Why Underreporting Holds Back Fraud Prevention

Underreporting of digital fraud is a well-known global issue—but just how widespread is it?

The answer isn’t simple, as the true extent of the underreporting of fraud remains difficult to quantify. Let’s delve into what we know and why it matters. 

While data on underreporting is limited, the available figures paint a concerning picture. Research from the UK reveals that only 32% of individuals targeted by a scam reported it. Yet, the actual reporting rate may be even lower. The Crime Survey of England and Wales (CSEW) estimates that just 13% of fraud cases are reported to the police or Action Fraud, the UK’s national center for fraud and cybercrime reporting. 

Data from the United States suggests even lower reporting percentages. A study by the Federal Trade Commission (FTC) found alarmingly low fraud reporting rates: just 2.0% for cases with losses under $1,000 and 6.7% for those exceeding $1,000. Using this data, and conservatively assuming that all cases with losses of $10,000 or more were reported, the FTC estimated total fraud losses in 2022 to be $20.5 billion—a figure 2.3 times higher than the officially reported $8.8 billion, underscoring how severely underreporting masks the true scale of fraud. 

Additionally, some studies have found that residents of less affluent countries experience financial losses from scams more frequently but are less likely to report them, highlighting a disparity in both victimization and reporting practices.  

Let’s consider what these already conservative estimates imply for global fraud losses, which allegedly exceeded $1 trillion in 2024 alone. 

Why do people fail to report fraud? 

Underreporting is a complex problem involving several key aspects. 

Psychological barriers 

Psychological barriers are among the most significant contributors to low reporting rates. Studies show that victims of fraud often experience shame and embarrassment, feeling humiliated for being deceived—especially when the scam seems “obvious” in hindsight—leading to reluctance in reporting. 

This reluctance is further compounded by secondary victimization, where victims of online fraud face high levels of blame from their families, friends, professionals, and the broader community. There is also a widespread belief among victims that authorities won’t take their cases seriously, particularly if the financial losses are relatively small. 

Finally, the trauma of being scammed can cause significant psychological stress, prompting many victims to choose moving on rather than reliving the ordeal by reporting it. 

Trust barriers 

Research indicates that trust barriers are also a major contributor to underreporting. Many victims believe that reporting fraud won’t result in meaningful action, such as recovering lost funds or apprehending the perpetrators, which significantly reduces their motivation to report. 

Unfortunately, this perception is often shaped by word-of-mouth accounts, as illustrated in a real-life example from our latest whitepaper, where a UK victim of an investment scam describes: “Our bank didn’t contact us until around 18 months later [after the scammer took over the victim’s account through remote access tool], by which time we had lost over £10,000. They froze our account and called us to ask us to go into the branch, which we did the next day. When we were in there the man from the fraud team actually accused us of committing fraud. After we had tried to explain what was happening he actually said: ‘I’m sorry sir, but I think you’re lying’.”  

Another victim expresses disappointment with their bank’s lax approach to handling a romance scam, stating: “To be completely honest with you, they [the bank’s customer service team] were absolutely awful. When I finally realised that I had been the victim of a scam I called my bank and told someone at the fraud team what had happened. […] I presented them with a very strong written case as to why I believed they had not carried out due diligence or carried out a duty of care to me as a long standing customer. They sent me a very generic letter back simply saying it was too long ago for them to consider looking into it. […]”  

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Some victims also worry that reporting the incident could expose them to further attacks or retaliation by the fraudsters, especially if sensitive personal information was compromised. Privacy concerns fall into this category as well, including fears that personal details shared during the reporting process might be mishandled or leaked, or worries about how the provided information could be used beyond the fraud investigation. Another factor damaging trust is the lack of feedback: victims often receive no updates after reporting, leading to disillusionment with the process. 

Practical barriers 

The practical obstacles to reporting cannot be ignored either. Victims may not know how or where to report fraud incidents or which organizations and authorities—such as the police, banks, non-profits, or ombudsmen—should be involved. This process can vary significantly from country to country. 

Complex reporting processes can also pose significant obstacles, as lengthy or unclear procedures discourage timely reporting. The lack of standardized processes across banks and jurisdictions further fragments and complicates the reporting experience. Additionally, victims may avoid reporting because they perceive it as time-consuming and offering little personal benefit. 

How can banks encourage fraud reporting? 

