BAI Survey: Finservs Experience Toxic Mixture of Fraud


By Roy Urrico

During the pandemic, financial services organizations dealing with fraud have mostly seen cases of third-party schemes, followed by a toxic mixture of first and third-party cons. The most frequently cited scams involve stimulus or economic relief benefits.


Those are among the findings revealed in a recent survey from Chicago-based BAI that polled FinServ executives about the type of fraudulent activity observed during the COVID-19 response.

According to BAI Banking Outlook research, organizations maintained they were very prepared or – somewhat prepared – for an increase in fraudulent activity during this period. The most common proactive changes cited by respondents included enhanced customer communications, additional employee training and revised employee policies and procedures.

“Consumers are eager to know that financial services organizations are taking the necessary precautions to safeguard against fraudulent activity,” Karl Dahlgren, managing director at BAI, said. “Our BAI Banking Outlook research over the past year has found nearly 60% of financial services customers would feel more secure if financial services organizations used fingerprints, retina scans, and/or speech patterns to identify them. This underscores the importance of security for consumers, and financial services leaders are responding to these expectations during the pandemic and beyond.”

When asked about the types of fraud emerging since early March, almost half of the respondents indicated most often they are dealing with instances of third-party fraud followed by a combination of first and third-party fraud. Besides stimulus check or economic relief scams, other commonly reported types of third-party fraud included electronic banking fraud, phishing and supply scams. The most common instances of first-party fraud involve checking and debit card fraud.

Karl Dahlgren, managing director, BAI

Dahlgren said, according to the BAI Banking Outlook research, 80% of financial services leaders indicated that they have seen or expect to see at least a minor increase in fraudulent activity as a result of COVID-19. “Almost half of the respondents indicated that since the start of pandemic-related shelter at home orders, they are most often dealing with instances of third-party fraud while 17% indicated dealing with an equal amount of first and third-party fraud.”

With more stimulus funds possibly on the way, IRS Criminal Investigation Chief Don Fort noted the agency recently reported that one of the most common forms of fraud involved criminals convincing people to “refund” part of an accidental stimulus overpayment or phishing for bank account or Social Security information to fraudulently file for a victim’s stimulus check. "History has shown that criminals take every opportunity to perpetrate a fraud on unsuspecting victims, especially when a group of people is vulnerable or in a state of need.".

Dahlgren suggested financial services executives need to stay diligent and incorporate comprehensive fraud protection measures to prevent attacks on their customers and organizations. “BAI Banking Outlook research found that financial services leaders are focused on staying ahead of fraud occurrences by utilizing customer communications, revising employee policies and procedure, and implementing additional employee training to better educate, prepare and fight this crime.”

To address the constant change in fraud type and volume, BAI recommends that leaders continue to enhance technology that helps verify and authenticate customer identities. Artificial intelligence and big data technology are among the innovations used for better authentication to ward off fraud, noted Dahlgren. He added that leaders are also quickly adopting biometrics to safeguard the customer and organization more effectively against the growing number of fraud instances.

Dahlgren added, financial services leaders should also educate their customers and members. By helping them understand the fraud landscape, they can better protect themselves by keeping personal data security top-of-mind.

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