Privacy laws and smart fraudsters make it difficult to protect people and their money.
Sometimes the best customer service a credit union can provide is to be slow and delay, delay, delay, even if that makes your member upset.
When front-line staffers fear someone is caught up in a scam and is trying to withdraw or transfer money to help a grandchild who is in trouble—one of the most common scams—the first line of defense is to slow things down, say police officers, credit union executives and experts in elder fraud abuse.
The goal is to keep the money in their account until you can check what is happening and either find a way to persuade the member that they are about to become a fraud victim or confirm the transaction is safe.
In February the RCMP, Ontario Provincial Police, and Canadian Anti-Fraud Centre issued a joint statement saying they had seen a huge jump in the grandparents’ or emergency scam in 2022, with losses of $9.2 million reported, up from $2.4 million in 2021. They also acknowledged that this represents less than 10% of the likely fraud since so little is reported.
CUES member Darren Heide, VP/enterprise risk management at $11 billion Access Credit Union, based in Manitoba, says that the credit union sees a lot of members hit by different types of scams that seem to come in waves or cycles. For example, Heide notes, during the pandemic, “the romance scams were some of the most common ones we were seeing, and they targeted seniors because of how lonely they were.”
The challenge when staff thinks there may be a problem is to find a way to determine what is really going on while treating the member respectfully and protecting their privacy.
Sandra Boyce, VP/personal banking at $7 billion Prospera Credit Union, based in Surrey, British Columbia, says the CU stresses to staff that if they see red flags, “you need to ask those questions. It’s not a nice [thing] to do. Trust your gut and when something is off pause and escalate. Go get a manager.
“We have a really good relationship with our members,” she says. “They trust us; we trust them, and so that allows us to really ask some questions. Really, we know their patterns and their behaviors.”
Heide agrees. “It comes down to knowing your member and knowing what to expect so you understand their normal behavior and when that behavior starts changing that’s when you need to do that additional due diligence to ask questions.”
Track Your Interactions
It’s important that credit unions use their CRM system to track all interactions with a member and note any concerns so that problems can be spotted, even if a member is being served by a different staff member.
Boyce recalls a recent incident when a member went to one branch and was questioned about their requested withdrawal and urged to talk to other family members before acting. That interaction was noted in the CRM and popped up when the member went to a different branch later that same day with the request. Eventually, they were persuaded not to follow through.
Heide notes that Access CU has been growing rapidly in recent years with several mergers so developing a consistent culture and approach has been important. It has also been shifting focus on the front lines from order-taking to advising, so spotting potential frauds and helping members deal with them fits with its cultural shift.
Access CU provides fraud training during staff orientation and offers webinars and Zoom sessions throughout the year. Recently it created a fraud forum on its intranet where staff can share information about any fraudulent activity they are seeing and any changes in tactics. Heide says this feature was created after he became aware that a bank had been criticized for not making staff aware of a recurring fraud and he wanted to ensure the credit union did all it could to promote awareness.
An employee creates a monthly fraud post about the latest threats and writes an engaging article that promotes discussion as well.s
Boyce said all employees at Prospera CU must complete an online, vulnerable-member training course annually to refresh their awareness of the problem and learn about the latest twists in scams. It also has blog posts on its website to inform members about potential threats.
One red flag that Heide highlights is that some scammers want members to use wire transfers to shift the money, often to a crypto exchange. Access CU has advised staff to be alert and question when someone who has never used wire transfers requests one.
“We’ll say: ‘This is your first wire. Where are you sending it? Why?’” say Heide.
And if the wire is going to a grandchild, supposedly, the staff has Googled the recipient and pointed out that, in fact, it’s a crypto platform.
Heide says one challenge is that “members are becoming increasingly well-coached by fraudsters. They’re being told what to say, which makes it increasingly difficult for us.”
When staff spot someone they think may be caught up in a scam, they try to delay providing money and slow the process in an effort to have an opportunity to intervene.
“We try to identify if the member’s uncomfortable, stressed or flustered. You try and take the member to an office to have a conversation. We educate people on scams and print out fraud materials. We encourage them to bring it to a trusted family member.”
