FTC Talks Up Fighting Cross-Border Fraud In US Congress

October 24, 2023
The US Federal Trade Commission (FTC) has warned lawmakers that cross-border fraud reports have grown ten times in the last two decades and urged Congress to give the agency permanent authority to fight it.

The US Federal Trade Commission (FTC) has warned lawmakers that cross-border fraud reports have grown ten times in the last two decades and urged Congress to give the agency permanent authority to fight it.

The US Congress passed the Undertaking Spam, Spyware, And Fraud Enforcement With Enforcers Beyond Borders Act (US SAFE WEB Act) in 2006 after recognising the increasing threats facing consumers in the global marketplace.

The act provides a framework for the FTC to engage in cross-border assistance, including information sharing and investigative support.

The act also gives the agency jurisdictional authority over foreign companies targeting US consumers.

In a report sent to Congress, the agency said the law has been “an indispensable tool” in helping the FTC combat cross-border fraud and protect consumers in an increasingly global and digital economy.

The SAFE WEB Act “has been instrumental in the FTC’s fight against cross-border fraud, which continues to plague consumers and shows no sign of abating”, the agency said.

Data in the report shows that consumers most often fall victim to online shopping scams, and in the last one and a half years the top countries where Americans reported the most fraudulent activities were China, the UK and Canada.

Source: The U.S. SAFE WEB Act and the FTC’s Fight Against Cross-Border Fraud report

The report also notes the increasing use of cryptocurrencies in the UK by criminals, which accounted for 21 percent of fraudulent payments. Credit cards accounted for another 21 percent, while wire transfers were used in 35 percent of the cases.

FTC pushes for congressional action

Although the FTC said the SAFE WEB Act is “indispensable” in its crackdown against cross-border fraud, the act has one notable deficiency. It has a “sunset” period of seven years after which the FTC loses that ability to fight fraud involving parties abroad. Since 2006, the act has been renewed twice and is now set to expire in September 2027.

In the report, the agency urged Congress to remove the sunset clause. 

The FTC argued that the expiration of the SAFE WEB Act would not only end its clear authority to pursue matters relating to foreign commerce, but may also hinder the relationship with its foreign counterparts as the FTC may not be able to help foreign partners.

It also warned that the EU-US Data Privacy Framework, which underpins more than $1trn in cross-border commerce, “would be called into question”.

The EU approved the adequacy of the EU-US Data Privacy Framework in July, ending nearly two years of uncertainty about whether and how Europeans’ data could be transferred to the US.

Since the FTC has grown to act as the main US agency for enforcing data privacy laws, the agency’s inability to take action against US companies over the data privacy rights of EU consumers could jeopardise the data transfer framework.

The US agency has increasingly stepped up its efforts to fight cross-border fraud recently.

Last month, it signed multilateral agreements with Chile, Colombia, Mexico and Peru to combat fraud.

When announcing the cooperation, Maria Coppola, director of the FTC’s Office of International Affairs, said the memorandum of understanding offers “a blueprint for extending cooperation even further through the region” and provides a mechanism for others to join forces with the US, “which will bolster our efforts to fight fraud wherever it might occur”.

Cross-border fraud keeps growing

Thirty years ago, less than 1 percent of fraud reported to the FTC was cross-border, while in 2022 it jumped to more than 11 percent.

In total, the FTC received 1.4m complaints regarding cross-border fraud, which cost more than $5.2bn in losses. US consumers reported nearly 0.5m of these incidents, resulting in $2.49bn in total losses.

These cases involved several high-profile payments-related investigations; for example, the one against Walmart where the FTC accused the retail giant of knowingly allowing fraudulent payments, including cross-border ones, to go through its money transfer service.

In another pending case involving Nexway, the FTC alleges that a multinational payment processing company with headquarters in Switzerland, France and Germany facilitated tech support scammers through credit card laundering.

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