Scams Thrive on Victim Losses—and Why Restitution Almost Never Happens

Scam economies thrive because victims lose money at scale. Those losses are not incidental; they are the primary source of capital that sustains scam centers, laundering networks, and the broader infrastructure of transnational fraud. Without a steady inflow of victim funds, there would be no resources to operate compounds, pay operators, finance cross-border money movement, or absorb enforcement pressure. Forced labor and coercive recruitment emerge downstream as mechanisms to preserve profitability, not as the initiating condition. The economic sequence is clear: scams scale because they generate revenue, and that revenue originates overwhelmingly from victims.

Yet once a scam transfer occurs, victims are rapidly excluded from the systems that respond to the loss. Authorized payments are classified as voluntary, even when consent is manufactured through deception. Financial institutions and platforms rely on this classification to define responsibility. Although banks and exchanges conduct know-your-customer checks on account holders, the resulting information is protected by confidentiality rules and is not disclosed to victims. These safeguards are justified in the name of privacy and financial stability, but their practical effect is to prevent victims from identifying counterparties, tracing the movement of funds, or obtaining the information necessary to pursue recovery. The systems designed to verify identity are not designed to enable restitution.

This exclusion has direct legal consequences. Civil recovery requires an identifiable defendant who controlled the funds and holds assets subject to judgment. Scam architectures are designed to prevent that alignment. The individual communicating with the victim does not own the receiving account. The receiving account holder—often a money mule—does not retain the funds and typically lacks both assets and knowledge of the broader operation. Even when mules are arrested or prosecuted, they cannot return money they never possessed. The individuals who direct the financial flows operate across borders and beyond the jurisdiction of victims’ courts. In practice, there is no party against whom a meaningful civil claim can be brought. Civil remedies do not fail; they never become available.

By the time law enforcement intervenes, the financial nature of the funds has already changed. Scam proceeds move rapidly through multiple jurisdictions, accounts, and asset classes, often passing through crypto wallets, OTC brokers, and informal liquidity providers that eliminate any clean chain of ownership. Once funds are mixed and converted, individual attribution becomes legally unprovable. At this stage, the money is classified as unassignable. Asset-forfeiture regimes are built precisely for this condition: when ownership cannot be reconstructed, value is secured by transferring it into state custody. The process is lawful, orderly, and consistent across jurisdictions. It is also structurally incompatible with restitution. Global assessments by law-enforcement bodies and multilateral institutions consistently indicate that less than one percent of cross-border scam proceeds are ever returned to victims.

The same logic applies to regulatory penalties imposed on banks, payment platforms, and digital asset exchanges. Fines for compliance failures and inadequate monitoring frequently reach into the billions. These penalties acknowledge institutional weakness, but they do not address victim harm. The funds are paid to state, not to the individuals whose losses generated the illicit flows. Victims have no standing in these settlements, no access to the proceeds, and no role in their allocation. Private loss is converted into public revenue through regulatory process.

The outcome is a systemic imbalance. Victims supply the capital that makes scam economies viable, yet they are excluded at every stage of resolution. They cannot access investigative information. They cannot pursue civil recovery. They do not benefit from seizures or fines. When funds are too laundered to be returned, they are absorbed by the state rather than redirected to those harmed. Enforcement resolves cases administratively, but loss remains unrepaired.

This dynamic creates a false binary in policy discussions: either money can be returned to specific victims, or it must belong to the state. That assumption is not inevitable. While individual attribution may be impossible once funds are washed, categorical restitution remains feasible. Seized scam proceeds and regulatory penalties could be partially ring-fenced to support the same category of victims whose losses financed the system—through compensation pools, debt relief, legal assistance, and recovery support. Such mechanisms would acknowledge harm even when precise ownership cannot be reconstructed.

Scam victims are among the most underreported and least supported vulnerable groups in the global financial system. Shame, stigma, and narratives of personal fault suppress reporting and isolate those affected. Treating their losses as private mistakes rather than public harm reinforces this invisibility and leaves the economic engine of scams intact. As long as recovery is treated as an exceptional outcome rather than a structural objective, scam economies will continue to thrive. Awareness campaigns and arrests may disrupt individual operations, but they do not alter the incentive that sustains the system: victim losses remain profitable, and those losses are never returned.

Reframing anti-scam policy around restitution does not require perfect attribution. It requires acknowledging that when money cannot be returned to individuals because it has been laundered, it should not default automatically to the state. Redirecting a portion of seized and penalized funds back to victims—collectively, if not individually—would align enforcement outcomes with the economic reality of harm. Until then, the system will continue to close cases efficiently while leaving the people who financed those outcomes unsupported.