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CUNA Mutual HELOC wire fraud alerts helped cut losses
MADISON, Wis. (3/25/08)--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 (HELOCs). 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. Sierra Central CU, Yuba City, Calif., thwarted an attempt to divert $584,000 after a fax arrived in the credit union’s call center from a purported member. At about the same time, an individual called to check 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 asset 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 several credit unions fell victim to the scam. The scam 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. It also--due to the sophistication of the criminals and the success of their scheme--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 its wire-transfer procedures. For 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 not been identified and arrested and undoubtedly will 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,” he said. The procedures include:
* Initiating a call-back verification to a secure telephone number before the funds transfer instruction is executed. * Consulting with a CUNA Mutual sales executive to better understand their policies and coverage. * Continuing to use RISK Alerts to get just-in-time information on scams and loss control.
Policyholders can view the RISK Alerts, which include specific loss prevention recommendations at and logging into the Protection Resource Center. Access to the Protection Resource Center and RISK Alerts require a UserID and Password. Those without a UserID and Password can go to New User Registration and choose "Credit Union Protection Resource Center" from the list of services. Those with a UserID and Password, can click "Edit my Services" to add Credit Union Protection Resource Center to their personalized services. Credit unions experiencing a loss can contact CUNA Mutual’s Credit Union Protection Response Center at 800-637-2676.
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