Focus on Fighting Fraud
Posted by Len Naidoo, CUDE, Director – Electronic Payment Services , Catalyst Corporate FCU on 6/28/2018

In our industry, it’s difficult to get experts to agree on any one thing. But when that one thing is fraud prevention, the viewpoint is unanimous – fraud must be stopped.

It’s happening with cards.
In a recent study on fraud prevention by the Federal Reserve Bank of Minneapolis, 96 percent of debit card issuers and 77 percent of credit card issuers responding experienced card fraud losses in 2016. Eighty percent of respondents reported counterfeit debit card use at point-of-sale outlets and fraudulent use of card data online as the top two most frequent debit card fraud attacks.

Card protection features, such as Catalyst Corporate’s CardNav, give cardholders additional safeguards for their finances. Users can turn cards off when they’re not being used, set geographic boundaries and dollar limits to deter unauthorized use, and choose to receive real-time alerts for certain types of card activity. Cardholders set all these controls on their mobile devices.

Why is this important? The study finds that information sharing is the top suggestion for mitigating fraud. Some of the methods cited for information sharing include comprehensive database and alerting and a tracking system to determine the source of the fraud.

It’s happening with wires.
The benefit of sending a wire transfer is payment certainty. The downside is no recourse or avenue for disputing the payment once it goes through.

Fraudulent wire transfers occur most often when members fall for get-rich-quick schemes or romantic scams. The rise of social media and online dating sites facilitates these types of traps by capturing a member’s attention and making them more likely to respond to a wire transfer request.

Email fraud is also on the rise. Fraudsters monitor email accounts for specific types of transactions, such as mortgage closings. During the interaction between the consumer and the mortgage company, fraudsters can insert themselves into the email string, requesting the member to submit payment via wire transfer.

It’s happening inside credit unions.
As much as we hate to admit it, fraud is also occurring because of credit union procedures. Many credit unions allow members to initiate wire transfers via email or over the phone, two vehicles easily hacked by fraudsters. Even when credit unions call a member at their listed home phone number to confirm, a fraudster can easily redirect the number, answer the phone and confirm the wire transfer on a member’s behalf.

If your credit union does allow members to request wire transfers by email or phone, develop additional validation steps, including questions with answers that can’t be obtained through credit reports, social media, etc.

How do you make it stop?
Can we cut out fraud completely? Probably not. But we have to start somewhere. Mitigate wire fraud by training your credit union staff to scrutinize each wire request. Staff should ask questions and follow up with members to identify the reason for the wire requests and document conversations for future reference.

Credit unions should also consider investing in fraud alerts for cards, remote deposits and other transactional services, so that staff – and members – can detect fraudulent activity before it’s too late.

The best offense is a good defense, so make sure your credit union and your members are protected from fraud.

Categories: Business Partners, Education & Training, Employment & Staffing, Technology Consulting & Compliance
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