In bank account fraud, cyber criminals gain unauthorized access to users’ bank accounts for financial gain. Fraudsters may use several tactics including identity theft, advanced phishing, card skimming and account takeover, among others. Once attackers have access to stolen personal information, such as social security numbers or login credentials, they can use it to compromise accounts, make unauthorized transactions, or commit other crimes.
Bank account fraud is increasingly causing significant financial losses to both banks and their consumers.
The impact on banks and financial institutions
Bank account fraud is a growing threat within the financial sector, impacting a wide range of financial institutions including banks, credit unions and fintechs. The rapid advancements in technology are enabling fraudsters to access commoditized tools such as bots, botnets and cybercrime-as-a-service (CaaS) to execute automated attacks with great speed and at scale.
With bank account takeovers, hackers gain control of genuine user accounts, causing direct and indirect financial losses. These include mitigation costs, account restoration, password reset, extra burden on customer support services and operational disruptions.
Through identity theft, fraudsters can use stolen personal information of genuine users for new account fraud that can be used to open new lines of credit and more sinister criminal activities like money laundering.
Furthermore, bank account fraud erodes customer trust and causes reputational damage. Security breaches and fraudulent activities within bank systems may attract regulatory scrutiny and potentially additional fees, fines or penalties.
Common types of bank account fraud
Account takeover fraud
Fraudsters obtain login credentials through tactics such as phishing, social engineering or data breaches to compromise user accounts and transfer funds, change contact information, and conduct other fraudulent activities.
New account fraud
Cybercriminals often use stolen information together with fake bits of information to register fraudulent new bank accounts to open new lines of credit, execute illegal transactions, or launder money.
Phishing
Fraudsters send out deceptive emails or messages, encouraging users to divulge personal or account information that can be used for identity theft, to steal funds, or to make fraudulent transactions.
Man-in-the-middle phishing attacks
Hackers intercept communications between consumers and banking websites, impersonating the bank's website to trick users into sharing login credentials.
ATM skimming and cloning
Fraudsters use hidden devices to capture debit card or credit card numbers when customers swipe their cards at compromised ATMs or point-of-sale terminals.
Wire transfer scams
Fraudsters trick individuals or businesses into transferring funds to accounts under their control through fake invoices, lottery winnings, or romantic scams.
Check fraud
Cybercriminals forge checks or create fake counterfeit checks with stolen bank account information to deposit them into accounts under their control and withdraw the money before the bank can detect the fraud.
Identity theft
Fraudsters steal personal information, such as social security numbers or driver's license numbers, to impersonate individuals and open fraudulent bank accounts or credit lines in their names.
Mobile banking fraud
Fraudsters exploit P2P payment and mobile banking apps such as Venmo, Zelle, PayPal and others on users’ mobile devices to steal login credentials, intercept authentication codes, gain remote access, and make unauthorized transactions.
Indicators that your bank may be under attack
There are several red flags that indicate that a bank may be under attack. These include:
Unusual customer complaint patterns
A sudden surge in customer complaints related to unauthorized account access, fraudulent transactions, or suspicious activity, possibly due to a security breach or phishing attack.
Unusual transaction volumes
Sudden and abnormal spikes in transaction volumes that may also deviate from typical consumer behavior.
Spike in failed login attempts
Multiple failed login attempts, especially from different IP addresses or locations, may indicate account takeover or brute-force attempts.
Increased chargeback requests
A sudden and significant increase in chargeback requests, possibly due to fraudsters using stolen credit card information for credit card fraud and to make unauthorized purchases.
Consistent chargebacks across multiple accounts
Consistent chargeback requests from multiple accounts or a clustering of chargebacks around specific transactions or merchants.
Mismatch between customer behavior and transaction patterns
Discrepancies between a customer's typical spending behavior and the transactions.
System slowdowns or disruptions
Unexpected system slowdowns or disruptions, due to scammers trying to target the bank's infrastructure.
Reports of phishing attempts
Reports of phishing attempts targeting the bank's customers, either through email, phone calls or text messages.
