Tax Fraud Affecting CU Members

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As if the COVID-19 pandemic and its ramifications haven't given members enough to worry about, it is now the time of year when criminals also focus on tax fraud, and they're using several schemes to attack your members.

Many members are not aware of just how easy it can be for criminals to submit a false tax return to the IRS in their name, using their personal information.  Thieves are using personal information that has been collected and stolen from various data breaches and sold over the years on the Dark Web. In 2020 alone, according to a newly released 2021 report by Risk Based Security, the volume of records comprised of recorded data breach events in 2020 "jumped by 141% to a whopping 37 billion records", the largest number seen since 2005.  

On the false return, the thieves make it appear as though there is a significant refund owed and in the member's name, using their social security number, claim that refund for themselves. And then they vanish, leaving your members with the clean-up process, which requires hours of paperwork and waiting to correct the situation so that their "real" federal tax return to be submitted.  It often takes months or longer to get resolved so that the member can receive their money.

Unfortunately, most tax fraud victims (your members) don't realize that they've been attacked until they go to submit their own tax returns and have it rejected because the criminals beat them to it.

Cyber-thieves are also using your members' personal information to submit fraudulent unemployment insurance claims, which means, according to KrebsOnSecurity, many members are likely to be told they owe significantly more in taxes than they actually do.  Scammers use stolen data to complete the false claims for benefits and then have the funds deposited into an online account under their control.

Now seems like the perfect opportunity for your credit union to take some positive action to help your members defend themselves.  You might want to consider what hundreds of other credit unions are doing.  Providing members with ID Theft Protective services that go far beyond anything they could find on their own...and these services prove to create greater member engagement and strong, residual, non-interest income.  These ID Theft Protective services defend your members from all fraudulent attacks that could devastate their livelihood.

With COVID-19, natural disasters, and other challenges affecting nearly all of us, now is an opportune time for credit unions to bring a positive message of support and protection to members.  It only makes sense that members want the credit union that they trust with their finances to protect their identity as well.

Article by Jim McCabe, Senior Vice President, Identity Theft Services at Vero.