When it comes to fraud, 2023 was a difficult year for credit unions.
According to Alloy’s 2024 State of Fraud Benchmark Report, 79% of credit unions and community banks surveyed experienced more than $500,000 in direct losses. That fell to nearly 60% for credit unions, banks, and fintechs as a whole. Two-thirds of those businesses noted an increase in fraud attempts against consumer accounts.
Last summer, Langley Federal Credit Union ($5.3B, Newport News, VA) noticed a rise in member-to-member fraud. Through social engineering, criminals were exploiting members’ trust to obtain confidential information or money. The rising trend pushed leaders to re-evaluate their approach to fraud.
“We realized we needed to have a more proactive approach than reactive,” says Mark Hutchinson, senior vice president of enterprise risk management and internal audit. “This pushed us in that direction a lot faster, which was a good thing.”
Langley FCU already had a fraud team, but that fall, the credit union formed a fraud mitigation council with the goal of improving inter-department communications and decreasing response times.
All Hands On Deck
When a fraud-related issue arises, it’s the credit union’s fraud team that first evaluates the seriousness of the issue to determines if it is something the team can address right away. If the fraud team tries unsuccessfully to tackle the issue, then it might go to the council, which comprises two members per core department — from member services and lending to IT and risk management. Together, council members work to resolve complex, severe issues.
Mihaela Ciocanu, director of BSA and fraud at Langley FCU, is one of the main organizers of the council. She says the primary problems her team sees are account takeovers, check fraud, and credit card fraud or compromised debit cards.
“We’re trying to solve fraud losses,” the director says. “Another thing we’re trying to solve is customer satisfaction, but that’s more of a byproduct of the council. That’s why we want everybody, all hands on deck.”
An Evolving Effort
Life Of A Fraud Incident
- A fraud-related issue arises.
- The fraud team analyzes the problem to determine its severity.
- The credit union sends an organization wide email to make all staff aware of the incident.
- The fraud mitigation council uses tools like Microsoft Teams group chat to escalate the issue as needed.
Since the inception of its fraud mitigation council, Langley FCU has reduced incidents of fraud by 25%. This is because problems are being flagged and then resolved faster than before. No department is left out of the loop, so when something happens, the credit union can cover all bases more effectively. Communication is more intentional, and having additional escalation procedures makes it easier to spot problems as soon as they happen.
Ciocanu says it’s an ever-evolving process.
“We have to always be on our toes,” she says. “Time is of the essence when decreasing exposure and fraud loss. When we have all of the stakeholders and decision makers sitting at the same table talking about the controls to put in place, that’s when we are proactive and can save a lot of money.”
Ciocanu says one of the organization’s biggest hurdles is finding a happy medium between keeping members informed in a timely way and being too alarmist.
“Finding this bliss point will always be part of the challenge,” Ciocanu says. “We’re still learning and trying to navigate all of that, but we’re getting better with every incident.”
Langley FCU keeps members up to date with frequent updates to its online resources — such as its fraud landing page — as well as issuing email notifications when appropriate.
As for what the future holds, Langley FCU is already looking at adopting additional technologies.
“We’re trying to push for finding a good source for real-time monitoring so we can start cutting things off before they happen,” Hutchison says.
In the meantime, the fraud mitigation council will continue to work with all levels of the credit union to adopt a more holistic view of how Langley FCU mitigates fraud risks.
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