Unauthorized changes to account information
Unauthorized changes to customer checking account information, such as email addresses, phone numbers or mailing addresses.
Modern fraud tactics
As technology continues to evolve, fraud tactics are also becoming innovative and sophisticated. These include man-in-the-middle attacks that mimic legitimate banking websites and emails, social engineering techniques that exploit human vulnerabilities to gain access to sensitive information, and malware attacks targeting both individual customers and financial institutions' systems to steal login credentials and personal data.
Modern fraud tactics leverage advanced technology and pose a significant challenge for banks in balancing users’ account security with user experience.
The role of bots in bank fraud
Easy availability and low costs have made bots a popular tool for automated bot attacks. Availability of bots-as-a-service enables even amateur fraudsters, with little-to-no technical skills, to execute targeted and complex attacks.
Fraudsters can program bots to automate specific malicious activities and achieve scale at speed that humans cannot possibly achieve. Bot traffic can overwhelm banking systems and exploit vulnerabilities with precision, enabling hackers to compromise several user checking accounts rather quickly.
Bots with advanced capabilities can interact with defense mechanisms that need nuanced human interaction to evade detection or pass on the attack baton to human fraud farms when deterred.
Human fraud farms: a growing concern
Human fraud farms are low-wage individuals that are paid to perform manual tasks, such as conducting phishing calls, creating fake identities for account opening, or laundering money through mule accounts.
Fraud farms operate in organized networks and exploit human vulnerabilities to bypass security measures, enabling attackers to achieve scale. It requires comprehensive fraud detection systems and collaborating with law enforcement agencies to dismantle these criminal enterprises.
Preventative measures against bank account fraud
As fraudsters continually evolve their tactics, banks must consider implementing the following proactive measures to thwart new ways of exploitation, mitigate risks, and maintain trust in the banking system:
Using advanced bot detection and mitigation
Deploy smart bot management software to strengthen protection against account takeover attempts, fraudulent transactions and other automated attacks.
Solutions such as Arkose Bot Manager, which leverages the latest technologies, sophisticated algorithms and behavioral analysis techniques, can effectively identify and block malicious bot activity on online banking platforms, allowing banks to proactively thwart fraudulent activities.
Advanced phishing detection and protection
Use machine learning algorithms and artificial intelligence to analyze email content, URLs and sender behavior, to identify suspicious patterns and potential phishing attacks. Solutions such as Arkose Phishing Protection leverage these technologies, enabling banks to automatically flag and block phishing emails, thereby reducing the risk of users falling victim to phishing scams.
Implementing stronger authentication processes
Incorporate multi-factor authentication methods, such as SMS codes, biometrics or security tokens, to verify the identity of checking account holders.
Educating employees and customers
Conduct training programs to educate employees to recognize suspicious activities and promptly report any potential threats. Educate customers about best practices for safe banking, such as protecting their login credentials, identifying phishing attempts, using strong passwords, and monitoring bank statements.
Leveraging AI and machine learning for fraud detection
Leverage AI and machine learning to analyze vast amounts of transactional data in real-time and detect anomalies or patterns indicative of fraudulent activity. By continuously learning from new data, these systems can adapt and evolve to detect sophisticated fraud schemes and minimize false positives, enhancing the accuracy and efficiency of fraud prevention efforts.
Conclusion
A dynamic digital landscape makes protection against bank account fraud challenging. Banks must adopt a multifaceted approach that encompasses advanced technologies and proactive strategies.
Banks must implement robust authentication processes, leverage AI and machine learning for fraud detection, and deploy sophisticated bot detection and phishing protection mechanisms to proactively fight bank account fraud attempts. Continuous monitoring of user activities and regular review of protective measures can help banks effectively mitigate the risks of bank account fraud, enhance safety of their customers' financial assets, and ensure the integrity of the online banking system.
Want to know more about protecting your financial institution from cyber attacks? Read about the Arkose Labs finance and fintech fraud prevention solution.