How to protect your members from elder scams

Financial institutions, including credit unions, reported $27 billion in elder financial exploitation incidents to the Financial Crimes Enforcement Network between June 2022 and June 2023. The overwhelming majority of those filings were related to elder scams.

Scammers have increasingly been targeting older adults with sophisticated schemes that drain their accounts. For financial institutions, it’s been a challenge trying to stop this surge. They’ve been pumping billions of dollars into fraud detection tools, yet fraud continues to rise. Two-thirds of financial institutions reported an increase in fraud over the past year, according to LexisNexis Risk Solutions.

However, it’s not a losing battle—especially for credit unions, which are in a unique position to prevent elder scams and fraud before they happen.

Prevention begins with the member

According to the Alloy 2024 State of Fraud Benchmark Report, 75% of financial institutions surveyed said they plan to invest this year in an identity risk solution to combat fraud. However, that same survey found that financial institutions ranked authorized push-payment (APP) fraud as their top fraud driver last year by case volume and losses.

While financial institutions, including credit unions, are investing primarily in fraud tools to address technical vulnerabilities, criminals are bypassing those controls by going directly to members and persuading them to hand over account information and authorize transactions.

In other words, simply confirming identity won’t prevent fraud. To succeed in today’s world, fraud protection needs to address the weak link: members.

Older members are at particular risk, considering that they are the favorite targets of scammers and lose significantly more money than younger adults when they are victims of scams. According to the Federal Trade Commission, the median fraud loss per victim in 2023 was $804 for adults 70 to 79 and $1,450 for adults 80 and older versus $480 for adults 20 to 29.

How to empower members to prevent fraud

Credit union members can be the best line of defense against elder scams and fraud—if they are given the tools to protect themselves and respond to threats.

• Education: A study by the FINRA Investor Education Foundation shows that consumers who know about a particular type of scam or fraud are 80% less likely to engage with it. Education needs to be integrated into the member experience through a steady stream of articles, newsletters and email alerts that can keep up with changing threats. Member awareness is made all the more powerful by also keeping frontline employees aware of the latest scams.
• Senior-specific smart monitoring: Fraud detection tools are good at identifying unauthorized transactions. With elder fraud, though, older adults are being coached into authorizing transactions. This requires effective AI monitoring systems that catch and alert to changes in account holder behavior that are red flags of scams but would otherwise go unnoticed by traditional detection—such as wire transfers, P2P payments or cryptocurrency purchases.
• Trusted contacts infrastructure: Older customers, in particular, could benefit from having a second set of eyes on their accounts. A survey by Cornerstone Advisors found that 87% of seniors manually check their accounts for suspicious activity without additional oversight by adult children or other trusted individuals. A secure system that allows older customers to name trusted contacts and give them view-only access to their accounts could provide an added layer of protection in spotting small issues before they become big problems.
• Early intervention: FINRA found that 51% of people who reported a third-party intervention were able to avoid losing money to scams and fraud. Credit unions are in a unique position to intervene when scammers target members because of the close relationship they have with members. The greater the trust, the greater the chance of protection.

Investing in these resources to prevent elder fraud can reduce the time and money spent addressing fraud as it occurs. The good news is that market-ready third-party solutions exist and can provide an affordable way to stop elder fraud before it happens.

Visit our CSS website to learn how Carefull can help you drive membership growth and operational excellence at an attractive price.