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Updated November 17th Related Posts Link to automotive form, business form
As Valentine’s Day approaches, hearts will melt, but some will inevitably be broken by romance scams. This season of love creates an opportune moment for scammers to prey on individuals feeling lonely or seeking connection. Financial institutions should take this time to warn customers about the heightened risks and encourage vigilance against fraud. In a tale as heart-wrenching as it is cautionary, a French woman named Anne was conned out of nearly $855,000 in a romance scam that lasted over a year. Believing she was communicating with Hollywood star Brad Pitt; Anne was manipulated by scammers who leveraged AI technology to impersonate the actor convincingly. Personalized messages, fabricated photos, and elaborate lies about financial needs made the scam seem credible. Anne’s story, though extreme, highlights the alarming prevalence and sophistication of romance scams in today’s digital age. According to the Federal Trade Commission (FTC), nearly 70,000 Americans reported romance scams in 2022, with losses totaling $1.3 billion—an average of $4,400 per victim. These scams, which play on victims’ emotions, are becoming increasingly common and devastating, targeting individuals of all ages and backgrounds. Financial institutions have a crucial role in protecting their customers from these schemes. The lifecycle of a romance scam Romance scams follow a consistent pattern: Feigned connection: Scammers create fake profiles on social media or dating platforms using attractive photos and minimal personal details. Building trust: Through lavish compliments, romantic conversations, and fabricated sob stories, scammers forge emotional bonds with their targets. Initial financial request: Once trust is established, the scammer asks for small financial favors, often citing emergencies. Escalation: Requests grow larger, with claims of dire situations such as medical emergencies or legal troubles. Disappearance: After draining the victim’s funds, the scammer vanishes, leaving emotional and financial devastation in their wake. Lloyds Banking Group reports that men made up 52% of romance scam victims in 2023, though women lost more on average (£9,083 vs. £5,145). Individuals aged 55-64 were the most susceptible, while those aged 65-74 faced the largest losses, averaging £13,123 per person. Techniques scammers use Romance scammers are experts in manipulation. Common tactics include: Fabricated sob stories: Claims of illness, injury, or imprisonment. Investment opportunities: Offers to “teach” victims about investing. Military or overseas scenarios: Excuses for avoiding in-person meetings. Gift and delivery scams: Requests for money to cover fake customs fees. How financial institutions can help Banks and financial institutions are on the frontlines of combating romance scams. By leveraging technology and adopting proactive measures, they can intercept fraud before it causes irreparable harm. 1. Customer education and awareness Conduct awareness campaigns to educate clients about common scam tactics. Provide tips on recognizing fake profiles and unsolicited requests. Share real-life stories, like Anne’s, to highlight the risks. 2. Advanced data capture solutions Implement systems that gather and analyze real-time customer data, such as IP addresses, browsing history, and device usage patterns. Use behavioral analytics to detect anomalies in customer actions, such as hesitation or rushed transactions, which may indicate stress or coercion. 3. AI and machine learning Utilize AI-driven tools to analyze vast datasets and identify suspicious patterns. Deploy daily adaptive models to keep up with emerging fraud trends. 4. Real-time fraud interception Establish rules and alerts to flag unusual transactions. Intervene with personalized messages before transfers occur, asking “Do you know and trust this person?” Block transactions if fraud is suspected, ensuring customers’ funds are secure. Collaborating for greater impact Financial institutions cannot combat romance scams alone. Partnerships with social media platforms, AI companies, and law enforcement are essential. Social media companies must shut down fake profiles proactively, while regulatory frameworks should enable banks to share information about at-risk customers. Conclusion Romance scams exploit the most vulnerable aspects of human nature: the desire for love and connection. Stories like Anne’s underscore the emotional and financial toll these scams take on victims. However, with robust technological solutions and proactive measures, financial institutions can play a pivotal role in protecting their customers. By staying ahead of fraud trends and educating clients, banks can ensure that the pursuit of love remains a source of joy, not heartbreak. Learn more
As data breaches become an ever-growing threat to businesses, the role of employees in maintaining cybersecurity has never been more critical. Did you know that 82% of data breaches involve the human element1 , such as phishing, stolen credentials, or social engineering tactics? These statistics reveal a direct connection between employee identity theft and business vulnerabilities. In this blog, we’ll explore why protecting your employees’ identities is essential to reducing data breach risk, how employee-focused identity protection programs, and specifically employee identity protection, improve both cybersecurity and employee engagement, and how businesses can implement comprehensive solutions to safeguard sensitive data and enhance overall workforce well-being. The Rising Challenge: Data Breaches and Employee Identity Theft The past few years have seen an exponential rise in data breaches. According to the Identity Theft Resource Center, there were 1,571 data compromises in the first half of 2024, impacting more than 1.1 billion individuals – a 490% increase year over year2. A staggering proportion of these breaches originated