers for financial gain.<br><br>“If you have an email address and you’re connected to the internet, you are going to be attacked. If you’re vulnerable, you will be exploited; it’s as simple as that,” Cutler says.<br><br>If you suspect you’ve fallen victim to an online banking scam or other financial fraud, the Financial Consumer Agency of Canada advises taking the following steps:

Online scams may be inevitable, but falling for one isn’t. Awareness, skepticism and a few strong security habits can dramatically reduce your risk.