Where did the word “scam” come from? Used as American carnival slang for decades, no one really knows the origin. It could have come from the English word “scamp,” meaning swindler or cheater, or the Irish “scam,” meaning crooked, or the Danish “skam,” meaning a sham. “Time” magazine used the word in 1963 to describe a swindle, and the FBI made it popular after giving a sting operation the code name Operation ABSCAM, memorialized by the 2013 movie “American Hustle.”Now that financial institutions have instituted more effective controls to combat fraud, criminals are increasingly taking the path of least resistance and targeting customers directly with scams. Here are four popular scam types impacting community financial institutions’ (CFIs’) customers, along with ways your institution can combat them.1. Check fraud. Check fraud is rampant at the moment, causing headaches for CFIs, consumers, and businesses. These are a few of the most common ways scammers use checks to commit fraud:
- Creating fake checks or forging a signature and cashing an existing check
- “Washing” checks, by substituting the original information with new information
- “Kiting” checks by writing a higher amount than what’s in the account, and depositing the check at another institution
- Sending a check to an unwitting victim, with fine print legally binding them to a contract, called “unsolicited check fraud”
How CFIs can help: “One of the strongest and most effective” tools to protect against check fraud is offering business customers positive pay automated monitoring with payee match, which double-checks whether names on checks match those already on file. “Our clients say it’s a real game-changer and it provides peace of mind,” says Sarena Barker, senior vice president and digital banking manager at the $1.6B-asset Plumas Bank in Quincy, California2. Pig butchering. Fraudsters are using fake apps or websites to entice wealthy individuals into investing dollars or cryptocurrencies. Once the victim sends the funds, the fake site or app is shut down.Many fraudsters find their victims through malware and business email compromise using scamming tools like WormGPT, EvilGPT, and FraudGPT. They then leverage AI, deepfakes, and voice cloning to dupe people into investing.How CFIs can help: Educate customers about pig butchering scams and encourage them to verify the validity of any investment opportunity, as well as the validity of an app before downloading it. Websites that are fake will often have domain names that resemble real FIs, but will misspell URLs or slightly deviate from the company's name.3. Ransomware that evades endpoint detection. One bad actor, Black Hat, several years ago introduced even more sophisticated ransomware that’s been able to defeat a business customer’s endpoint detection response software and attack at the network level. The successful ransomware has now been copied by other fraudsters, all of whom are still using phishing in many cases to dupe employees at businesses to grant access.How CFIs can help: Inform business customers how they can educate their employees to spot and delete a phishing email. But let them know that there are still ways to thwart the ransomware attack even if the employee clicks on the phishing email. Business customers can configure individual employee workstations to prevent their computers from executing the malicious code. If the code is executed and the EDR doesn’t block it, the company’s network monitoring should catch it and block it.4. Wire transfer scams. Fraudsters dupe people into wiring money for a myriad of reasons, including pretending they are a family member with an emergency financial need, pretending they are the IRS demanding back taxes and threatening jail time, and romancing the victim before conning them into sending money.How CFIs can help: Remind consumers to never wire money to strangers, particularly those who insist that this is the only payment option. Tell them to be wary of anyone stressing urgency, and remember — no government agency will ever ask anyone to wire money.You’ve done a great job implementing fraud prevention tools — now is the time to help both your consumer and business customers enact anti-fraud measures, too. Increasing customer awareness of these scams and offering education and tools to prevent your customers from becoming victims will go a long way.
