Which schemes, scams and trends are financial fraud investigators seeing most often in 2018? We joined the International Association of Financial Crimes Investigators (IAFCI) Minnesota/Dakotas Chapter at their annual conference to learn more about the most compelling topics in fraud-fighting today.
The IAFCI Fall Conference is attended by multiple fraud investigators from the private sector, in addition to white-collar crime investigators from law enforcement. The conference focused on insights from industry leaders in financial services, including Ameriprise, Allianz, U.S. Bank and more. Key discussion topics included:
Fraud across multiple channels
Investigators revealed how fraudsters exploit different communications channels to perpetrate financial fraud, primarily account takeover (ATO). Fraudsters are using phone centers, along with stolen customer credentials, such as SSN and DOB. Attendees also reported online fraud using stolen or hacked login information, as well as forged paper documents used to open new accounts and change personal information within existing accounts.
Data breaches are powering fraud
Retail banks are seeing victims of high-profile data breaches become victims of financial fraud. Conference attendees advised banks to take a multi-layered approach to fraud detection and prevention, using a series of ID verification and ID proofing technologies – as well as an internal “blacklist” of known frauds across DDA and credit accounts – to ensure they stymie more ATO fraud schemes before they can hit customer accounts.
Manual schemes that use social engineering are growing
A financial institution attendee reported an uptick in fraud from phone centers, focused on callers phishing for information about customer credentials. This company is revamping its customer service training to detect people phishing for information. These callers frequently have bits and pieces of customer identity they use to perpetrate the fraud, often acquired through data breaches. The company is also exploring solutions that identify IP addresses with high rates of fraud or past fraud losses as a way to better identify callers at the other end of the line.
Mobile and peer-to-peer payment fraud is an emerging concern
Attendees discussed the rising tide of mobile wallet and peer-to-peer payment fraud schemes, using Zelle, Apple Pay, Venmo and other payment systems to gain access to customer profiles that are tied to DDA or credit accounts. Investigators stressed the need for real-time fraud tools that would help detect more mobile payment fraud by screening email addresses, IP addresses and other digital “fingerprints” that may not currently be tracked by financial institutions.
While fraudsters have become more organized and are implementing technology to automate their schemes, we are encouraged that the industry is fighting back with technologies to thwart these nefarious efforts. Today, many banks are using a several data sources (including industry consortium data) – compiled and delivered quickly – in addition to their own data sets to catch fraud before it results in losses. Banks also need to be ready not just for today’s schemes and scams, but for a now-unknown set of future fraud risks. Therefore, banks and credit unions require solutions that will give them the power to add capabilities, integrate new data sources, and configure business rules—all to help ensure that the bank’s assets and customers are well-defended from fraud attempts.
About the Author: ID Insight President Adam Elliott contributed this blog post.
I hear about new fraud schemes just about every week, but sometimes even I’m surprised by how easily criminals can find a new way in to consumers’ bank accounts. Usually, these schemes rely on a tried-and-true formula: impersonate the customer, change their contact information, request funds and cash out. But I just learned about a new wrinkle that takes account takeover fraud to a new level.
A fraudster got a hold of a customer’s email address and online banking password
Instead of changing the customer’s email, the fraudster used an email rerouting provider to hijack all of the customer’s email messages
The fraudster then used email to request a $40,000 transfer using ACH
Initially, the bank didn’t flag the request as suspicious, since it came from an email address that matched the customer information file
When the bank realized the customer did not have enough money in his account to execute such a large transfer, a representative emailed the “customer” asking for clarification.
The fraudster refused to agree to a phone authorization and the bank finally got suspicious and called the legitimate account-holder
The customer was oblivious to the fraud attempt, though he had noticed that “something was up” with his email
Fortunately, this particular attempt was foiled by a very diligent banker.
We often see this sort of scam perpetrated with address changes (fraudulently changing an address by contacting the bank). But today – thanks to improved controls by financial institutions and USPS – fraudsters are taking a less traditional path: changing email or phone contacts and rerouting communications.
How can banks prevent this type of scam?
Don’t wire funds based on a customer email
Be suspicious of wire transfer requests made by phone (especially large dollar amounts)
Take extra steps to get customer authentication before approving transfers
For all transfer requests, make sure the customer has not recently changed their phone number, mailing address or email address
Vigilance is always a best practice in fraud prevention, but adaptability is just as important. You need to be ready not just for today’s scams, but for every future possibility. Fraudsters always choose the path of least resistance, so make sure every path to your customers’ accounts is well-defended (especially the digital ones).
Do you have a question for ID Insight President Adam Elliott? Let us know at
What’s so cool about fraud prevention? A lot, apparently. While being cool is not one of our business priorities, it certainly is a badge of honor we wear proudly. And now, we’re thrilled that the folks at MinneInno agree that our work, our people and our office (not to mention a random pirate who posed with us at a St. Paul Saints game) are super cool.
What makes us the coolest? There’s the requisite “cool-office” amenities, like a brand-new rooftop deck, complete with seating and a grill for raucous office luncheons or happy hours. But coolness isn’t about the visible trappings for ID Insight: it’s a reflection of the way we approach every challenge with creativity, collaboration and (of course) cool.
The coolness starts with our recruiting process, which is designed to cast a wide net for talent and champion workplace persity, and runs throughout our entire company culture. With such a tightly-knit team, it’s essential for everyone to care deeply about the company’s work, customers and each-other. That’s why we foster mutual respect and collaboration every day by constantly seeking team feedback and engagement.
Recognition also makes us cool, especially when we’ve got our very own “MacGyver Award,” a coveted framed photo of Minnesota’s own Richard Dean Anderson a.k.a TV’s MacGyver, a trained scientist who worked as a secret agent to solve life and death situations. The award is given to a different employee every quarter who exhibits ingenuity and resourcefulness to solve a critical business problem. We may take our work seriously, but our team never takes itself too seriously.
Coolness comes in many forms, and while ID Insight has the standard accoutrements of cool on the surface, it also permeates every piece of our business. We’re cool because of what we do, not just because we’ve got bike parking in the office.