FraudShare: A Neighborhood Watch For The Financial Community
The virus wasn’t the only thing that rapidly spread during the COVID-19 pandemic. So did incidents of online fraud and identity theft brought on by people turning more to internet commerce, banking, telehealth, and online business and education.
Consumers reported losing more than $5.8 billion to fraud in 2021, a 70% increase over the prior year, according to the Federal Trade Commission, with a record of 2.8 million people filing a fraud complaint. Imposter scams were most prevalent, but investment scams cost the typical victim the most money.
Retirement Funds Vulnerable
Particularly vulnerable were retirement funds, which weren’t necessarily targeted by fraudsters more than other financial accounts, but the losses were generally higher and impacts more devastating.
“The average individual has a larger 401(k) balance than in their savings account,” said Russell Anderson, head of financial crimes services for LIMRA and LOMA. “When fraud occurs, it can also have a big impact on the plan sponsor’s reputation and on the advisor. So the impact can be more significant from that aspect. As a plan sponsor with a fiduciary responsibility to help your employees save for retirement, a key piece of that is keeping accounts secure.”
Anderson will head a discussion called “Addressing Retirement Fraud and Cybersecurity - Protecting Society’s Most Vulnerable,” at the Retirement Industry Conference sponsored by the Secure Retirement Institute and the Society of Actuaries in Boston. Panelists joining him will review a recent cybersecurity report that found about half of the record keepers surveyed said that executives, and participants with higher balances or higher compensation are frequent targets of fraudsters. And many of these people are relatively easy to research online.
Better Identity Authentication Needed
The report, sponsored by the SOA Research Institute and the Secure Retirement Institute and titled “Keeping Retirement Plans Secure in an Insecure World,” called for greater measures in identity authentication and inserting real people into the distribution process as an additional control.
“Some record keepers are most concerned with new forms of financial services malware or ransomware,” the report said. “A record keeper can be doing all the right things to protect participant assets, but all it takes is one successful attack to cause great harm. This could happen at either the record keeper or plan sponsor level.”
Anderson said his panel discussion will also review the work of researchers at the FINRA Foundation and Rush University Medical Center, which studied the role of aging and cognition on financial and health decision-making and scam susceptibility.
“The scammers stepped up their attacks on individual consumers,” he said. “A lot of email compromised schemes, a lot of romance scams, and a lot of schemes targeted the elderly during the height of the pandemic when they were more likely to be isolated, alone and more susceptible. They were able to obtain a significant amount of personal data, which they used to commit the account takeover type frauds.”
'FraudShare' Tool To Be Reviewed
The panel will also use its time to review a fraud-fighting tool developed by LIMRA called “FraudShare,” which has been successful in providing early-warning signs of potential suspect activity allowing users to proactively research and stop a potential account takeover.
“The FraudShare application is really a consortium database,” Anderson said. “As companies encounter account takeover fraud instances, they report that data to FraudShare, so everyone has the scammers phone numbers, bank accounts, email addresses, and IP addresses they use. We find fraudsters reuse this data. So by sharing this data, companies are able to alert each other when there's a fraudster working the neighborhood. We like to say it is a neighborhood watch for the financial community.”
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].
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