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Banks that monitor minors’ accounts for signs of “sextortion” attacks can prevent grave harm by contacting parents or legal guardians as soon as suspicions arise, analysts told ACAMS moneylaundering.com.

In a Jan. 23 alert, the FBI raised an alarm about financially motivated sextortion schemes, in which predators manipulate adolescents into providing sexually explicit photos or videos, then threaten to release the compromising materials online unless paid a ransom.

The FBI and Homeland Security Investigations together received 13,000 reports of financial sextortion of minors in the 17 months to March 2023, which involved 12,600 victims and led to at least 20 suicides. Victims are typically boys aged between 14 and 17, though “any child can become a victim,” the FBI said.

According to Stacey Troup, an independent financial crime analyst in northern New Jersey, compliance officers can play a role in halting sextortion scams. Because an adult must co-sign on a minor’s bank account, bank personnel can communicate directly with the adult if signs of abuse emerge, in addition to filing a suspicious activity report to alert law enforcement, she told moneylaundering.com.

“It has to be an effort in concert between the parents and the banks to keep the kids safe.”

Financially motivated sextortion against teenagers is a relatively recent twist on the broader crime of child sexual exploitation.

Sextortion gangs use social media sites, messaging apps and online gaming platforms to target victims, taking advantage of weak identity verification protocols to set up multiple online personas. As awareness of the scam grows, some attackers are now also obtaining images of teens without their knowledge or consent—or are claiming to have done so—by hacking their computer cameras.

Offenders may pose as neighbors or classmates of the target to gain trust of their victims, but are usually located in Nigeria or Ivory Coast in West Africa, or in the Philippines or other Southeast Asian nations, according to the FBI.

In a recent case, James Timothy Woods, a 17-year-old high school senior from Ohio who was visiting colleges and planning a career as an attorney or in law enforcement, took his own life in November 2022 within 24 hours of being targeted by a sextortion scheme on Instagram.

Police investigators found that the scammers who targeted Woods initially demanded the teenager hand over $6,000 to delete a sexual video chat he had been tricked into transmitting to a woman online. After he turned over $100 worth of iTunes gift cards, the gang peppered him with 200 messages threatening he would be labeled a pedophile and lose his career prospects unless he paid more.

“James tried everything he could think of to stop his parents from learning of the embarrassing acts that took place,” parents Tamia and Tim Woods wrote in an online memorial to their son. The couple said they came forward publicly with details of the scam to help other families avoid a similar tragedy.

Warning signs

Troup, the New Jersey-based consultant, noted that although teen sextortion may be perceived as a family matter, intervention by financial institutions is important because victims often go to great lengths, as Woods did, to conceal an attack from family and peers.

Gift cards and prepaid cards like the iTunes cards Woods used are a common form of sextortion payment, as scammers in the U.S. or abroad can obtain account access codes via text from their victims and access the stored value remotely, or resell access to the account to third parties, she said.

Accordingly, unusually large purchases of gift cards via debit card—or unusually large cash withdrawals that could be converted to gift cards—should be treated with suspicion.

“[Parents] can set the account up to require their approval of transactions over $100 that are not done as a debit card purchase in person,” Troup wrote in a Feb. 12 blog post on LinkedIn.

Unusually large peer-to-peer transfers to new recipients—who may already have been flagged for suspicion of other frauds—can be another indicator of sextortion. Victims who try to pay off their tormentors via peer-to-peer platforms, such as Zelle, may in the memo line refer to photos, video clips or the online platform on which they shared images with the scammer.

If certain purchases or peer-to-peer transfers raise suspicion, banks can further check public social media feeds for any indications of a sextortion attack against the account holder, Troup said. In Woods’s case, scammers made good on their threats and began posting still images captured from the video sent by the teenager on social media sites to ratchet up the pressure.

The chief compliance officer of a financial services company in the Southwest told moneylaundering.com that the low dollar amounts characteristic of transactions on minors’ accounts present a barrier to instituting transaction-monitoring controls against teen sextortion.

“For minor accounts, those are usually for snacks and such, so the dollar amounts are way below anything we would normally look at,” the compliance officer said on condition of anonymity.

A 2022 survey by Fidelity Investments found that roughly half of youths aged between 13 and 17 have access to funds from a custodial or joint account with a parent, grandparent or legal guardian.

While minors’ transactions rarely approach the $5,000 threshold for suspicious activity reporting, compliance departments should consider setting alert thresholds far lower for signs of minor sextortion, Troup said.

“Banks should treat $100 for a minor like $10,000 [for adults].”

Outgoing payments from accounts held by minors to cryptocurrency platforms could also indicate sextortion.

Chris Bagnall, a former compliance officer at Fifth Third Bank in Cincinnati, Ohio, told moneylaundering.com that sextortion scammers are increasingly pushing their victims to make payments in cryptocurrency, as criminals can move digital assets more easily across borders.

Having set up accounts to teach his three children saving habits, Bagnall, now a director at financial services information technology company Quantexa in Chicago, said he set alerts to notify him of outgoing payments of any amount.

“My kids only get their debit card when I hand it to them to go pay for something that they want to buy.”

Contact Fred Williams at fwilliams@acams.org and Chelsea Carrick at ccarrick@acams.org