Half of financial businesses feel ill prepared to address scams

Financial institutions recognize the importance of mitigating risk and potential losses from money transfer scams, but many are struggling to address the threats, Lexisnexis found. 

More than four out of five, or 81%, of leaders in financial services said they prioritized prevention efforts to head off such schemes and help affected customers mitigate losses, according to research from Lexisnexis Risk Solutions.

Yet despite fully understanding the threat, only 50% said they were confident in their ability to deal with such crimes, where perpetrators manage to successfully convince, or coach, victims to transfer money to them through various means, including romance scams, fake sales transactions or impersonations of trusted individuals or businesses.

Financial institutions "must analyze digital and behavioral signals to implement better strategies for mitigating scams across multiple channels," said Soudamini Modak, the firm's director of fraud and identity, in a press release.

"Consumers increasingly expect safer and more secure interactions and transactions," she added.

Almost two-thirds of leaders felt their current methods to mitigate the crimes were not fully up to the task, with new, sophisticated scams requiring more robust technology to properly identify potential fraud. 

Mortgage lenders and associated businesses involved in real estate transactions, in particular, represent what some cybersecurity experts call "targets of opportunity," with frequent transactions requiring transfer of large sums of money. 

More often than not, the difficulty financial institutions face when they try to deal with money transfer scams comes from victims themselves. A total of 69% of financial leaders said they found it difficult to convince affected parties they had unknowingly trusted a criminal. But a larger share of 72% are making an effort to demonstrate to victims they have fallen into a scam while revealing minimal information. 

It is important for banks and financial institutions to "detect scams and other fraudulent behavior without frustrating consumers by slowing legitimate transactions and risking customers abandoning their transactions," Modak said. 

Companies are also running into challenges when it comes to timely consumer notification of suspect money transfers. Only 4% of financial institutions are able to alert their customers within 24 hours of scams if a fraudster impersonates one of their employees, with 31% indicating it would take at least one week. 

Immediate notification of fraudulent transfers improved only modestly with other imposter types. If scammers impersonated businesses, only 7% of financial companies informed victims in 24 hours. The share rose to 9% when perpetrators pretended to be friends or family.

Contributing to the low percentages is the fact that financial institutions themselves are not necessarily aware that crimes have occurred until days later, particularly if it involves a fraudster's successful impersonation of an intended recipient of funds, such as a title agency. 

Unless a receiving account was already flagged as suspicious, payments are going to go through, and wires are immediate, said Thomas Cronkright, co-founder and executive chairman at real estate fraud prevention firm CertifID. 

Meanwhile, the actual intended recipient won't be aware of the scam until the sender indicates funds were remitted and they didn't arrive. By that time, the perpetrators — and wired amounts — are likely gone.

"That's the gap, so there will always likely be a gap, because there's really no requirement bank to bank," Cronkright said.

Scammers often tend to coax victims into sending funds before holiday weekends when chances of eluding detection are higher as well. 

"Now you've got a more advanced and immediate cycle of funds transfer, our ability to identify and freeze and move those funds back to the sender-victim is going to be harder," Cronkright added

"To protect the consumer, or protect anybody sending funds in, you want to proactively and kind of early on in the transaction provide them with trusted wiring instructions, not knowing along that continuum of the transaction when they're actually going to go to the bank or online to initiate the transfer," he said.

News this week that 10 billion passwords had been published on the dark web points to the continued threat that fraudsters might be able to successfully impersonate individuals to facilitate their crimes. The passwords, which were compiled from several past data breaches, would likely only become a bona fide threat, though, if users recycled them and failed to implement multifactor authentication, cyber experts advised.