To effectively combat fraud at your financial institution, you need to understand the three stages of the bank fraud lifecycle. They include the following:
- Planning – Gathering intelligence and selecting the target.
- Launching – Targeting the victim through phishing, pharming, malware, etc.
- Cashing – Moving money out of the bank to the fraudster.
Stage 1 – Planning
During the planning stage, the fraudster learns more about the target. They may use the following tactics to access personal or business information:
Footprinting
Footprinting entails obtaining publicly available information about the target bank or target customer, such as domain names, IP addresses, email addresses, and employee names.
Reconnaissance
Reconnaissance is a broad phrase that incorporates both passive and aggressive methods of acquiring information. It entails gathering data on a target, such as technical specifications, network topology, vulnerabilities, and potentially sensitive data.
Hacking
Hackers collect large volumes of personal data from multiple sources that they can leverage in an attack. For example, during the planning stage, hackers may piece together stolen data from the dark web to get the information they need to break into your customers’ accounts. Or they may hack into your system to learn about your fraud detection settings.
Stage 2 – Launching
The second stage of the bank fraud lifecycle is launching. This is when the fraudster begins to target the victim. There are several ways fraudsters target their victims, including the following:
Phishing
Phishing refers to sending emails or other messages that appear to be from trustworthy sources in order to trick people into disclosing personal information, such as passwords and credit card details. Attackers may bait your customers or your employees in phishing attacks.
In a phishing attack, the attacker usually offers a promise or scares the victim into taking action. For example, the “hook” in many phishing scams involves convincing the victim that one of their accounts has been compromised, generating a sense of urgency, and compelling the target to act quickly.
The attacker can then direct the victim to a fake webpage that looks like your bank’s site. When your customer tries to log in, the attacker steals their credentials to access their bank account. With bank employees, the attacker generally uses a different approach — but the goal of obtaining sensitive information is the same. For example, the phisher may try to trick someone in your accounting department into authorizing a payment to a fake vendor.
Pharming Attack
A pharming attack is a type of cybercrime in which web traffic is diverted from a legitimate website to a false website made to look like the original. Any information provided on the fake website, such as passwords or credit card data, goes directly to the hackers.
Malware
Malware, such as spyware or Trojans, can be transferred onto devices through phishing emails, software installations, or other methods. Fraudsters use malware to steal personal information such as login passwords or to steal the entire identities of your banking customers.
Stage 3 – Cashing
The third and final stage of the bank fraud lifecycle is cashing. This is how fraudsters move money through various channels in order to get it out of the bank and into their pockets.
ACH Fraud
Through phishing, data breaches, or even physical theft of checks, fraudsters acquire personal information such as bank account numbers, Social Security numbers, or log-in details. Then, they transfer money out of the victim’s account using this information.
Sometimes, they take a flat sum and run, and in other cases, they set up recurring ACH payments. Often, they disguise the recurring payments to look like purchases to evade detection. Unfortunately, the time delay associated with ACH payments is a significant weakness that financial fraudsters exploit.
Wire Transfer
Wire transfer fraud has expanded to include any type of bank fraud that uses electronic communication techniques rather than face-to-face communication at a financial institution. It also includes the illicit acquisition of banking information under false pretenses in order to obtain access to another person’s bank account.
Check Fraud
Many fraudsters use check fraud to take money out of their victims’ accounts. This can take a variety of forms. For example, fraudsters may print checks once they have the account holders’ details. Then, they may cash them at branches with weak security or use them in stores. In other cases, fraudsters steal checks out of the mail, erase the ink, and re-write the checks to themselves.
Credit Card Fraud
If a fraudster takes over a victim’s account, they can request to have a card mailed to them. Then, they can use the card for fraudulent transactions. However, they don’t necessarily need a physical card. As long as they have the right numbers, they can commit card-not-present fraud.
Protect Yourself From the Three Stages of Bank Fraud
Different analysts have different names for the three stages of fraud. While some focus on planning, launching, and cashing, others refer to the stages as customer access, transaction, and monetization. Regardless of the verbiage you use, the risk is the same.
Bad actors are always looking for ways to exploit your financial institution and your customers. They want your funds, and they’re constantly exploring new ways to get them. To protect your financial institution, you need a fraud solution that looks at all stages of fraud.
At SQN Banking Systems, we employ cyber threat intelligence to learn about the latest strategies of bad actors. We want to know what they’re planning. We also believe heavily in the importance of customer and employee education — that’s your strongest defense against the launch of an attack. To prevent thieves from cashing out, we offer a dynamic suite of tools that look for fraud based on changes in account holders’ patterns.
You don’t have to fight bank fraud alone. To get help protecting your financial institution, contact us at SQN Banking Systems today.
