The Credit Union’s Role in the Fight Against Fraud
With the right safeguards in place, CUs can secure member information and provide an elevated experience.
The threat landscape is constantly evolving, so it’s important to address which threats are causing the biggest issues in the banking and financial services industry.
Let’s kick things off with an issue that has been plaguing the industry since the formation of financial institutions: Money laundering. Verifying the identity of a member is the best way to thwart money laundering operations, but as technology has become more advanced, so have the tactics of these criminals. Know Your Customer processes offer credit unions a way to identify suspicious situations early in a member relationship and prevent the institution from being used for money laundering operations. Implementing tighter KYC controls and interfacing with third-party applications via application programming interfaces can also be valuable to credit unions onboarding new members.
Going a step further, credit unions can develop real-time, daily analytical reports through an adaptive model based on artificial intelligence and machine learning. With the right information in hand, credit unions can monitor suspicious transactions much more closely and take preventative measures to prevent fraud where necessary.
While it’s a relatively new technique, ATM skimming has quickly become one of leading tactics of fraud for credit unions. With one swipe of a member’s debit card, a criminal gains access to all of the member’s banking information. How can this practice be stopped without taking away the convenience ATMs offer members? The answer: Multi-factor authentication for one-time password (OTP) and channel-based transaction solutions. With an added layer of security, credit unions can help members feel confident at the ATM without making them feel like they’re jumping through hoops to get to their money. For instances when multi-factor authentication is not an option, or to add yet another level of action to help mitigate the impact of fraud, credit unions can introduce the ability for members to deactivate their card from their mobile device.
Credit unions have become a major target for cyber criminals given the amount of personal information they require from credit union members, from home addresses to Social Security numbers. With no automated checks and balances built into the credit union membership application process, it can be difficult to differentiate a fraudulent attempt from a legitimate one. The best defense is having properly-trained staff members who know what suspicious activities to look for and how to act accordingly. It can be beneficial for credit unions to use AI and machine learning to monitor and analyze the pattern of employee activity to identify where an issue may be occurring. Additionally, credit unions should develop security awareness training programs to help reduce employee mistakes that can lead to a data breach. Organizations can also look to mobile training apps to help continue education around fraudulent behavior.
Identity theft is something that goes hand in hand with a data breach. Not only is this a major problem for the member, who can face financial losses and future fraud associated with their personal identity, it is also an issue for the credit unions themselves, as members will often switch to a new financial institution out of fear it may happen again. Two-factor authorization on any transaction can help stop personally identifiable information data from being downloaded or shared fraudulently. When PII data is downloaded, credit unions should receive an automated email or report on the transaction to help them determine whether it was a fraudulent activity or not. Robotic process automation is also a useful tool to help automate manual investigative processes and speed up investigations.
When it comes to fraud, failing to evolve with new technology can leave credit unions vulnerable. Relying on legacy applications such as fragmented and non-scalable processes often means less security and inefficient analytics capabilities. To provide the ultimate secure member experience, credit unions must enable an omnichannel experience, focus on the operations process and scalability platforms, and in addition, focus on risk management capabilities that can be achieved through technologies such as AI and machine learning.
Manas Chakraborty is Global Head of Banking, Financial Service and Insurance for Mindtree. He can be reached at info@mindtree.com.