CU On Guard

Best Practices

Fraud prevention best practices - Sep 18, 2025

This guide outlines 10 key fraud prevention practices for financial institutions, including setting transaction limits, using multi-factor authentication, real-time fraud detection, dual control, system updates, employee training, rigorous ID verification, strong customer communication, regular audits, and collaboration with external fraud intelligence networks to detect and prevent threats.

Check Kiting

Check Kiting - Sep 18, 2025

This procedure outlines how to detect, investigate, and address check kiting—a fraud using multiple accounts to inflate balances. It includes red flags, investigation steps, documentation, and customer handling. Preventative measures and compliance with legal and regulatory policies are emphasized to minimize financial risk and support fraud prevention efforts.

Best Practices

Fraud prevention best practices, Sep 18, 2025

Top 10 Best Practices for Fraud Prevention in Financial Institutions

1. Set Transaction and Payment Limits

Implement teller, ATM, online, and mobile banking limits for cash withdrawals, check cashing, wire transfers, and ACH payments.
Use dynamic thresholds based on account type, history, and risk profile.

2. Implement Multi-Factor Authentication (MFA)

Require MFA for all online and mobile banking access, as well as high-risk transactions (e.g., wire transfers).
Encourage biometric verification where possible (e.g., fingerprint or facial recognition).

3. Use Real-Time Fraud Detection Systems

Employ AI- and rule-based monitoring tools to detect suspicious patterns in real time.
Integrate anomaly detection that triggers alerts or blocks transactions when behavior deviates from the norm.

4. Enforce Dual Control and Separation of Duties

Require two-person approval for high-risk operations like large transfers, account overrides, or customer identity changes.
Separate responsibilities between staff who initiate, approve, and audit transactions.

5. Regularly Update and Patch Systems

Maintain up-to-date core banking systems, apps, firewalls, and fraud monitoring software.
Conduct vulnerability scans and penetration testing regularly.

6. Conduct Ongoing Employee Training

Provide mandatory, up-to-date fraud awareness training for all employees, especially front-line staff.
Include simulations and case studies to help staff recognize red flags.

7. Verify Identity Rigorously

Use multi-layered identity verification for account openings, especially online.
For in-person services, verify IDs using document authentication tools and validate against fraud databases.

8. Maintain Strong Customer Communication Protocols

Notify customers immediately of suspicious activity or unusual login attempts.
Offer easy, secure channels for reporting fraud (e.g., mobile app, secure messaging, 24/7 hotline).

9. Perform Regular Internal Audits and Risk Assessments

Review internal processes, staff behavior, and high-risk account activity.
Identify system weaknesses and update controls based on audit findings.

10. Partner with External Fraud Intelligence Networks

Subscribe to industry alert systems, such as FinCEN advisories or fraud consortium data.
Share and receive information about emerging threats, stolen identities, or coordinated attacks.