Every technology that improves the customers’ banking experience also comes with new fraud risks. Mobile capture technology allows banking customers to conveniently deposit checks into their accounts without visiting a branch or ATM, but this technology also presents new fraud opportunities to criminals.
To protect your financial institution, you need to understand the risks and diligently work to minimize them. Consider the following as you develop your anti-fraud strategy.
Types of mobile capture scams
Thieves may use mobile capture to draw funds against the same check multiple times. They may deposit the check using the mobile app and then withdrew the immediately credited funds with an ATM card or through a transfer. Then, they take the same check to a branch or a check-cashing facility.
Depending on the sophistication of the scam artist, they may do this with their own account — while popular when mobile capture technology was new for consumers, this approach isn’t used much anymore because it allows the thieves to get caught more easily. In most cases, thieves use hijacked accounts and fake debit cards for this scam. Or, they get a victim involved and use their account as a mule account.
In another mobile capture scam, thieves will deposit a fake check into an account using mobile capture. Then, they will immediately withdraw the credited funds. This may happen in a new fraudulent account or a mule account.
How to prevent mobile capture scams
Financial institutions need to take the right steps to protect themselves against mobile capture scams. To reduce your risks, keep these tips in mind.
1. Unify check fraud detection processes across all deposit channels
To ensure the same check cannot be deposited more than once, you need a unified approach to processing deposits across all your banking channels. If in-branch deposits are being scanned with Check-21 processes and mobile deposits are using remote deposit check or image cash letters, these safeguards won’t be effective if they are working in silos. You must integrate them so that they can work together and provide real-time protection for your deposits.
2. Integrate your mobile banking app with a fraud database
Talk with the core processor of your mobile banking app about integrating with a fraud compliance database. This will help to prevent your system from accepting deposits of fake checks. The app should be able to look through the database and provide real-time alerts if the check is counterfeit, duplicate, or from a closed account or an account with insufficient funds.
3. Use behavioral analytics when assessing mobile deposits
Your customers want and expect to be able to deposit checks through mobile capture. If your fraud prevention controls are too restrictive, legitimate customers may not be able to make deposits. To reduce the chance of legitimate transactions being flagged as fraud, you need a fraud prevention and detection solution that relies on complex behavioral analytics.
These fraud solutions use artificial intelligence to look at multiple elements of a translation. They assess the age of the account, the previous behavior of the account holder, the images on the check, the device being used for the mobile deposit, the IP address, and countless other data points. Then, they look at the likelihood of fraud based both on known fraud profiles and the account holder’s unique banking patterns.
Over time, these solutions use machine learning to improve their approach. If they miss a case of fraud or mistakenly issue a false positive, for example, they essentially learn from those experiences and improve their efforts the next time. By implementing these types of anti-fraud solutions, you reduce the risk of mobile deposit fraud, but you safeguard the customer experience.
4. Educate customers about the risks.
Many scam artists buy or steal customer account information for these types of scams. But as explained above, many fraud artists use social engineering attacks to obtain customers’ personal details so they can gain access to their accounts. They may love-bomb a victim into sharing their details, or they may trick someone into giving up their passwords by pretending to be the bank or another trusted entity.
To reduce the risk of customers falling prey to these scams, educate your customers. Remind them that free money or other too-good-to-be-true promises are almost always not real. Write about scams in your emails or newsletters or even hang posters in your branch advising customers about how to protect themselves.
5. Ensure staff know how to spot victims
Because so many scams involve the use of victims’ accounts, your staff should be aware of the signs that a customer is being victimized. This may include an unusual deposit schedule, accessing the mobile app from foreign IP addresses, or other significant changes to an accountholder’s typical actions.
Again, however, your staff cannot spot all of these red flags. You need a fraud detection solution that scans all of your transactions and looks for signs of fraud. To be as effective as possible, the solution should not just look at financial transactions. It should monitor things like installing a mobile app, using sign-in credentials, changing personal details such as the mailing address, and other actions that need to take place for the scam to occur.
At SQN Banking Systems, we provide fraud prevention and mobile capture solutions. We can help you protect your financial institution from the risk of fraud. To learn more, contact us today.