Based on the findings above, banks have numerous opportunities to encourage reporting and address concerning statistics. Below is a list of the most important steps: 

1. Make reporting accessible and user-friendly: Simplifying and streamlining the reporting process is essential for increasing reporting rates. Banks should ensure that consumers are informed about where and how to report any suspicious contact or fraudulent activity. The reporting process should be accessible and easy to understand, offering multiple reporting channels, such as online forms, dedicated hotlines, and in-person reporting to accommodate the needs of diverse customers, including those who are disadvantaged or less tech-savvy.

2. Educate customers: Awareness campaigns are undoubtedly a crucial part of banks’ fraud protection strategies. Providing clear information on how—and, most importantly, when—consumers should report fraud or fraud attempts is essential. Banks must also recognize that scams and phishing attempts are an everyday reality for most consumers. Therefore, it is important to inform customers about when they should notify the bank or authorities and when they can simply block and delete the “spam.”

3. Offer anonymity: To encourage trust and a sense of security, banks might consider providing an option to submit anonymous fraud reports. Ensuring that victims’ identities are protected can, in some cases, alleviate fears of retaliation or further data breaches. This approach also helps protect potential whistleblowers.

4. Provide support: The Australian Institute of Criminology found that victims are more likely to report fraud if they feel they will receive compassionate, immediate assistance. Banks should offer empathetic, prompt support when fraud is reported. Examples of support could include dedicated fraud response teams, counseling services, and compensation plans when applicable.

5. Foster trust: According to Deloitte, customer trust is a key driver in their willingness to engage with banks on sensitive issues like fraud reporting. It’s essential for banks to cultivate a trustworthy reputation, reassuring customers that their reports will be taken seriously and acted upon.

6. Use behavioral nudges: Banks can use behavioral science techniques, such as nudges or prompts within digital banking platforms, to encourage users to report suspicious activity. For example, after unusual transactions, a pop-up message can encourage users to verify and report potential fraud.

7. Promote success stories: Highlighting positive case studies can motivate victims to come forward. By sharing anonymized success stories where reporting led to the recovery of funds or the apprehension of fraudsters, banks can demonstrate the tangible benefits of reporting fraud.

The connection between reporting and effective fraud detection systems 

Encouraging reporting and increasing reporting rates is crucial even when banks rely on advanced fraud detection systems. This is because fraud detection technologies, such as behavioral intelligence, and reporting work together in a symbiotic relationship. 

The more reported incidents, the richer the dataset available for behavioral intelligence tools. This enhanced dataset improves the accuracy and responsiveness of fraud detection. In other words, the more data behavioral intelligence systems have, the better they can identify patterns, anomalies, and emerging fraud tactics. Therefore, the implementation of advanced fraud detection systems should go hand in hand with efforts to improve fraud reporting processes and responses. 

However, implementing technology can still decrease the impact of underreporting and play a significant role in determining the scale of fraud. For instance, ThreatMark’s behavioral intelligence can detect fraud that has not yet been reported by flagging anomalous behavior patterns—even before the user is aware they’ve fallen for a scam. Our Behavioral Intelligence Platform can also identify fraudulent users against legitimate customers, interrupting fraud operations across all stages of the attack and protecting bank customers at scale. 

Learn more about behavioral intelligence 

Why is underreporting a critical challenge for 2025?  

Reporting digital fraud—and encouraging consumers to always do so—is crucial for several reasons. 

First and foremost, banks need to understand the full scale of fraud they are facing. This is closely linked to increasing reporting rates. By reporting fraud, banks and other organizations can gain a comprehensive understanding of fraudulent practices, which is essential for developing effective prevention, detection, and enforcement strategies. 

Second, without the defrauded customer reporting the fraud, the chances of recovering stolen funds are minimal. In many cases, a quick response is crucial to saving at least some of the money. For example, at the ThreatMark Czech&Slovak Fraud Summit, police officers shared that funds can sometimes be recovered even after being deposited into a cryptocurrency machine, as operators often cooperate with law enforcement. 

Third, fraud reporting enables banks, law enforcement, and regulatory agencies to take action against perpetrators, preventing further victimization. In this way, reporting directly helps protect others from falling victim to similar scams. 

Last but not least, reporting helps build awareness, increase vigilance, and reduce the stigma surrounding digital fraud. This creates a positive snowball effect, where increased reporting reduces the likelihood of further victims and encourages those who are defrauded to come forward. 

However, the low reporting rate makes all these efforts difficult. Without proper reporting, we only get a glimpse of the true scale of fraud, which benefits no one but the fraudsters. Therefore, increasing the reporting of online fraud is one of the most important tasks in improving the security of the digital environment in the future.