from compromised employee credentials or phishing attacks. Explore Experian's Employee Benefits Solutions The Link Between Employee Identity Theft and Cybersecurity Risks Phishing and Social EngineeringPhishing attacks remain one of the top strategies used by cybercriminals. These attacks often target employees by exploiting personal information stolen through identity theft. For example, a cybercriminal who gains access to an employee's compromised email or social accounts can use this information to craft realistic phishing messages, tricking them into divulging sensitive company credentials. Compromised Credentials as Entry PointsCompromised employee credentials were responsible for 16% of breaches and were the costliest attack vector, averaging $4.5 million per breach3. When an employee’s identity is stolen, it can give hackers a direct line to your company’s network, jeopardizing sensitive data and infrastructure. The Cost of DowntimeBeyond the financial impact, data breaches disrupt operations, erode customer trust, and harm your brand. For businesses, the average downtime from a breach can last several weeks – time that could otherwise be spent growing revenue and serving clients. Why Businesses Need to Prioritize Employee Identity Protection Protecting employee identities isn’t just a personal benefit – it’s a strategic business decision. Here are three reasons why identity protection for employees is essential to your cybersecurity strategy: 1. Mitigate Human Risk in Cybersecurity Employee mistakes, often resulting from phishing scams or misuse of credentials, are a leading cause of breaches. By equipping employees with identity protection services, businesses can significantly reduce the likelihood of stolen information being exploited by fraudsters and cybercriminals. 2. Boost Employee Engagement and Financial Wellness Providing identity protection as part of an employee benefits package signals that you value your workforce’s security and well-being. Beyond cybersecurity, offering such protections can enhance employee loyalty, reduce stress, and improve productivity. Employers who pair identity protection with financial wellness tools can empower employees to monitor their credit, secure their finances, and protect against fraud, all of which contribute to a more engaged workforce. 3. Enhance Your Brand Reputation A company’s cybersecurity practices are increasingly scrutinized by customers, stakeholders, and regulators. When you demonstrate that you prioritize not just protecting your business, but also safeguarding your employees’ identities, you position your brand as a leader in security and trustworthiness. Practical Strategies to Protect Employee Identities and Reduce Data Breach Risk How can businesses take actionable steps to mitigate risks and protect their employees? Here are some best practices: Offer Comprehensive Identity Protection Solutions A robust identity protection program should include: Real-time monitoring for identity theft Alerts for suspicious activity on personal accounts Data and device protection to protect personal information and devices from identity theft, hacking and other online threats Fraud resolution services for affected employees Credit monitoring and financial wellness tools Leading providers like Experian offer customizable employee benefits packages that provide proactive identity protection, empowering employees to detect and resolve potential risks before they escalate. Invest in Employee Education and Training Cybersecurity is only as strong as your least-informed employee. Provide regular training sessions and provide resources to help employees recognize phishing scams, understand the importance of password hygiene, and learn how to avoid oversharing personal data online. Implement Multi-Factor Authentication (MFA) MFA adds an extra layer of security, requiring employees to verify their identity using multiple credentials before accessing sensitive systems. This can drastically reduce the risk of compromised credentials being misused. Partner with a Trusted Identity Protection Provider Experian’s suite of employee benefits solutions combines identity protection with financial wellness tools, helping your employees stay secure while also boosting their financial confidence. Only Experian can offer these integrated solutions with unparalleled expertise in both identity protection and credit monitoring. Conclusion: Identity Protection is the Cornerstone of Cybersecurity The rising tide of data breaches means that businesses can no longer afford to overlook the role of employee identity in cybersecurity. By prioritizing identity protection for employees, organizations can reduce the risk of costly breaches and also create a safer, more engaged, and financially secure workforce. Ready to protect your employees and your business? Take the next step toward safeguarding your company’s future. Learn more about Experian’s employee benefits solutions to see how identity protection and financial wellness tools can transform your workplace security and employee engagement. Learn more 1 2024 Experian Data Breach Response Guide 2 Identity Theft Resource Center. H1 2024 Data Breach Analysis 3 2023 IBM Cost of a Data Breach Report
A recent survey of 1,000 representative American consumers showed that while 78 percent of respondents are aware that they have more than one credit score, some key misperceptions remain: • Fewer than half (44 percent) understand that a credit score typically measures risk of not repaying loans rather than amount of debt (22 percent), financial resources (21 percent) or other factors. • More than half still think that a person's age (56 percent) and marital status (54 percent) are factors used to calculate credit scores, and 21 percent incorrectly believe that ethnic origin is a factor. Click here to get the facts on the types of credit scores and what influences them. Source: VantageScore® press release, May 2012. VantageScore® is owned by VantageScore Solutions, LLC.
