Keeping International Student Tuition Safe from Fraud

Listen to Keeping International Student Tuition Safe from Fraud (9 mins):

According to the latest figures, approximately 556,000 international students studied in the U.K. during the 2019-2020 school year. Meanwhile, the U.S. hosted over 1 million international students during this same period, and more than 347,000 American students traveled abroad. To a fraudster, each of these students represents a potential scam target. That’s why financial institutions (FIs) need to make sure they are prepared to keep international tuition payments safe as students pursue their studies abroad.

International Students Make Attractive Fraud Targets

Why do fraudsters target international students? Their legal statuses, language barriers, and overall unfamiliarity with administration processes make them ideal targets. Here’s why. 

Strangers in a Strange Land

First, international students are visitors to a new country and are unlikely to be familiar with local customs and rules. Some students, for example, will not understand their commitments under the terms of their student visas. Fraudsters are eager to exploit this for their ends.

Language Barriers

Second, many international students are still learning the language of their host country and making them susceptible to a fraudster’s deception. Even students who can speak the local language at advanced levels are vulnerable to fraud. 

Cross-Border Communication Gaps

Third, many international students are separated from their families by several time zones. Even with smartphone technology and instant messaging apps, reaching their parents with pressing questions can be challenging. If a fraudster uses a high-pressure tactic – such as impersonating an immigration official or another government agent – students might panic and send money before they can consult with their parents.

Students are Still Learning the Ropes

Fourth, fraudsters understand that many international students are taking their first forays into independence and learning to deal with their college’s bureaucracy. Fraudsters count on taking advantage of international students’ naivete in administrative matters to push tuition fraud scams.

Fraudsters’ Payoff Potential is Significant

Finally, fraudsters are drawn to the size of the prize. Tuition costs for colleges and universities are worth large sums of money. Even if a scammer isn’t widely successful overall, their fraud efforts will be worth it if they can deceive just one international student out of their tuition.

Common international student tuition fraud scams

Fraudsters have a wide range of tricks in their arsenal. Here are some of the most common scams used to target international students.

Third-Party Provider Scams

One of the more elaborate scams fraudsters attempt involves deceiving students into believing they can get a discount on their tuition by working with a (fake) outside partner. Fraudsters contact students using social media or messaging services like WhatsApp or WeChat. They claim to have locked in a lower currency exchange rate and offer students a tuition discount by acting as an intermediary. The student provides access to their online university account to make the payment. When the student sees their balance has been paid, they transfer money to the fraudster believing they purchased legitimate services. 

The trouble is, the fraudster used a stolen credit card number to make the payment and has now pocketed the student’s tuition. The payment is eventually rejected – something the student doesn’t realize until it’s too late. Worse yet, the victim can unwittingly bring other international students involved in the fraud scheme believing it can get them a discount on tuition fees. 

Criminals use this type of scam to target international students with increasing frequency. In 2016, the University of Washington reported that nearly 100 Chinese students lost approximately $1 million to the fraud. Meanwhile, international students attending U.K. schools have been targeted by similar scams.

Impersonation and social engineering scams

Fraudsters also often exploit international students’ anxiety and uncertainty over their student visas to their advantage. Students get a phone call from what appears to be an official caller ID. The caller claims to be a government official and tells the student they owe fees to continue their education, threatening deportation or imprisonment. In a panic, students provide payment information or initiate a wire transfer to the fraudster’s account. Both the U.S. Department of Homeland Security and U.K. Council for International Student Affairs (UKCISA) have warned of scammers using fake phone numbers for these scams. 

Student rental and housing scams 

Some fraudsters will target international students with fake properties to rent in exchange for an advanced payment. They’ll claim they are traveling and can’t show the property and that it won’t be available for long. Students learn the listing is fake after sending the fraudster money. 

Tuition payment malicious misdirection   

In this scam, a fraudster will target either the student, their family, or both to steal the student’s tuition payment. They impersonate a university official and claim the tuition payment should be delivered to a different account. The student or family member wires the money to the new account, unaware that they are being defrauded. Because of the stigma of fraud, some people are unwilling to report that they were victims of a scam to authorities. This makes it very challenging to track the success of this fraud type. 

How banks can prevent international student fraud

Both higher education institutions and government agencies have boosted awareness of scams targeting international student scams. That leaves banks as the last line of defense. Here’s what banks can do to protect international students and their families from tuition fraud.

Educate customers

With scams like these, customer education and awareness are the most important steps banks can take. Arming students and families with the knowledge of common scams and how they work is the best defense against fraud attempts. Plus, if a student is opening a new student account near their school, it’s a perfect opportunity for banks to teach them about financial responsibility. After all, there’s no reason their education should stop at the classroom.

Monitor account changes

Besides education and awareness campaigns, banks can also watch for changes to student accounts. A sudden change in the beneficiary’s name should trigger an alert that bank personnel should investigate further. Another situation that warrants further scrutiny is if the student account starts making transactions to a different account far outside their school’s geographic location. Banks can provide an extra set of eyes to understand if fraud is underway.

Follow the money

Banks can also scrutinize where the students are sending money. For example, if a student has labeled their transaction as “student fees,” but the money is going to a business account that isn’t associated with their school is an indication that fraud is underway. Banks can also flag and investigate business or personal accounts that receive multiple transactions in the same amount in a short time period from international student accounts. This activity suggests the account is potentially linked to some kind of suspicious activity.

Communicate with students in real-time

Allowing students to pause before their tuition funds are lost for good can provide an important safety net. Banks can introduce pop-up windows and ask students if they are certain they trust the recipient. Pop-up messages can also provide a last-minute check to help students avoid scams by re-thinking a risky transaction.

International students have enough to worry about as they pursue their studies abroad, find a place to live, and learn to mingle with their host country. Fraud threatens to derail these students’ academic plans. Banks that help keep tuition payments safe from fraudsters are bound to get top grades from international students and their families. 

FIs can’t afford to let fraudsters blend in among legitimate customers. Download our eBook How to Choose a Machine Learning Platform to Detect and Prevent Financial Crime to make certain you’re working with the right machine learning vendor.