Insights

Understanding Impersonation Fraud vs. Spoofing Fraud: A Guide for Financial Professionals

Apr 07, 2025

Financial institutions are increasingly targeted by a wide range of sophisticated fraud schemes. Among the most prevalent and damaging are impersonation fraud and spoofing leveraging the telecommunication channel. While these deceptive tactics may appear similar, understanding their key differences is essential for banks, financial service providers and consumers to effectively recognize, prevent and combat these evolving threats.

Impersonation Fraud

Impersonation fraud occurs when a fraudster poses as a trusted individual, such as a bank representative, government official or even a colleague, to deceive victims into transferring money or disclosing sensitive information. This type of fraud often exploits trust and social engineering tactics to manipulate individuals into taking action that benefits the scammer.

Common Impersonation Fraud Tactics:

• Vishing (Voice Phishing): Scammers call victims pretending to be from financial institutions, law enforcement, or technical support, using urgency and fear to extract sensitive information or payments.

• Smishing (SMS Phishing): Bad actors send fraudulent text messages claiming to be from trusted entities, urging recipients to call a provided number to resolve urgent issues. When the victims call, they are directed to a cloned Interactive Voice Response (IVR) system mimicking the legitimate entities’ phone menu, tricking them into divulging sensitive information such as account numbers and PINs.

• Robocall Impersonation: Automated calls posing as financial institutions or government agencies, designed to trick victims into providing personal or account information.

Spoofing Fraud

Spoofing fraud, on the other hand, involves hijacking digital identifiers such as phone numbers to make fraudulent communications appear legitimate. Unlike impersonation fraud, which focuses on deceiving individuals through misrepresenting a person or brand, spoofing fraud relies on misleading victims by falsifying the information shown on a caller ID display.

Common Spoofing Fraud Techniques:

• Caller ID Spoofing: Fraudsters manipulate phone numbers to appear as if they are calling from a legitimate institution.

• Neighbor Spoofing: Scammers use phone numbers that resemble the recipient’s local area code and prefix, increasing the likelihood of the call being answered.

• Toll-Free Number Spoofing: Manipulating caller IDs to appear as official Toll-Free Numbers, tricking victims into believing they are speaking with trusted organizations.

What can Financial Institutions do to help mitigate these risks?

1. Enhanced Customer Education: Provide clear guidance to customers on recognizing fraudulent communications and encourage skepticism of unsolicited requests for sensitive information.

2. Caller Verification Processes: Implement multi-factor authentication and encourage customers to verify calls by calling the official institution number.

3. Call Authentication Solutions: Leverage STIR/SHAKEN protocols and establish Right To Use (RTU) to verify phone numbers for outbound use. This ensures that only entities that have proven the right to use a phone number are accurately identified, reducing the risk of fraudulent interactions.

4. AI-Powered Fraud Detection Tools: Deploy advanced fraud detection solutions that analyze behavioral patterns and flag anomalies in communication.

5. Internal Staff Training: Conduct regular cybersecurity awareness training to help employees recognize and respond to fraud attempts.

While both impersonation and spoofing fraud are serious threats to financial security, understanding their nuances can help institutions better protect themselves and their customers. By implementing proactive measures, leveraging advanced security technologies and fostering awareness, financial professionals can significantly reduce the risk of falling victim to these deceptive schemes.

Learn more about how Somos can help your financial institution enable fraud prevention strategies to protect your organization with RealBrand. Contact our team today!