By David Ver Eecke
“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. “Your computer has a virus!” claims the robocall on your cell phone.
Do these sound familiar? These are just a few types of scams that credit union members, their friends and family are exposed to on a daily basis. While many individuals ignore, delete or toss these scams, fraudsters need just one person to respond and get hooked.
Most Common Types of Scams
The majority of scams originate online as the anonymity provided by electronic communication provides a level of safety for scammers and their operations, and most schemes originate in and are executed from foreign countries, making it difficult for law enforcement to prosecute or recover stolen funds.
A survey of fraud professionals conducted in 2017 by Verafinrevealed 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 and attempt to gain a victim’s trust by showering him or her with loving words and gifts. After the perpetrator has gained trust, he or she will pretend to need money for a 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 do not require much effort to set up or execute; any fraudster with a computer and an internet connection can start his or her very own romance scam operation.
The Size of the Problem
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 2018, 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 important to remember that scammers are smart, organized and often work together to successfully scheme against individuals. Once victims fall prey to a scam by sending money, they are placed on a “sucker list,” according to FBI Special Agent Christine Beining. This list is then used by scammers to target victims who are the most susceptible to being scammed again. Fraudsters often play with their target’s emotions and 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? Educating members about the numerous and different types of scams is an important step towards helping them 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 their personal nature as scammers often appeal to fears, hopes or the excitement of a sudden windfall to make the scheme successful. Providing information about emerging scams to members online, in newsletters and in your credit union’s branches will help members keep threats on their radars to steer clear and avoid potential losses.
Remind your members to be suspicious of unusual payment methods and to never send money to someone they do not know. Scammers often ask for payments to be made through prepaid or reloadable gift cards, wire transfers, money orders or cryptocurrency due to lack of traceability. 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 want to place signs in branches alerting members to suspicious requests for money transfers and encourage them to report scams to the appropriate government agencies.
It Pays to Educate
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.