How to Protect Your Members from Scams
By David Ver Eecke, Senior Fraud Product Manager, PSCU
“Act now! Limited time offer to pay off your mortgage!” says the junk mail in your mailbox. “Click here, you have just won a free prize!” reads the spam in your email account. “You have just won a free cruise to the Caribbean!” claims the robocall on your cell phone.
Do these sound familiar? Those are just a handful of the types of scams that credit union members, their friends and family are exposed to on a daily basis. In fact, the FBI has catalogued 23 different types of scams on its website – and those are just the “most common” types.
Unwanted solicitations and too-good-to-be-true opportunities bombard consumers on a regular basis. While many individuals ignore, delete or toss these scams, fraudsters continue on and count on just one person to respond and get hooked. And, unfortunately, scammers often prey on those who are the most vulnerable.
Most Common Types of Scams
A survey of fraud professionals conducted in 2017 by Verafin revealed the most common types of scams are romance, work from home and lottery scams. Romance scams continue to be the most popular choice, with more than a quarter of scams being conducted in this fashion.
In a typical romance scam, a fraudster will create a fake online dating profile. The fraudster then attempts to gain a victim’s trust by showering him or her with loving words and gifts. Once the perpetrator has gained the victim’s trust, he or she will pretend to need money for some sort of personal emergency – for example, a sick family member or financial hardship. Once the funds are sent to the scammer, they are nearly impossible to recover. These forms of scams are the most popular as they do not require much effort to set up or execute. Essentially, any fraudster with a computer and an internet connection can start his or her very own romance scam operation.
The majority of scams originate online as the most common scam tactics are conducted via email (36 percent), website (22 percent), phone (13 percent) and malware (6 percent). The anonymity provided by electronic communication provides a level of safety for scammers and their operations. Additionally, most schemes originate in and are executed from foreign countries, making it difficult for law enforcement to prosecute or recover stolen funds.
The Size of the Problem
As can be expected due to their prominence in consumers’ day-to-day lives, billions of dollars are lost to scams each year in the U.S. alone – and that does not include the billions of dollars lost to credit and debit card fraud. In fact, the problem is so widespread around the world that governments have created websites dedicated to raising awareness and tracking scams.
One of the most innovative and informative websites is Australia’s ScamWatch Radar, which tracks scams on a monthly basis by type, delivery method, gender and age. The site also provides monthly insights into who is most impacted and which scams are the costliest to consumers. Unsurprisingly, romance scams cost Australians dearly in 2018 with nearly $24 million AUD ($17 million USD) in losses, according to ScamWatch. In the U.S., the FBI’s Internet Crime Complaint Center (IC3) reported more than $230 million in losses due to romance scams with over 15,000 complaints during the same time frame. That sort of low risk and high reward is what attracts scammers to this type of scheme.
It is sometimes hard to understand how someone could fall victim to a scam and have his or her savings siphoned away by an unknown entity over the internet or phone. However, it is important to remember that the scammers are smart, organized and often work together to successfully scheme against individuals. The sad reality is that once victims fall prey to a scam by sending money, they are often placed on a “sucker list,” according to FBI Special Agent Christine Beining. This list of marked “suckers” is then used by scammers to target victims who are the most susceptible to being scammed again. Fraudsters love to play with their target’s emotions and will often create a sense of urgency, so the victim does not have time to think about the deceptive request. Scammers may even produce official-looking documents and use high pressure tactics to get what they want from their victims.
Prevention and Solutions
So, what can be done to protect your members from scams? Education is the most important weapon credit unions can put to use. Educating your members about the numerous and different types of scams is an important step that will potentially help members recognize a fake offer or solicitation. Data breaches and compromises in recent years have taught many members how to spot unauthorized usage of their credit or debit card. However, some members still have a difficult time spotting scams due to the personal nature of certain scams as scammers often appeal to fears, hopes or the excitement of a sudden windfall to make their scheme successful. Providing information about emerging scams will also help your members steer clear and avoid potential losses. Making members aware of scams online, in newsletters and in your credit union’s branches will keep threats on their radars.
It is also important to remind your members to be suspicious of unusual payment methods and to never send money to someone they do not know. There may be many different types of scams out there, but all of them end with money being transferred in some way. The scammers will often ask for payments to be made through prepaid or reloadable gift cards, wire transfers, money orders or cryptocurrency as all of these payment methods are difficult to trace. Confirming whether they know the person they intend to send money to before the transaction takes place is a good way to start a dialogue if a credit union suspects a member is being scammed. Credit unions may also want to place signs in branches alerting members to suspicious request for money transfers. Encouraging members to report scams to the appropriate government agencies is another step that can help.
Unfortunately, it seems that scams are here to stay. The low risk, high-reward mechanics of scams mean that scammers have little startup costs and can easily conduct them if they have Internet accessibility. And while the amount of losses caused by scams seems to rise every year, that does not have to be the case. Educating members and training them to spot scams can go a long way toward keeping members safe from scammers and their schemes.
David Ver Eecke is a Senior Fraud Product Manager at PSCU. David knows that the cooperative nature of credit unions provides a unique advantage when it comes to stopping fraud. When he isn’t working on products to increase payment security for credit unions and wage war against fraudsters, he finds time to write about topics on risk and fraud. David has worked in the financial services industry focusing on fraud and risk for over seven years.