“So, tell me, what’s going on?”

The credit union CEO had called a long-term member into her office, sat him down and leveled with him. “You’re withdrawing thirty thousand dollars in cash,” she said. “That’s not like you.”

“It’s for vacation,” the member shot back, continuing with a sketchy explanation of where he was going and who he was going with. It didn’t add up. The CEO knew this member; their kids had played sports together in school. She could sense something was wrong. “You’re not being coerced, are you?” she asked. The member became indignant and, in the end, there was nothing she could do. He had every right to his own money.

The CEO released the funds — which ended up in the pocket of a scammer. The member was devastated, not only because of the financial loss; his heart was broken, too.

That, unfortunately, is how romance fraud can play out. Scammers take the time to really get to know their victims, gain their trust, get them to care and convince them that they care, too — before they ever start to talk about money or ask for favors. It’s one example of a rapidly growing category of fraud — consumer-engaged, persuaded — that employs highly sophisticated psychological manipulation and AI tools to generate polished, personalized, very convincing messages — at scale. And according to Chainalysis, AI is driving up impersonation scams, a subset of the “persuaded” category, by as much as 1400%.

On a personal level, persuaded fraud can be devastating. Romance and relationship-based scams take a particular toll — but any scam that uses scare tactics (“You missed a tax payment and you’ll be arrested right now if you don’t pay bail”) or appeals to a victim’s empathy (“Grandma, it’s Owen; my wallet was stolen and I’m stuck in Germany”) has the added baggage of shame. Once the scam is revealed, victims not only suffer financial loss, but immense embarrassment, too.

It’s especially difficult when members believe that they or a loved one is in trouble, that they could receive a substantial payout if they help a deserving stranger, or that someone actually cares for them — that they’re truly in love.

So how can credit unions protect their members when emotions and personal dignity are involved?

I recently spoke with Susan Ralston, EVP and Chief Operations Officer for Tower Federal Credit Union, where they’ve taken a holistic approach to fraud. Susan talked about how fraud protection has become an enterprise-wide imperative at Tower, with every employee learning about fraud from Day One. They have a fraud steering committee and a “tiger team” that jumps into action whenever a scam is discovered. She calls those relationship-based scams “emotional hijacking,” and credit union employees are trained to watch for the telltale signs that a member is being persuaded.

In our conversation, three things stood out:

Use Your Data

The ultimate aim of fraud protection is to stop it before it happens or before major damage occurs. To do this, we need a long view of member behavior and patterns: What happened leading up to the scam?

This is where data is key. With a solid, coordinated ecosystem of member data, we can compare signals between payments, digital transactions, contact center interactions, fraud and disputes. We can aggregate and cross-pollinate this data to see threats or emerging trends that we might not have otherwise seen. While credit unions are champions at building relationships with their members and identifying when something doesn’t seem quite right, data provides a holistic view of what’s normal and what’s not, offering proof that a member’s patterns have changed.

Of course, technology is only as good as the human experts behind it, so consultants and intelligence analysts intercept the information and use it to make more informed decisions proactively.

Educate Your Staff and Members

Tower Federal Credit Union’s approach is spot on: Every employee must be involved in fraud protection, starting with onboarding and continuing through regular training as scams evolve. Begin with baseline education in common fraud tactics, followed by updates as new trends arise. Protect the identity of victims but share as many details as possible. Be specific and use real-life examples, highlighting the telltale signs that a credit union employee would see.

Move beyond pure transactional monitoring to include behavioral monitoring. Has a member suddenly taken out multiple new credit cards? Has a widowed member changed his purchase patterns? Is a member acting nervous in the teller line?

Beyond education, empower frontline staff to take action. Who should they alert? How will they escalate? Can they decline a transaction? What should they ask a member suspected of being scammed?

Talk About It

When a victim is in the midst of a scam, the best practice is to listen, show empathy and serve as the rational voice in the storm. Unfortunately, especially in romance scams when emotions are high, they’re not going to want to talk about it, hear what you’re saying or change their mind. And once the fraud is revealed, unbearable shame can often keep the victim from mentioning it ever again.

But we need to keep talking about it. In New Mexico, a recent fraud victim — who gave away nearly $2,500 to “avoid prison for not paying her taxes” — takes it upon herself to tell the story in every social situation. Now, instead of the shame keeping her up at night, she was brave enough to share her story in hope of saving her friends from the same fate.

As credit union professionals, it’s up to us to educate our members and the greater community. Tell the stories at civic events and speaking engagements. Share what you learn with other credit unions. Meet with local law enforcement — and advocate on your members’ behalf when law enforcement doesn’t take financial crime seriously.

Operationalizing Empathy

Global fraud is now a trillion-dollar economy, rivaling global drug trafficking and arms markets in economic scale. Fraud-fighting technology is keeping pace — but with advances in social engineering, faster payments and AI-driven deception, fraudsters see humans as the weak link.

Persuaded fraud is both a technology issue and a human issue – and one that must involve every credit union employee. Tower Federal Credit Union calls their approach “operationalizing empathy”: At every level, employees understand the human cost of persuaded fraud and are encouraged to keep their members — their friends and neighbors — in mind as they go about their daily activities.

Persuaded consumer-engaged fraud is not going away. So, take advantage of the power of data, as well as the power of education and human connection, to keep up the fight.

PSCU Payments Index July 2023: Credit and Debit Purchases Rebound with Positive Year-Over-Year Growth

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