But the credit union’s ability to intervene is restricted if the family member is not listed on the account or does not have power of attorney.
Access CU has refused to carry out wire transfers when it wasn’t comfortable, a move that has angered members and led some to threaten to move their money and close their accounts.
But there is little the credit union can do if someone insists on taking out cash. “I mean, that’s your own money,” Heide says. In such cases, Access CU will try to provide a money order as another delaying technique.
Sergeant John Jaklitsch with the Waterloo Regional Police Service’s Organized Financial Crimes Unit says he and other officers have discussed the complicated ethical and privacy challenges that financial institutions face in persuading people not to follow their plans for their own money. “The question is, it is the client’s money, and who is responsible, and is it even right for anyone to intervene? It’s tough; it’s a bit of a conundrum.”
Jaklitsch says versions of the grandparents’ scam have been going on for more than 20 years, and that’s because it is extremely successful for the fraudsters. The Waterloo police force noticed an uptick in the scam in its area about two years ago and realized that its existing efforts were not effective, so it reached out to local bank and credit union branches to offer training about how to spot the scheme. It also created a one-page sheet that explains how the scam works and identifies warning signs.
He says that combatting such scams requires a multi-faceted approach that demands personal responsibility from members, action by financial institutions and police enforcement. “This is almost a disheartening thing for me to say, because it’s a lot more work than just arresting the bad guy who’s doing it. If we can’t arrest our way out of the problem, then we have to find another way to protect and shield people.”
Jaklitsch says many victims realize after the fact that their credit union or bank representative was trying to protect them. “So many of the people that are victimized successfully, they say to me, ‘The very next thing I’m going to do is go in and apologize to the representative of the financial institution because I was so rude and tore a strip off them for even questioning why I needed the money.’ They feel awful.”
Jaklitsch says his unit is involved because these scams truly are an organized crime. It’s unclear where the leaders may be located, but their success depends on trained phone operators who carefully draw people in, then provide warnings and tips for how to ensure credit unions and banks don’t refuse to turn over their cash. Also, in many cases, the fraud involves local thieves who come to the victim’s door to get the money. In other cases, the money is simply transferred to the fraudsters.
“It’s very organized, very complex, and I think that there’s quite a hierarchy involved,” Jaklitsch says.
The Fraud Business
The fraudsters operate like a business, says Laura Proctor, a prevention consultant at Elder Abuse Prevention Ontario. “It’s set up like a small business where you have boots on the ground. You have the operations doing the robo calls, and then you have the upper management making the decisions and inventing more frauds to get more money.”
Proctor notes that 20 years ago mail frauds were the big risk. “Now, there’s barely any mail fraud and it’s all online and few of them are telephone. The grandparent scam is one of the last telephone ones, and that’s only because they know seniors have landlines. But fast forward 15 years and these telephone scams are going to be gone and it’s going to be all online.”
Sometimes the original caller has gleaned personal and family information from social media, especially Facebook, and has names and background details. In other cases, the caller might say “This is your favorite grandson calling,” and the potential victim will often respond with a name, which the caller can then use to develop a fake persona.
And now AI voice cloning is on the rise. Here, scammers use artificial intelligence and easy-to-access generative AI tools to spoof a loved one’s voice. Experts suggest setting up a code word for loved ones to use in an emergency to know it’s really them.
Jaklitsch says the fraudsters follow a script that is designed to build on the grandparent’s normal desire to help and create a sense of urgency. Often, the victim will be passed off to a second caller who claims to be a lawyer or police officer who provides more information and explains the request for bail money. That person may also provide a password, or ID number, that the victim uses when handing over the money to the courier, another step that appears to give legitimacy to the process.
“The core of the scam is always creating that emotional response and that sense of urgency,” says Benedicte Schoepflin, executive director of the Canadian Network for the Prevention of Elder Abuse. “Because that helps people gloss over the details that they would otherwise immediately pick up on and say ‘This doesn’t add up.’”
Schoepflin says many older people have been conditioned to be nice and not make a fuss, so they are reluctant to hang up on a caller or challenge someone who claims to be an authority figure. “That’s the first step of saying, ‘It’s OK to be rude.’ It’s OK to say no, because that’s an act of self-preservation. That’s the hardest first step for people to take.”
