Fighting Fraud Through Relationship Building: Knowing Your Member

Photo of Theresa Bruckner

By Theresa Bruckner, Fraud Manager, Alloya Corporate FCU

November 14, 2025

As many of us know all too well, today’s fraud risk landscape is evolving rapidly, and fraud risk is growing in scale, sophistication and impact. Notably:

  • Federal Trade Commission (FTC) fraud reports rose 70% from 2014 to 2024, with $12.76 billion in reported losses in 2024 alone (FTC, 2024).
  • Top scams include impostor scams — fraudsters posing as trusted entities to gain access or solicit funds — and investment scams, where victims are lured into fake opportunities through relationship-building.

Meanwhile, interest in digital finance and cryptocurrency is surging:

  • 28% of U.S. adults (≈65 million) own cryptocurrency (security.org, 2025).
  • 67% of current holders and 14% of non-holders plan to buy in 2025.
  • 60% expect crypto values to rise during President Donald Trump’s second term; 46% anticipate broader adoption.

These trends intersect dangerously:

  • “Pig butchering” scams — often crypto-related — rose 40% year over year, with $9.9 billion in related blockchain transactions (Chainalysis, 2025).
  • Fraud is becoming a professionalized global industry, growing in sophistication.

As systemic controls improve, fraudsters increasingly exploit the human element — targeting consumers through psychological manipulation. But this vulnerability can become a strength through trusted member relationships.

We’re more effective at protecting members when we understand who they are — and when they trust that we’re on their side. Strong Know Your Customer (KYC) or Know Your Member (KYM) frameworks, paired with genuine relationship-building, create a fraud defense rooted in trust, awareness and human connection.

 

Build a Strong KYM Foundation

KYM helps credit unions understand who they’re doing business with and assess risk. It supports compliance with anti-money laundering and counter-terrorist financing regulations while also strengthening fraud defenses and member relationships.

Key components include:

  • Identity Verification: Confirm individuals or entities, including beneficial owners.
  • Relationship Understanding: Know what products members use, expected transaction types and volumes, and typical fund flows.
  • Ongoing Monitoring: Detect deviations from expected activity and update member profiles.
  • Risk Assessment: Evaluate transaction history, geography and business type to identify high-risk members for enhanced due diligence (EDD).

KYM enables early detection of red flags, supports tailored solutions and builds trust. When seen as a relationship-building tool — not just a compliance checkbox — it enhances both fraud prevention and member service.

 

Verify and Authenticate Effectively

Identity fraud is growing. Ensure onboarding processes can detect identity theft and synthetic identities and connect those checks to ongoing authentication.

Implement a system that:

  • Validates government-issued IDs and addresses.
  • Cross-references data sources for accuracy.
  • Aligns verification across channels (in-branch and online), tailored to each.

 

Use Advanced Tools for Ongoing Protection

Fraudsters use sophisticated tech, and so should you. Strengthen defenses with:

  • Multi-Factor Authentication (MFA) and biometrics to secure access.
  • AI-powered transaction monitoring to detect patterns and anomalies, whether from unauthorized access or fraud coached by external actors.

 

Do What Credit Unions Do Best: Build Relationships

Members choose credit unions for relationships, not just accounts. As member-owned, not-for-profit institutions, credit unions prioritize service and trust.

In today’s tech-driven fraud landscape, these relationships are a powerful defense. Yet a common challenge persists: Risk teams need detailed information while member service teams may hesitate to ask sensitive questions. Training and scripting can bridge this gap, helping staff engage members in natural conversations that uncover key insights — without compromising trust.

 

Build In Member Information Updates

Regularly asking, “Has anything changed?” is essential to KYM. Every interaction is a chance to validate member details.

Consider:

  • Digital prompts for members to confirm contact information.
  • Staff training to verify information naturally during transactions.
  • Listening for cues — e.g., if a member mentions moving, ask if their contact information needs updating.

 

Member Conversation Cues: Spotting Red Flags

Use these questions and observations to assess transaction risk and uncover potential fraud indicators:

  1. Transaction Purpose
    • Does the member understand the reason for the transaction?
    • Does their explanation make sense?
  2. Relationship to Counterparty
    • What’s their relationship with the recipient?
    • How did they meet? Have they interacted in person?
    • Was the connection made through social media, dating apps or unsolicited messages?
    • Does the story seem credible?
  3. Consistency with Member History
    • Is the transaction typical for this member?
    • Example: A wire transfer may be routine for someone with a history of international transfers but unusual for someone who typically only writes checks.
  4. Recent Deposits and Withdrawals
    • Is the member quickly moving newly deposited funds?
    • Ask: “Was there something you hoped to do with this deposit that didn’t work out?”
  5. Cryptocurrency-Related Activity
    • Has the member shown interest in investing, trading or financial tech?
    • Would crypto investing be out of character?
  6. Sense of Urgency or Pressure
    • Is the member rushing the transaction?
    • Are they expressing stress or urgency that seems externally driven?
  7. Third-Party Influence
    • Is someone coaching them during the transaction (e.g., via phone or chat)?
    • Are they using rehearsed or unfamiliar financial terms?
    • Ask: “Is someone helping you with this transaction?”
    • Consider asking: “Have you been told not to talk to us about this transaction or told what to say?”
  8. Reluctance or Vagueness
    • Is the member hesitant or evasive? This may suggest manipulation or embarrassment.
  9. New Digital Behavior
    • Are they using a new email, phone number or device? Sudden changes may indicate account takeover or fraud coaching.

 

Questions? We're Here to Help!

Feel free to reach out to Member Services at (800) 342-4328 or memberservices@alloyacorp.org to connect with Alloya’s team of compliance and risk experts.