By: Mike Horrocks This week, several key financial institutions will be submitting their “living wills” to Washington as part of the Dodd-Frank legislation. I have some empathy for how those institutions will feel as they submit these living wills. I don’t think that anyone would say writing a living will is fun. I remember when my wife and I felt compelled to have one in place as we realized that we did not want to have any questions unanswered for our family. For those not familiar with the concept of the living will, I thought I would first look at the more widely known medical description. The Mayo Clinic describes living wills as follows, “Living wills and other advance directives describe your preferences regarding treatment if you're faced with a serious accident or illness. These legal documents speak for you when you're not able to speak for yourself — for instance, if you're in a coma.” Now imagine a bank in a coma. I appreciate the fact that these living wills are taking place, but pulling back my business law books, I seem to recall that one of the benefits of a corporation versus say a sole proprietorship is that the corporation can basically be immortal or even eternal. In fact the Dictionary.com reference calls out that a corporation has “a continuous existence independent of the existences of its members”. So now imagine a bank eternally in a coma. Now, I cannot avoid all of those unexpected risks that will come up in my personal life, like an act of God, that may put me into a coma and invoke my living will, but I can do things voluntarily to make sure that I don’t visit the Emergency Room any time soon. I can exercise, eat right, control my stress and other healthy steps and in fact I meet with a health coach to monitor and track these things. Banks can take those same steps too. They can stay operationally fit, lend right, and monitor the stress in their portfolios. They can have their health plans in place and have a personal trainer to help them stay fit (and maybe even push them to levels of fitness they did not think they could reach). Now imagine a fit, strong bank. So as printers churn, inboxes get filled, and regulators read through thousands of pages of bank living wills, let’s think of the gym coach, or personal trainer that pushed us to improve and think about how we can be healthy and fit and avoid the not so pleasant alternatives of addressing a financial coma.