Jaklitsch says these scammers often insist there is a legal gag order that means the potential victim can’t talk to anyone about the call. He notes there are no gag orders in Canada and says front-line credit union reps should realize that this is a sign that a fraud scheme is under way.
Once a person has been identified by the fraudsters as a gullible victim, they may be hit again, Jaklitsch warns. “If a victim seemed like an easy target, seemed very willing, seemed to have the money available, they might get hit the next day.”
Or their contact information may be sold to other scammers to be used in the future, says Laura Tamblyn Watts, founder/CEO of CanAge, a national seniors’ advocacy organization. “We talk about frauds and scams is if it’s a one-off, but really what happens behind the scenes is this very sophisticated kind of underground black market where your information, as a confirmed lead, which means that you’ve been hooked at one point, is then sold to other scam artists.”
So, a person who falls victim to the grandparents’ scam may soon be approached by a lottery scammer or face a fraudulent contractor at their front door looking to take advantage of a soft touch. “All of that confirmed information is hidden behind the scenes but in a very sophisticated fashion,” Tamblyn Watts says.
If a credit union customer service rep suspects a member is caught in a fraud attempt, Jaklitsch suggests the first step is to ask whether the person has contacted another family member or tried to reach their grandchild. Then reps should lay out the possible scheme and explain to the member what may be happening. “Because the scheme is so standard, when tellers present the scheme back to them with all those facts, then the veil starts to lift. That’s when the realization often hits, and they think, well maybe I am being taken.”
Fraud Rarely Reported
Tamblyn Watts says that often seniors don’t report fraud because they are embarrassed and fear it will be seen as evidence that they are losing their faculties.
“What people don’t necessarily realize is that in many cases it is not just an inconvenience or not just embarrassing,” Tamblyn Watts says. “It can actually have an effect on [the victim’s] quality of life. What are the reasons people don’t report frauds and scams, particularly elder abuse frauds and scams? They are really worried that they’ll be considered mentally incapable or face questions about their mental capacity, and frankly, that is exactly right.”
The other reality that keeps people from reporting frauds is the awareness that there is little likelihood of getting the money back or seeing the perpetrators caught, she says.
Tamblyn Watts says many people aren’t aware of where fraudsters can get their information. “Some of that information that targets you gets scraped every single time somebody answers one of those questions: What’s your favorite color? What was the year that you graduated from high school? What was the name of your first boyfriend? All of that information [can be found on] social media accounts, typically Facebook.”
In general, CanAge encourages seniors not to respond “to something that comes either to your email box, to your door, and increasingly to your text messages. Text messaging is one of those areas that we’ve really seen a huge spike in frauds and scams targeted to older people because texting somehow seems closer than email.”
Tamblyn Watts notes that banks, federal credit unions and some others have agreed to follow the voluntary Code of Conduct for the Delivery of Banking Services to Seniors, which includes the promise to train staff to spot scams and to provide a quiet space where problems can be discussed. She says the voluntary code should be made mandatory and include tighter oversight to ensure it is being followed.
Tamblyn Watts says credit unions have a good record in this area but face a particular challenge because many members also have accounts with banks. “Sometimes credit unions work extremely well within their bubble but can be challenged to work more broadly across that landscape.”
Boyce says she’s aware of instances where a member who couldn’t take money out of their Prospera CU account because of fraud concerns turned to their account with another financial institution and withdrew the cash.
Information about how to spot and stop fraud is available from several sources. Canadian Credit Union Association offers a Financial Crime Micro-Learning Library that includes 48 short modules focused on topics not covered in the annual anti-money laundering training, such as seniors scams, romance fraud and eTransfer fraud. The content was created by CCUA’s partners at Tamlo(r) International.
The websites of Elder Abuse Prevention Ontario and the Canadian Network for the Prevention of Elder Abuse both resources and background information, as does the Canadian Anti-Fraud Centre. cues icon
Art Chamberlain is a freelance writer who focuses on the credit union sector.
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