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Fraud prevention and detection: Empowering clients through education

Terri Luttrell, CAMS-Audit, CFCS
February 8, 2024
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Client fraud education to prevent banking losses

Financial institutions play a crucial role in safeguarding customers and members from fraud. Fraud education is key. 

You might also like this infographic: 5 Fraud typologies impacting you and your customers or members.

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Trust matters

Protect your relationships from fraud

Today’s financial transactions happen at the speed of a click, and the threat of fraud looms more prominently than ever. Fraud schemes, evolving with technology, are more sophisticated and more complex to detect.

As custodians of their money and stewards of their trust, financial institutions play a crucial role in safeguarding their customers and members from falling victim to fraud in financial services. While fraud detection software and robust security measures are essential, educating clients on fraud prevention is equally important.

Fraud losses mount

Why educate bank/credit union clients on fraud?

The increasingly digital nature of financial transactions and the growing prevalence of fraud require consumers and businesses alike to be equipped with the knowledge to navigate day-to-day business securely.

The Federal Trade Commission (FTC) reports that U.S. consumers lost more than $7 billion during the first three quarters of 2023, up 5% compared to the same period in 2022. Check fraud alone, the most significant current fraud threat, is projected to create losses of $24 billion in 2024.

Fraudsters have adjusted their tactics as technology has changed. From check washing, phishing emails, and pig butchering to identity theft, fraudsters are employing a variety of tactics to exploit unsuspecting victims who use traditional and emerging forms of banking. As financial transactions become increasingly digital, consumers and businesses must be equipped with the knowledge to navigate day-to-day business securely. At the same time, it is important not to deter clients from using digital banking methods for daily transactions.

Effective fraud risk management includes detection and fraud monitoring that should consider customer or member history and behavior. It also requires processes and systems that enable timely and effective responses to fraud. The OCC has said that customer education on fraud risks and prevention is an example of the preventive controls that should be deployed in combination with detective controls as part of sound fraud risk management.

The stakes for financial institutions to protect customers and members are higher than ever. Fraud-related losses, reputation damage, and added expenses all affect the bottom line. 

Stay up to date with fraud prevention.

In an unprecedented move, the New York Attorney General recently filed a lawsuit against Citibank for failing to protect clients from hackers and scammers, citing that Citibank was responsible for millions of dollars in fraud losses to clients.

Tips for avoiding phishing, ID theft

What should client fraud education include?

Financial institutions should take the initiative to provide clients with valuable knowledge to protect their identity and finances by implementing a fraud education program. What should a financial institution’s fraud education program include? Start with these seven key takeaways:

  1. Recognize phishing attempts: Clients should understand common tactics used in phishing and exercise caution with emails by checking the sender’s address for anything unusual. Clients should know to be cautious if they receive an unscheduled or unexpected email. Advise them not to click on any links or attachments, to close the email, and to verify its legitimacy when unsure. Clients should also protect themselves by not clicking on pop-ups claiming their computer is infected, as they may be installing malicious software (malware) on their devices.

    Clients should also be wary of social media scams. While interacting with friends and family online can be a fun pastime, social platforms are a feeding ground for fraudsters. According to the FTC, $2.7 billion was lost to fraud through social media between January 2021 and June 2023. Romance scams, fake profiles, and deepfakes are growing at an alarming rate. Consumers must understand these tactics.

  2. Protect personal information: Clients should create a strong password by incorporating a mix of letters, numbers, and characters. Explain the importance of avoiding easily predictable passwords like birthdays, children’s names, or home addresses. Advise clients to change their passwords regularly and refrain from using the same password across multiple accounts. Clients should know to maintain confidentiality by not sharing their passwords or any personal information online or over the phone with others.
  3. Monitor account activity: Clients should frequently check their credit reports, online balances, and account statements to spot any fraudulent activity and report it immediately to their financial institution. Highlight the significance of setting up transaction alerts for immediate notification of any suspicious activity.
  4. Use secure networks: Emphasize the dangers of conducting financial transactions on public Wi-Fi networks and encourage using secure and private networks when accessing online banking or making transactions. Educate clients on how to avoid fraudulent websites by understanding what is authentic and secure. When conducting financial transactions online, clients should look for a lock icon on the browser’s status bar or a Web site URL that begins with “https:” rather than “http:” (the “s” means secure).
  5. Use multi-factor authentication: Advocate for your clients to adopt multi-factor authentication (MFA) to add an extra layer of security. Guide customers on how to enable and use MFA features for their accounts.
  6. Remember to log off: Bank customers and credit union members should sign off secured networks when they have finished online banking or other sensitive websites. It is also important to log off their computer to prevent unauthorized access to your information and files.
  7. Learn about new and emerging threats: Keep clients informed about fraud trends and tactics. Provide resources and updates on new threats, ensuring customers can stay ahead of evolving risks. The U.S. senior population, those over 60 years of age, are particularly vulnerable, and education efforts should have specific resources for this segment of clients.

Fraud is a persistent threat that continues to grow, and education is a powerful weapon. Financial institutions have the unique opportunity to be both trusted partners and educators, guiding their clients toward safer financial practices.

Ideas for banking fraud awareness

Ways financial institutions can provide fraud education

So, how do banks and credit unions go about teaching customers and members the actions they can take to head off and detect fraud? There are various methods to educate clients and build on that trusted advisor relationship. Some options include:

  • In-person fraud prevention seminars, either held at a branch location or a local community center. These events are a great way to show leadership and support to the community while having face time with customers, members, and prospects and maximizing time spent.
  • Website pop-ups and fraud-warning messaging embedded in transactions. These electronic flags can be ongoing reminders that banking transactions deserve careful attention.
  • Emailed newsletters, blogs, and printed materials such as flyers and posters. Educational material can be broadly focused on fraud prevention or target groups specifically vulnerable, such as older adults or younger people.
  • Tap into anti-fraud resources offered by other organizations. The FTC and the OCC have resources available for financial institutions to use for client education, and so do other agencies and groups:

    • The FDIC has a fraud education web page for students, parents, and teachers to help young people learn ways to protect themselves and to quiz youngsters on spotting scams.
    • The NCUA has an on-demand webinar for credit unions intended to help institutions alert their members to common scams that lead to financial fraud losses.
    • The Consumer Financial Protection Bureau has free downloadable resources financial institutions could provide to customers or members to help them prevent fraud. One resource helps people plan so that diminished capacity and illness don’t make them more vulnerable to fraud. Another helps banks and credit unions explain how having a trusted contact can help protect financial well-being.
    • The AARP has a program partnering with financial institutions to educate older customers about online banking and fraud to boost trust in the financial institution and prevent losses.
  • Find out how other financial institutions across the country handle fraud education and adapt the ideas for your customers or members. For example, Regions Bank offers small businesses tips on preventing fraud on its website, and it describes fraud training small firms can offer themselves to prevent and more quickly detect fraud. Its tips for businesses include:

    • Teaching employees to spot the signs of business email compromise and phishing attempts.
    • Encouraging employees to stop, question, and verify a change or payment using known contact information before they complete a transaction or take other actions.
    • Setting up checks and balances for internal processes to make it more difficult for fraudsters to succeed.

Fraud prevention culture

Foster awareness and resilience

By fostering a culture of awareness and resilience, financial institutions can fortify the trust that forms the foundation of their relationship with clients. As we navigate the growing threat of fraud, education can serve as a significant tool to fight against hard dollar losses for both the clients and the financial institution.

Learn strategies to combat check fraud in this on-demand webinar, "Fraudulent checks and their complexities."

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About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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