While more than 35 million Americans have applied for unemployment benefits since mid-March during the COVID-19 public health and economic crisis, credit unions and banks are seeing an influx of fraudulent checks.
New York credit unions — some already understaffed and working over-capacity to assist members during the pandemic — are taking a closer look at incoming unemployment benefits being deposited in members’ accounts, in addition to closely eyeing other transactions that raise any sort of red flags.
“Credit unions should be aware that opportunist scammers posing as unemployed, and in many instances, out-of-state workers, are using the names of people with stolen identities to steal unemployment benefits,” said Sarah Hodgens, the New York Credit Union Association’s director of compliance. “As always, credit unions should continue to employ vigilant practices as they process the millions of unemployment checks that are currently flooding credit unions, and investigate any other transactions that raise red flags.”
Paul Malinowski, COO of Auburn Community FCU, said he has seen as much as $33,000 in fraudulent unemployment benefits attempting to be deposited into member accounts, most with names that do not match that of the member accounts they were intended to be deposited into.
“While NACHA rules state that you can post by account number only and that names do not matter, we still took a closer look,” Malinowski said.
He said that many of the fraudulent deposits originated from the Massachusetts Department of Unemployment, and none of the Auburn Community FCU members who received benefits live or work in Massachusetts, and in some cases did not even anticipate the deposits. Scams emanating from other states including Florida, Pennsylvania, Texas and Washington have also been reported.
Malinowski said that he has seen some common themes emerge from the scam, including:
- the member met someone online through a dating site or Instagram;
- the member was told by that individual that the person they met had a bank account that was locked or frozen;
- the scammer asked the member if they could use their bank account to receive funds and then use either a check or mobile payment service like Cash App, to send funds to them; and
- the purpose of the funds was purported to pay bills and buy groceries.
Malinowski said he’s also seen other instances of fraud amid the pandemic, including altered checks from new members who opened accounts online and then attempted to deposit the checks to an ATM, and members who want staff to “rush” a transaction.
Yet Malinowski credits his staff for being alert and investigating transactions that raise any sort of red flags. He also believes that the cooperative nature of credit unions who band together, whether through list servs or meeting online to share information, has made a positive difference in fighting against the recent scams.
“Cooperative nature, definitely — it thwarted these guys to hold off or find a different way,” Malinowski said. “Now that you know it’s there, it’s going to be easier to spot. Before you didn’t know, and you could get stung.”