By: Joel Pruis From a score perspective we have established the high level standards/reporting that will be needed to stay on top of the resulting decisions. But there is a lot of further detail that should be considered and further segmentation that must be developed or maintained. Auto Decisioning A common misperception around auto-decisioning and the use of scorecards is that it is an all or nothing proposition. More specifically, if you use scorecards, you have to make the decision entirely based upon the score. That is simply not the case. I have done consulting after a decisioning strategy based upon this misperception and the results are not pretty. Overall, the highest percentage for auto-decisioning that I have witnessed has been in the 25 – 30% range. The emphasis is on the “segment”. The segments is typically the lower dollar requests, say $50,000 or less, and is not the percentage across the entire application population. This leads into the discussion around the various segments and the decisioning strategy around each segment. One other comment around auto-decisioning. The definition related to this blog is the systematic decision without human intervention. I have heard comments such as “competitors are auto-decisioning up to $1,000,000”. The reality around such comments is that the institution is granting loan authority to an individual to approve an application should it meet the particular financial ratios and other criteria. The human intervention comes from verifying that the information has been captured correctly and that the financial ratios make sense related to the final result. The last statement is the key to the disqualification of “auto-decisioning”. The individual is given the responsibility to ensure data quality and to ensure nothing else is odd or might disqualify the application from approval or declination. Once a human eye is looking at an application, judgment comes into the picture and we introduce the potential for inconsistencies and or extension of time to render the decision. Auto-decisioning is just that “Automatic”. It is a yes/no decision and is based upon objective factors that if met, allow the decision to be made. Other factors, if not included in the decision strategy, are not included. So, my fellow credit professionals, should you hear someone say they are auto-decisioning a high percent of their applications or a high dollar amount for an application, challenge, question and dig deeper. Treat it like the fishing story “I caught a fish THIS BIG”. No financials segment The highest volume of applications and the lowest total dollar production area of any business banking/small business product set. We had discussed the use of financials in the prior blog around application requirements so I will not repeat that discussion here. Our focus will be on the decisioning of these applications. Using score and application characteristics as the primary data source, this segment is the optimal segment for auto-decisioning. Speeds the decision process and provides the greatest amount of consistency in the decisions rendered. Two key areas for this segment are risk premiums and scorecard validations. The risk premium is important as you are going to accept a higher level of losses for the sake of efficiencies in the underwriting/processing of the application. The end result is lower operational costs, relatively higher credit losses but the end yield on this segment meets the required, yet practical, thresholds for return. The one thing that I will repeat from a prior blog is that you may request financials after the initial review but the frequency should be low and should also be monitored. The request of financials should not be the “belt and suspenders” approach. If you know what the financials are likely to show, then don’t request them. They are unnecessary. You are probably right and the collection of the financials will only serve to elongate the response time, frustrate everyone involved in the process and not change the expected results. Financials segment The relatively lower unit volume but the higher dollar volume segment. Likely this segment will have no auto-decisioning as the review of financials typically will mandate the judgmental review. From an operational perspective, these are high dollar and thus the manual review does not push this segment into a losing proposition. From a potential operational lift perspective, the ability to drive a higher volume of applications into auto-decisioning is simply not available as we are talking probably less than 40% (if not fewer) of all applications in this segment. In this segment, the consistency becomes more difficult as the underwriter tends to want to put his/her own approach on the deal. Standardization of the analysis approach (at least initially) is critical for this segment. Consistency in the underwriting and the various criteria allows for greater analysis to determine where issues are developing or where we are realizing the greatest success. My recommended approach is to standardize (via automation in the origination platform) the various calculations in a manner that will generate the most conservative approach. Bluntly put, my approach was to attempt to make the deal as ugly as possible and if it still passed the various criteria, no additional work was needed nor was there any need for detailed explanation around how I justified the deal/request. Only if it did not meet the criteria using the most conservative approach would I need to do any work and only if it was truly going to make a difference. Basic characteristics in this segment include – business cash flow, personal debt to income, global cash flow and leverage. Others may be added but on a case by case basis. What about the score? If I am doing so much judgmental underwriting, why calculate the score in this segment? In a nutshell, to act as the risk rating methodology for the portfolio approach. Even with the judgmental approach, we do not want to fall into the trap thinking we are going to be able to adequately monitor this segment in a proactive fashion to justify the risk rating at any point in time after the loan is booked. We have been focusing on the origination process in this blog series but I need to point out that since we are not going to be doing a significant amount of financial statement monitoring in the small business segment, we need to begin to move away from the 1 – 8 (or 9 or 10 or whatever) risk rating method for the small business segment. We cannot be granular enough with this rating system nor can we constantly stay on top of what may be changing risk levels related to the individual clients. But I am going to save the portfolio management area for a future blog. Regardless of the segment, please keep in mind that we need to be able to access the full detail of the information that is being captured during the origination process along with the subsequent payment performance. As you are capturing the data, keep in mind, the abilities to Access this data for purposes of analysis Connect the data from origination to the payment performance data to effectively validate the scorecard and my underwriting/decisioning strategies Dive into the details to find the root cause of the performance problem or success The topic of decisioning strategies is broad so please let me know if you have any specific topics that you would like addressed or questions that we might be able to post for responses from the industry.