Banking professionals must be ever vigilant against fraud. However, you must look at more than just payments. Most bank fraud starts long before the money exchanges hands. To reduce the threat of fraud at your financial institution, you need to monitor multiple elements of accounts and customer interactions.
Want to detect fraud before money leaves your customers’ accounts? Then, you need to be aware of these seven red flags of fraud.
1. Multiple accounts with similar names opened at the same time.
Often fraudsters open multiple accounts to commit their crimes. A spate of new accounts or loan applications with very similar names can be a big red flag. Criminals get lazy and often use methodical variations of similar names such as Bill A. Smith, Bill B. Smith, etc.
2. Different customers with the same contact information.
When committing account takeover, credit card theft, new account fraud, or loan fraud, criminals often direct correspondence to their own physical addresses, phone numbers, or email addresses. The same address on multiple accounts is a big indicator of fraudulent activity.
3. Inconsistent personal details on accounts.
Particularly persuasive with new account or loan fraud, inconsistent details typically include incorrect Social Security numbers or unverifiable contact details. If the details on a customer’s application don’t match details found in the Social Security Administration or public databases, they are likely to have been entered fraudulently.
4. Unusually high deposits.
You must be ready to jump on this red flag immediately because if you wait, the fraud will play out. Typically, when a higher deposit is part of a fraud, it’s followed by a quick withdrawal of some or all of the deposited funds. To prevent losses, you need tools that will flag the deposit as potentially fraudulent. Then, you need to put a hold on the deposit until you learn more about the situation.
5. Unexpected public benefit payments.
If an account holder who doesn’t normally receive public benefits receives a Social Security check or a similar payment, be aware of the risk. Scammers often steal people’s identities and direct their benefit payments to the scammer’s account or a mule account.
6. Out-of-character chargebacks or disputes.
Often, chargebacks are a part of friendly fraud. A consumer buys a product, and then, they pretend like it was fraud so that they can get the money back. Sometimes, people aren’t even aware that this is fraud. They think they’re just playing the system.
In other cases, chargebacks are a common way to get cash after taking over someone’s account or credit card. To protect your financial institution, invest in tools that track customer behavior and alert you when actions seem out of character. Make sure that your tools are monitoring chargebacks, refunds, and deposits as well as payments.
7. Undue influence from a third party.
Your customers have all kinds of reasons to send large repetitive payments to third parties. However, if they say that they need to send a large payment to an unusual third party urgently or they seem secretive about the details, that’s generally a red flag.
Often, the customer will come to a branch or call customer support. Then, they will ask for info on how to get a cashier’s check or how to send a wire. To minimize the risk of losses, train your customers to watch for these red flags, and give them follow-up questions to help protect your customers from being coerced into committing fraud or falling victim to fraud.
Remember, even if the “third party” is a loved one, it could be a sign of fraud. Criminals can easily pretend to be loved ones in distress, and with the rise of AI voice imitation, this threat is becoming even more prevalent.
Often, the customer will mention the third party repeatedly. The third party may be with them or on the phone as well. Tread cautiously and be aware that your customer may be dealing with a social engineering threat. A criminal may be pressuring them into committing fraud, and they may not know they’re being victimized.
Get Help Detecting Red Flags of Fraud
At SQN Banking Systems, we know that you have to look beyond payments, and we understand the importance of looking for signs of fraud during all customer interactions. Want help protecting your financial institution from fraud? Ready to focus on prevention just as much as detection?
Then, contact us today. When you work with SQN Banking Systems, we will help you find the best fraud detection and prevention solutions and services for your unique needs.