CUNA Mutual Group Risk Alert: Credit Unions Fall Victim to Cash Advance Scams

Fraudsters are obtaining cash advances at the teller counter using counterfeit cards. Typically, the fraudster is a non-member and uses a card from another financial institution. Although this scam has been around for years, credit unions have witnessed an uptick in losses as fraudsters perfect their methods. In most cases, this is an uninsurable loss.

Seemingly outdated in today’s cyber-savvy world, cash advance scams are increasingly impacting financial institutions. Member Service Representatives and Tellers have let their guards down by bypassing standard procedures - allowing fraudsters to get away with cash.

How the Scam Operates:

• The fraudster requests a cash advance at the teller counter using a credit or debit card. The card appears real; however, it is a counterfeit card with a fake phone contact number on the back.
• When the credit union employee attempts to process the transaction; the cash advance is unable to be processed. The fraudster claims it is a problem with the card company or issuing financial institution.
• As a result, the fraudster calls the number on the back of the card; in reality, the fraudster is calling an accomplice at that phone number.
• The fraudster gives the phone to the credit union employee and the accomplice states that the transaction must be force-posted offline. Unknowingly, the credit union employee is given an erroneous authorization code and processes the transaction.
• Ultimately, the transaction is charged back as unauthorized by the issuing financial institution.

Often, fraudsters executing this scam will visit multiple branches of the credit union until they find a credit union employee who falls for their scam. Therefore, measures should be taken to mitigate risk in all branches of the credit union.

If your credit union is a VISA member, refusing to process a cash advance from a non-member using a VISA card is a violation of VISA’s Operating Rules. The same applies if your credit union has membership with Mastercard; you must accept a non-member’s Mastercard for cash advances. Unfortunately, fraudsters are aware of this and use it to their advantage.

Risk Mitigation
Consider these tips to minimize the risk of cash advance scams:

• Set maximum cash advance limits per day for cash advances made at the teller counter. Ensure that any limits are in accordance with VISA or Mastercard Operating Rules.
• Request two forms of identification, such as a driver’s license and passport, from those requesting cash advances at the teller counter.
• If the cash advance is unable to be authorized with the magnetic stripe or EMV reader, do not call the number on the back of the card or a number provided by the cardholder for authorization.
• Always authorize transactions with the magnetic stripe or EMV reader.
• Educate front line staff about cash advance scams and the importance of following procedure.
• Never override or force-post a transaction.

Risk Prevention Resources
Access CUNA Mutual Group’s Protection Resource Center at cunamutual.com for exclusive risk and compliance resources to assist with your loss control. The Protection Resource Center requires a User ID and password. Review these resources to learn more:

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