From Reactive to Proactive: The next layer in fraud defense
By Becky Ross, Head of Marketing, Carefull
Multi-layered problems need multi-layered solutions.
The fraud landscape has changed. While traditional tools such as basic authentication systems and simple transaction checks have long been a backbone of credit union defense, they’re no longer enough. The biggest threat today isn’t stolen credentials or forged checks – it’s manipulation. Scammers now use persuasion, urgency, and trust to convince members to willingly send money or share sensitive information.
These socially engineered scams have surged, becoming the most common type of fraud reported by financial institutions. Scam-related losses rose 121% last year alone, according to PYMNTS. What makes these scams so dangerous is that the transactions are technically authorized, allowing them to slip through the cracks of most back-office fraud systems.
To keep pace, credit unions must layer smarter, proactive member-focused solutions on top of their existing fraud infrastructure. A LexisNexis study found that institutions using a wide range of fraud tools saw 41% lower losses than those relying on fewer methods. A layered strategy works if it includes the right tools for today’s threats.
Fraud Detection: Catching what traditional tools miss
Many fraud prevention tools are designed to catch transactional fraud such as check washing, account takeovers, or unauthorized logins. While these tools are critical, they only address a portion of the risk. What happens when fraudsters manipulate members into transferring funds themselves or sharing credentials willingly? The transaction seems legitimate, so traditional detection tools likely won’t flag it as fraud.
That’s why credit unions must go beyond traditional approaches and invest in technologies built to detect socially engineered scams. Behavioral analytics powered by machine learning and AI can spot subtle changes in how someone normally interacts with their accounts – such as unusual withdrawal patterns, abnormal transaction timing, or high-risk transfer behavior.
Account Alerts: The basics aren’t enough
Credit unions already provide account alerts, but these standard alerts catch only a fraction of the threats and the real risks are often lost in the sea of irrelevant alerts. To be effective, alerts must be smart, specific, actionable, and based on the known patterns of behavior for the specific individual. This is backed by a recent survey of financial institutions by KPMG.
Insights that intelligently detect changes in spending volume, quantity, or even vendor – when combined with known scam patterns targeting vulnerable members – can reveal the earliest warning signs of social engineering scams.
Comprehensive Monitoring: Protection across accounts
The next layer involves providing members with full financial monitoring across an array of accounts, expanding your line of sight. Today’s members often manage multiple accounts across various platforms such as Venmo, Zelle, PayPal, investment apps, and even crypto wallets.
For example, a member’s credit union account shows a $200 grocery charge, which looks normal on its own. But paired with a new Venmo account sending odd transfers to unfamiliar names, this could signal a gift card scam or mule activity. Without a comprehensive view of someone’s financial footprint, these warning signs can easily go unnoticed.
Staff Training: Building a fraud-aware team
While technology is essential in detecting fraud, human involvement remains crucial. Employees need to be trained to identify signs of fraud and respond appropriately. Regular staff training ensures that employees are up to date-to-date on the latest fraud tactics and know how to handle suspicious activities.
Credit unions that train their employees to detect and report fraud are more effective in protecting members from losing money to fraud. A study by AARP found that financial institution employees who underwent training reported four times as many suspicious incidents and saved older adults 16 times as much money over a six-month period as untrained employees did. A teller notices a member nervously asking how to wire money to “fix a problem with their computer.” With the right training, the teller intervenes, halting a tech support scam before the money leaves the account. This protects the member and the credit union.
Member Awareness: Strengthening the weakest link
Member awareness is often the weakest link in the fraud prevention chain. Unfortunately, the least-prepared individuals are often the most targeted, and most vulnerable, while educated members are less likely to engage when targeted, according to the FINRA Investor Education Foundation.
Credit unions should provide ongoing education about common scams – phishing, identity theft, social engineering – and how to avoid them. This can’t be one-and-done. Effective programs use multiple touchpoints: emails, web content, in-branch materials, workshops, and webinars.
Bottom Line
Scams are no longer purely technical. They’re emotional, manipulative, and personal. That’s why credit unions must evolve beyond back-office tools to layer in forward-facing, intelligent defenses that protect members before, during, and after fraud attempts. Behavioral analytics, smarter alerts, full financial monitoring, and education help credit unions reduce losses, build trust, and protect members from increasingly personal and sophisticated scams.
As you build or expand your risk department, don’t stop at back-office solutions. You must also layer in member-facing tools that empower members directly – tools that not only detect fraud but also prevent it by helping people recognize and respond to suspicious activity in real time.
These efforts don’t just reduce financial losses; they build trust, safeguard reputations, and protect members from irreversible harm. As scams grow more personal and sophisticated, institutions must be just as smart, vigilant, and proactive. A layered approach isn’t just a defense – it’s a competitive advantage.
Connect with Carefull to learn more.
