Fraudsters Are Going 'Back to School'

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In most college towns, this is the time of year when swarms of U-Hauls and overstuffed cars bear down onto college campuses. Students will settle into their dorms and likely kick off their social lives before their classes even begin. The funds that they have for day-to-day expenses will begin to run low, and students will look for ways to supplement their income. This is prime opportunity for fraudsters to seek out and prey upon students.

Given that, we can deduce why college campuses are a ‘hang out’ for fraudsters - because students are easy targets. The sheer volume of students makes it easy to recruit vulnerable, needy, and/or naive students. I find it interesting that the scams have not changed much since I was in college. Scams relating to fraudulent grant letters, credit cards applications, work from home, check cashing and the ever so popular ATM card scams are still thriving. It is still common for fraudsters to not only pay students to pass bad checks through their accounts for nominal compensation, but also to buy their checks and ATM cards, wherein they perpetrate fraud and the student then reports the items stolen, more times than not resulting in reimbursement, especially for the Reg. E claims.

Students are more wired today than ever before, and with the speed and ease of money movement, it is making it increasingly more challenging for banks to monitor for and prevent fraud losses. Yes, check and ATM fraud are still booming, but the growth of ACH fraud is looming on the horizon. Fraudsters have evolved and so should your fraud detection and risk mitigation solutions. As fraudsters migrate cross channel and cross product, banks too need to be aggressive and ensure those analysts and investigators have all of the tools necessary to detect and prevent the fraud. And, as we have seen in recent court cases where banks are incurring significant financial losses as well as reputational loss, now is the time banks need to revisit their prevention and mitigation risk strategies and solutions.

With the explosive growth in online and mobile banking, as well as fraud prevention efforts becoming more demanding and sophisticated, it doesn’t hurt to reiterate a few recommendations to banks:

• Educate your employees as well as your customers to the red flags for scams
• Ensure you have strong account opening verification processes especially for web based account openings (ex. follow your KYC guidelines)
• Ensure ongoing robust transaction monitoring across channels
• And most importantly, move quickly to incorporate the FFIEC recommendations

Questions to ask yourselves: Is your fraud risk team getting the tools they need to mitigate fraud? Are your customers and employees aware of the latest fraud scams? Is your prevention solution capable of handling cross channel fraud? Have you begun discussions around the FFIEC recommendations?

Posted in: ACH and Wire Fraud Check Fraud Collusive Networks Credit Card Fraud Debit Card Fraud Deposit Account Fraud New Account Fraud Account Takeover Identity Theft