How Credit Unions Can Stay Ahead of Elder Scams and Fraud
By Todd Rovak, CEO, Carefull
September 9, 2024
Stop elder fraud before it happens starts with educating members and using your credit union's biggest asset: the relationship within your community.
Identity Verification Is No Longer Enough
Credit unions are facing a growing threat: imposter scams. Thieves are claiming to be with financial institutions, government agencies and other known businesses and persuading account holders to hand their life savings over to them. Because account holders are authorizing transactions, traditional fraud detection tools are being bypassed
Losses from imposter scams have increased sixfold from 2019 to 2023, surpassing $1.3 billion. Given the low reporting rate, this figure is likely many times higher.
Older adults are particularly at risk of losing money to imposter scams. Scammers target them for their wealth – retirement savings and a steady stream of income from Social Security and pensions. Plus, isolation, declines in physical and mental health, and their trustworthy nature can make older adults even more susceptible.
Behavioral Analysis Is the Key to Stopping Impersonation Scams
Since the victim is willingly participating in the crime, proactive analysis on the part of the institution is crucial to prevention. Impersonation scams all follow similar patterns. These scams are usually initiated through random outreach using email or text, but the outreach can be through any form of digital communication. The victim then engages in a series of behaviors that are generally different from the usual way he or she engages with their accounts. Some of the most prevalent behaviors include the sudden trading of cryptocurrency or use of a P2P payment app, or, most simply, the sending of a random wire transfer. No matter the method, there is a novel behavior that’s indicative of being a victim. Initially, these amounts are small, but over time they can lead to financial ruin for the victim.
Identifying these behavioral indicators can go one step further. There are a series of early behaviors that can be signs a person is being scammed. The most obvious is the romance scam. For this specific scam, victims often purchase a membership to a dating app for the first time. In the instance of an impersonation around crypto, it’s the signup and funding of a trading account. The challenge, though, is that each instance of fraud identification requires a credit union to track back through a member's purchases and transaction, and only then can the credit union expose the anatomy of the scam. Executing this level of analysis on a case-by-case basis is just not sustainable and requires technology to analyze members’ behavior at scale.
What You Can Do Today
Some good news: programs that perform this type of behavioral analysis exist and can be easily distributed to your members. But until you roll that out, there are three key steps to take that can lower the threat for your elder members.
Step 1: Educate Members
Making your elder members aware of a scam can reduce the chance of victimhood by 80%. It could be as simple as sending an article to your members alerting them to ignore any message they receive about Medicare coverage. Staying on top of the new scams your older members might face is the next step from there. Usually, the FBI has a resource that can be found here, where they keep the public updated on the newest fraud or scam. Member awareness is made more powerful by also keeping your frontline employees aware of the scams.
Step 2: Educate Employees
Employee awareness is a powerful tool. In the best case, the employee, him or herself, might be able to identify a victim and trigger the necessary action to keep that potential victim protected. At the very least, however, your employees will be on the lookout and engaging with your membership reinforcing that loop of education.
Step 3: Leverage Your Relationships
The final action, and the one where credit unions stand out, is to build trusting relationships with your members. Credit union/ member relationships are some of the most personal and powerful in all financial services. These ties can be the element that breaks the grip of the scam. The greater the trust, the greater the chance of protection.
Last, but certainly not least, is a credit union’s intention and focus on serving their members. The purity and power of people protecting people will help credit unions lead the charge to keep their elder members safe from fraud and scams.
Connect with Carefull to learn more.
About Carefull
Carefull is a PRT (protect/retain/transfer) service for credit unions purpose-built to protect older members, retain deposits, and bridge to the next generation ahead of wealth transfer. It is the first and only digital platform designed to help credit unions protect the daily finances of seniors while assisting the adult children who often support them.