By: Dan Draz, VP, Risk Program Management (Enhanced Fraud Services) at PSCU

There’s only one constant about fraud — and that is it’s constantly changing. Fraud is fluid, dynamic and often different from one day to the next. When one method ceases to be effective, not surprisingly, another variant pops up. This perpetual state of “fraud flux” creates challenges for many credit unions, who often have a tough time keeping up with the rapidly changing nature of fraud loss avoidance, risk mitigation and member experience issues facing them on a daily basis.

According to the Federal Trade Commission (FTC), American consumers lost more than $5.8 billion to fraud in 2021, a 70% increase from the $3.4 billion lost in 2020. As instances of fraud continue to rise, this number will continue to grow. Almost 2.8 million consumers filed a fraud report with the FTC in 2021. About 25% of those scams lead to a financial loss, with the average loss being approximately $500 per person — and those are just the people who actually reported fraud to the FTC. 

There are always going to be bad actors, and instances of fraud are continuing to increase, probably even more so due to the uncertain economy. However, many credit unions are not able to handle such a high volume of fraud — they don’t have the resources, tools, training or data to keep up. Partnering with tenured anti-fraud professionals, who have “in the trenches” financial institution experience, can be a valuable tool in a credit union’s fraud-fighting arsenal. 

Current Challenges Facing the Financial Services Industry 

Due to a variety of factors, including the post-COVID employment economy and the current state of corporate hiring, as well as trends in the fraud space, many credit unions are having challenges hiring the experienced staff necessary to meet their operational needs. 

Like other industries, the fraud profession has become extremely specialized and niche-specific. The operational challenges credit unions are having with fraud and risk mitigation extend to not only finding experienced fraud professionals with financial industry expertise — but hiring at a price point they can afford. 

The Value of Tenured Fraud Professionals

There are fintech credit union service organizations (CUSOs) that offer fraud loss avoidance and risk mitigation services, some of which are specifically designed for mid-sized credit unions to help combat their resource, risk, anti-fraud and member experience challenges. Some even offer concierge (think five-star hotel) fraud services, often with distinct levels of assistance offered based on a credit union’s size, needs and budget. 

How do tenured, experienced fraud professionals work with a credit union? Typically, it all starts foundationally with getting to know their partner’s operational objectives, business methodologies and risk appetites as intimately as the credit union does itself. 

To accomplish that goal, tenured fraud professionals work diligently to identify the types of challenges and pain points around fraud and risk that the credit union is experiencing, as well as to identify their goals for fraud and risk mitigation. Tenured professionals then use that inside information to align and prioritize the strategies needed to meet those goals, reducing the overall impact of fraud at the credit union and improving their members’ experience. 

Benefits of a Consultative Approach

There are numerous benefits to a consultative approach – the biggest of which is having a tenured, experienced professional working on fraud and risk mitigation initiatives on your credit union’s behalf. A consultative approach involves conducting a 360-degree portfolio review from a fraud and risk lens on a daily basis. This helps the credit union meet fraud loss goals through a variety of strategies, which can include the following:

• Reviewing all fraud and dispute cases, looking for the presence of first-party fraud and member fraud participation.
• Developing compromise responses for your credit union on a per event basis. 
• Conducting in-depth reviews to proactively identify local, regional and national common points of purchase. 
• Performing lost-stolen analytics and customized rules and strategy development daily, along with monthly performance reviews.
• Providing card-level dark web monitoring and intelligence gathering capabilities to identify at-risk accounts earlier. 
• Creating customized data, reporting and visualization requests to support the analytic needs of your credit union. 
• Serving as in-depth Subject Matter Expert (SME) support for various initiatives, such as preventing fraud when partnering with Visa/MasterCard, or working on SecureCode 2.0, mobile wallets or other marketplace technologies with elevated risk. 
• Offering fraud-focused efficiency and training opportunities for your credit union staff. 
• Sharing access to the fintech CUSO’s Blacklist, including suspect IP addresses and phone numbers. 

Partnering with a fintech CUSO that offers fraud intelligence services via tenured fraud and risk professionals also gives credit unions access to up-to-date research, data, analytics and other resources which are critical given the constant changes in the world of fraud. 

Unique Times Call for Unique Measures

The global fraud environment is dynamic and rapidly changing. While your credit union is probably already doing a lot to monitor, analyze, prevent and recover assets lost because of fraud, it is important to consider adding more tools to your fraud and risk mitigation toolbox to keep pace with the steadily increasing fraud landscape. Partnering with a fintech CUSO to add a specialized resource in the form of a tenured fraud professional will help your credit union customize and enhance your fraud fighting portfolio. 

There’s an oft referenced saying in the anti-fraud profession which is “follow the money.” Make no mistake about it, the bad actors are following the money directly to your credit union’s front door. Are you equipped with the best tools and personnel possible to protect your members and your credit union? 

Dan Draz is the Vice President of the Risk Program Management team at PSCU. Via the Enhanced Fraud suite of solutions that he oversees, his team provides “concierge-level,” anti-fraud, risk mitigation, and member/customer experience services for PSCU partners enrolled in the Enhanced Fraud Services-Consulting and Enhanced Fraud Services-Monitoring solutions. With 38 years of sophisticated anti-fraud, investigations, and risk mitigation experience exclusively in the private sector, Dan is widely recognized as a thought leader in the enterprise fraud risk management space and has been published extensively in industry, news, and trade publications. He has an M.S. in Economic Crime Management and has been a high-profile Certified Fraud Examiner (CFE) for more than 28 years.