The financial services industry has been hit hard in the past 18 months – $ 76 billion lost in Paycheck Protection Program (P3) fraud, over $ 300 million lost in stimulus check scams and a significant increase in credit card and check fraud. Overall, attempted financial crimes increased 109%. But rather than directly targeting institutions, fraudsters take the path of least resistance, which is often that of individual members. Their methods vary, but include: IRS scams, romance scams, or even sneaky account takeovers during P2P, where a hacker can pose as a credit union employee while helping a new member to open an account, ultimately stealing account login information and transferring funds to their own. Account.
As much as we would like to rid the world of scammers, it is impossible. As new technologies emerge and the financial services industry becomes more and more digital, fraudsters are evolving and updating their strategies as well. And as we move towards a post-pandemic environment and government loans and relief programs dry up, fraudsters will begin to turn their attention to traditional financial crimes. In 2021, we have already seen an increase in traditional crimes such as ransomware, social engineering, identity fraud and money laundering. It’s safe to say the industry can use a refresh on how to fight back.
So what can credit unions do to protect themselves against fraud?
- Start with education. The industry is collaborating better than ever, sharing resources and stories to help financial institutions defend themselves against fraud. It is essential that credit unions take advantage of the many resources available at the community level to develop their own prevention strategies.
- Employees are the first line of defense. Installing training programs within organizations and educating employees about the different types of financial crimes and detection mechanisms will prepare staff to detect and report suspicious activity. Your employees are your first line of defense and making sure they are trained and prepared is essential to keep your data and your business secure.
- Promote your community. Raising awareness of fraud trends in your community through educational campaigns and programs will help your members understand when they have been targeted and how to respond. Highlighting the reality of fraud puts your brand in an advocacy position, strengthening the bond between your caisse and your members and reducing the risk of members taking the bait.
Credit unions need to understand their customers before sharing personalized educational content. For example, millennials, known as the tech-savvy generation, may have a deeper understanding of how security works, but could still use information to guide them safely on new purchases when they start to shop. apply for personal loans, credit cards and mortgages. Baby boomers, on the other hand, are used to coming to a branch and feel secure knowing that their financial needs will be taken care of in person. Like the rest of the world, they have been immersed in this highly digitalized environment and may not be confident in the safety of their money. This is an opportunity for credit unions to strengthen member relationships, restore your commitment to promoting a safe environment, and educate you on the steps you are taking in this direction.
- Build your financial crime program. Start by identifying, valuing and classifying your assets and risks, then tailor financial crimes and cybersecurity tools accordingly. Many credit unions are beginning to develop comprehensive programs as part of their long-term business plans, rather than looking at separate and disconnected components.
- Take advantage of modern technologies. Once your financial crime and cybersecurity programs are in place, implement defense technologies such as encryption, software patches, firewalls, multi-factor authentication, and real-time monitoring systems to reduce the likelihood of an attack. Early detection mechanisms for breaches that send alerts once the fraudster has entered the system are also crucial, as they will allow you to react quickly and minimize damage. Finally, having backup and recovery programs will help you get your data back quickly in the event of an attack. Regular monitoring and evaluation of these technologies along with your institution’s plans to combat financial crime and cybersecurity risks will help maintain a strong defense program, making it increasingly difficult for fraudsters to break through.
- AI is the future. Innovative credit unions that are already ahead of the game with their financial crime and cybersecurity programs can increase their resilience by using artificial intelligence and machine learning technologies that analyze member behaviors, track transactions, and report any deviation from usual behavior in real time. Fully automating fraud detection processes will help your credit union quickly identify and challenge suspicious activity by directly notifying account holders, reducing the risk of errors down the line, reducing costs and increasing efficiency throughout the organization.
Educating members on the reality of financial crimes, as well as fraud prevention best practices, creates the right balance to help mitigate losses while keeping members safe and comfortable in their new digital banking experiences. Credit unions that take this into consideration will not only have a stronger line of defense as we move into this post-pandemic environment, but will maintain their central role in their communities, protecting the interests of their members and increasing the trust that the members have instilled in them.
Rene Perez is a Financial Crime Consultant at Jack Henry & Associates, a Monett, Missouri-based SaaS provider primarily focused on the financial services industry. He also contributes to the US Federal Reserve Payments Improvement Fraud Task Force.