Credit unions battle fraud's viral spread with collaborative defense networks
Fraud schemes are evolving and spreading across the country with virus-like adaptability, targeting credit union members through increasingly sophisticated methods including business impersonation, elder abuse, and AI-enhanced scams. Credit unions are responding by strengthening collaborative networks, enhancing member education, and leveraging their personal relationships to intervene before members fall victim.
"Fraud is like a virus," said James Johnson, describing how schemes mutate and spread across the country like digital contagion. What starts as a localized scam in California quickly evolves and travels—East Coast to South, Midwest to West—adapting and finding new victims along the way.
Financial fraud as a constant
Johnson, vice president of compliance at First Community Credit Union, has tracked this viral pattern firsthand through America's Credit Unions Compliance & Risk Council discussions and regional fraud networks. The schemes may vary in their details, but their infectious spread remains consistent.
The latest mutations are particularly concerning. Fraudsters are creating shell companies with names nearly identical to legitimate businesses, then intercepting and "washing" checks intended for the real companies. In check washing, criminals steal checks from the mail, use chemicals like acetone or bleach to remove the ink and alter the payee and amount, and then deposit or cash the rewritten check to steal funds from the victim's account.
This business impersonation scheme works with startling simplicity. A fraudster establishes a false company, such as "Tom Corp," Johnson said, to steal checks meant for the legitimate "Tom LLC," washing the stolen mail and depositing funds before anyone notices the deception.
The evolving threat landscape
The vulnerability stems from an unexpected source: many businesses still rely on mailed checks despite digital payment options. Criminals exploit this by purchasing mailbox keys online or, in some cases, collaborating with compromised postal employees. Financial institutions reported more than $688 million in suspicious mail theft-related check fraud activity in just six months following a federal alert on this growing threat.
Meanwhile, elder abuse targeting cryptocurrency has surged dramatically. Elderly Americans lost nearly $2.8 billion to crypto fraud in 2024, despite representing only 17% of the U.S. population. Vulnerable members are being convinced to withdraw large cash sums for deposit into crypto ATMs, often through elaborate romance scams or celebrity impersonation schemes.
These cryptocurrency scams prey on isolation, targeting individuals without strong social networks. Scammers pose as romantic interests, military officials needing emergency funds, or even celebrities like Liam Neeson claiming to be stranded overseas. Crypto ATM fraud complaints jumped 99% in one year, with seniors losing over $107 million specifically through these schemes.
Human cost of digital deception
The challenge for credit unions lies in the delicate conversation required when members request unusual large withdrawals or wire transfers. Johnson noted the difficulty of convincing members that their online "relationships" are fraudulent without damaging trust.
Adding complexity to the threat landscape, artificial intelligence is making check counterfeiting and other traditional fraud methods increasingly sophisticated and harder to detect. Credit unions faced the brunt of 2024 fraud losses, with 79% experiencing more than $500,000 in direct fraud damages. This impact was higher than any other financial sector.
Combined losses to business and government impersonation scams topped $1.1 billion in 2024, more than triple the amount reported in 2020. The scope of the problem extends far beyond individual institutions.
The credit union advantage
However, credit unions possess a unique weapon in this escalating fraud war: their collaborative foundation. Regional fraud groups meet regularly to share intelligence about emerging schemes and successful intervention strategies.
Johnson cited Chelsea Treboniak, owner of Critical Ops, a business integration company, for the value in her regular Fraud Fighters presentations to members of the America's Credit Unions Compliance & Risk Council. Her anti-fraud meetings enable credit union leaders to exchange real-time information about threats and technological solutions. Treboniak, a West Point graduate, a credit union supervisory committee member, and a certified risk manager, specializes in helping credit unions strengthen their fraud prevention capabilities.
This information-sharing network allows credit unions to implement protective measures before new schemes reach their markets, creating a collective defense system that larger banks struggle to match.
Build stronger defenses from the inside out
Credit unions are prioritizing fraud detection and mitigation as their top technology investment, with 43% citing it as a primary focus for 2024 and 2025. While technology investment remains crucial, Johnson emphasized that staying current with fraud detection software must be paired with enhanced staff training on emerging schemes.
The most effective approach combines technological tools with the personal relationships that define credit union service. Staff members trained to recognize fraud indicators can initiate caring conversations that protect members.
Member education also plays a critical role. Credit unions are developing programs that help members recognize red flags while encouraging open communication about unusual financial requests or online relationships. Consumer reports to fraud increased by 25% to $12.5 billion in 2024, underscoring the urgent need for enhanced awareness campaigns.
The focus on prevention has never been higher
For credit union members, this approach means stronger protection and staff who are trained to spot emerging threats before they spread. The personal touch that defines credit unions becomes a crucial defense against increasingly sophisticated criminal networks.
Credit union leaders should evaluate their participation in regional fraud networks, invest in current detection technology, and ensure staff receive regular training on the latest schemes affecting their members.
As fraud continues its viral spread, the credit union movement's greatest strength provides members with a level of protection that reflects the fundamental difference between member-owned institutions and profit-driven competitors. In an era where criminals share tactics across state lines, credit unions are fighting back with their own collaborative network, turning their cooperative model into a powerful shield against financial crime.
Stay ahead of the curve at Compliance & Risk Council Conference, September 2026, in Scottsdale, AZ. Open to Council and non-Council members.
