For more information:
Phil Tschudy 608/231-7188 philip.tschudy@cunamutual.com
Rick Uhlmann 608/231-8940 rick.uhlmann@cunamutual.com
March 24, 2008
Credit Unions Heed Advice to Prevent HELOC Wire Fraud
Losses Decrease, But CUNA Mutual Urges Policyholders To Follow Risk Management Requirements
MADISON, Wis. – Two e-mail RISK Alerts and nearly 2,700 phone calls from CUNA Mutual staff to at-risk credit unions have helped significantly reduce a sophisticated fraud scheme aimed at individual members with high home equity lines of credit.
From early January to March 1, credit unions reported to CUNA Mutual 43 incidences of losses or fraud attempts totaling $8.8 million, said Gary Pate, director of insurance compliance and risk management. “The good news is we haven’t had a reported claim from this scam since Feb. 6,” Pate said.
One credit union, Sierra Central Credit Union, Yuba City, Calif., was able to thwart an attempt to divert $584,000 after a fax arrived in the credit union’s call center from a purported member. At about the time the fax arrived, a call came in from someone asking about the transfer’s status. The call center supervisor instructed the call-taker to glean as much information as possible from the caller, according to Terry Garcia, vice president of Audit and Compliance at the $548 million credit union.
“The alert from CUNA Mutual was what made her so cautious,” Garcia said. “This transfer request fit the description of what we’d been told to watch out for.”
CUNA Mutual launched the alert campaign, a service under its Credit Union Bond program, shortly after a few credit unions fell victim to the scam, which involved fax or e-mail requests for wire transfers from HELOCs in amounts of $100,000 or more. CUNA Mutual immediately issued e-mail alerts to its credit union bondholders. In addition, due to the sophistication of the criminals and the success of their scheme, CUNA Mutual also convened a special employee task force of 27 field risk managers and home-office staff who telephoned about 2,650 credit unions to underscore the potential danger.
“Part of the scam’s strategy was to confound common fraud-prevention procedures, such as callbacks to verify members’ identity,” Pate said. “Those calls appeared to be going to members’ phone numbers, but in fact were forwarded to the phones of the fraudsters. The perpetrators also had personal member information that enabled them to answer additional challenge questions used to verify identity.”
Besides helping fend off a fraud attempt, CUNA Mutual’s alerts prompted Sierra Central CU to amend wire-transfer procedures. As one example, “We no longer rely solely on callbacks to members for verification,” Garcia said.
Although specific instances of this type of fraud have curtailed, the perpetrators have yet to be identified and arrested, and they will undoubtedly continue to attempt this type of fraud, Pate said. “Credit unions need to continue to remain vigilant and follow specific security procedures to prevent this type of fraud.”
These procedures include the initiation of call-back verification to a secure telephone number prior to the funds transfer instruction being executed. “Credit unions should consult with their CUNA Mutual sales executive to better understand their policies and coverage," Pate said.
As with the Sierra Central CU situation, credit unions should continue to use RISK Alerts as a means to get just-in-time information on scams and loss control, he said.
Policyholders can view the RISK Alerts, which include specific loss prevention recommendations, by going to www.cunamutual.com and logging into the Protection Resource Center. Access to the Protection Resource Center and RISK Alerts require a UserID and Password.
If you do not currently have a UserID and Password and would like access, go to New User Registration, and choose Credit Union Protection Resource Center from the list of services.
If you already have a UserID and Password, click Edit my Services to add Credit Union Protection Resource Center to your personalized services.
Credit unions that have experienced a loss are encouraged to contact CUNA Mutual’s Credit Union Protection Response Center at 800.637.2676.
CUNA Mutual Group is a leading provider of financial services to cooperatives, credit unions, their members and valued customers worldwide. With more than 70 years of market commitment, CUNA Mutual’s vision is unwavering: to be a trusted business partner who delivers service excellence and customer-focused, best-in-class products and market-driven innovation. More information on the company is available on the company’s Web site at www.cunamutual.com.
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