The Many Faces of Imposter Fraud

​What can credit unions do to combat the tactics that scammers are using in the digital space? Start with early detection using AI, real-time reporting, and fraud blocking tools. 

By Maryanne Colucci with Envisant

In 2021, the most frequently reported cases of fraud to the FTC involved imposter scams. Imposters are everywhere and difficult to spot, especially when they enter the digital space. What imposter tactics are these scammers using and what can your credit union do to combat them?

Two of the most common imposter fraud schemes credit unions have encountered in the last year or so involve romance scams and identity theft, leading to account takeovers and fraudulent P2P transfers.

Identity Theft
Some examples of identity theft seen by our fraud team at Envisant include fraudsters imitating a credit union’s phone number to trick members into giving their account information. The scammers then either use that stolen “true name” to take over a user’s account and transfer money or create a new account.

Increasingly, fraudsters are also combining different people’s personal information to create “synthetic identities.” They use these false identities to create new accounts and build up credibility over time with a credit union, eventually taking advantage of the relationship to cheat the credit union out of significant sums of money. Synthetic identity fraud is more complex and thus harder to combat than true name fraud.

Romance Scams
According to the FTC, romance scams reached record levels last year. These can occur both on social media and dating sites. Fraudsters fake their identities and pretend to enter a romantic relationship with someone to get them to send money or even help them transfer stolen funds. Many operate outside the U.S. making prosecution difficult.

Ways to Fight Back Against Fraud
Prevention and early detection are the best ways to counter fraud attacks. Using multiple forms of verification for all types of new accounts is a good place to start. To help with this step, the Social Security Administration has launched an electronic system for checking that an applicant’s name, date of birth, and social security number match its records. Tracking IP addresses is another preventative measure to verify account applicants and users.

Member awareness is also vital to preventing fraud. Keeping on top of fraud trends and sharing that information with members can make all the difference. Even if your credit union already shares tips on avoiding fraud, you may want to check that you are using the most effective communication channels to share that information. Hosting educational events can help as well.

If fraud still occurs, early detection is vital. Digital identity tools utilizing artificial intelligence, real-time reporting, and fraud blocking tools can help stop initial fraud attempts. Setting money transfer limits can help cut down on losses if fraudsters still manage to sneak through the system. Once your team is aware of the fraud, you can block the fraudster’s IP address or set limits on how they can use the funds in their account to prevent further loss.

At Envisant, our mission is to help credit unions compete and to provide credit unions with a favorable operating environment and quality information, products and services, which have value, and which enable credit unions to exist, compete and prosper in the financial marketplace. Visit our website to learn more. Envisant is a DakCU Senior CAP preferred partner. Contact George McDonald, DakCU's Chief Officer of Strategic Services with any questions.