Not My Credit Union: 6 Ways to Fight Back

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The financial services sector has been hit hard in the past 18 months – $76 billion lost in Paycheck Protection Program (PPP) fraud, more than $300 million lost in stimulus check scams and a significant increase in credit card and check fraud. Overall, financial crime attempts increased by 109%. But rather than targeting institutions directly, fraudsters prey on the path of least resistance, which is often that of individual members. Their methods vary but include: IRS scams, romance scams, or even underhanded account takeovers during P2P, where a hacker can impersonate a credit union employee while helping a new member to open an account, ultimately stealing account login information and transferring funds to his own. Account.

Although we would like to rid the world of fraudsters, it is impossible. As new technologies emerge and the financial services industry becomes increasingly digital, fraudsters are also evolving and updating their strategies. And as we move into 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 theft 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 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. Implementing training programs within organizations and educating employees about 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 ensuring they are trained and prepared is essential to keeping your data and your business secure.
  • Educate your community. Raising awareness of fraud trends within your community through campaigns and educational programs will help your members realize they have been targeted and know how to respond. Highlighting the reality of fraud puts your brand in a defensive position, strengthens the bond between your credit union and your members, and reduces the risk of members taking the bait.

Credit unions need to understand their customer base 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 as they begin to apply for personal loans, credit cards and mortgages. Baby boomers, on the other hand, are used to coming to the 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 thrust into this highly digitized environment and may not be confident in the security of their money. This is an opportunity for credit unions to strengthen relationships with their members, re-establish your commitment to promoting a safe environment and learn about the steps you are taking in this direction.

  • Build your program against financial crime. Start by identifying, assessing and classifying your assets and risks, then adapt 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, 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 breach detection mechanisms 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 recover your data quickly in the event of an attack. Regular monitoring and evaluation of these technologies along with your institution’s financial crime and cybersecurity risk plans 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 curve 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 deviations from the usual behavior in real time. Complete automation of fraud detection processes will help your credit union quickly identify and challenge suspicious activity by notifying account holders directly, reducing the risk of errors down the line, reducing costs and increasing efficiency across the organization.

Educating members about the reality of financial crime, along with fraud prevention best practices, creates the right balance to help mitigate losses while keeping members safe and comfortable in their new banking experiences digital. Credit unions that take this into account will not only have a stronger line of defense as we move into this post-pandemic environment, but they will maintain their central role in their communities, protecting the interests of their members and increasing the confidence that the members have instilled in them. .

Rene Perez Rene Perez

Rene Perez is a Financial Crimes Consultant at Jack Henry & Associates, a Monett, MO-based SaaS provider primarily for the financial services industry. He also contributes to the Federal Reserve Bank Payments Improvement Fraud Task Force.

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