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CU System Briefs (09/19/2013)

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  • VIENNA, Va. (9/19/13)--The Financial Crimes Enforcement Network issued an advisory to financial institutions Wednesday based on the Financial Action Task Force's updated lists of jurisdictions with strategic anti-money laundering and counter-terrorist financing deficiencies. These changes may affect U.S. financial institutions' obligations and risk-based approaches with respect to relevant jurisdictions ...
 

Conway To Succeed McCormack As PCUA CEO

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HARRISBURG, Pa. (9/19/13)--Patrick Conway, who served as the president/CEO of the Pennsylvania Restaurant and Lodging Association for the past 12 years, has been named the new president/CEO of the Pennsylvania Credit Union Association.
 
Conway also served as president/CEO of the Harrisburg Regional Chamber and the Chamber of Business and Industry of Centre County. He began his career in the district office of U.S. Rep. Bill Clinger, served as executive director of the Governor's Action Team under Gov. Tom Ridge, and ran for Congress in Pennsylvania's 5th district. 
 
"We are extremely pleased and fortunate to welcome Pat to the Pennsylvania credit union movement," said PCUA Board Chair Maria LaVelle. "While there were many strongly qualified candidates for the position, Pat's leadership skills, association experience, and political involvement make him a great fit for moving PCUA forward."
 
Conway is the PCUA's fifth president/CEO since its inception in 1934. "I feel honored and privileged to be given the opportunity to lead such a strong organization as PCUA," said Conway. "This organization has a strong tradition of advocating on behalf of Pennsylvania credit unions and for providing solutions to credit unions of all sizes. This is an exciting time for Pennsylvania's credit union movement and an exciting time for me personally as we continue to grow and thrive in what is clearly a challenging environment."
 
Conway will join the association on Oct. 28 and will work with current PCUA CEO Jim McCormack, who is retiring at year-end, after 32 years of service. McCormack will remain on as a consultant to PCUA through November 2014.

CUNA Mutual CEO: CUs Face Costly Fraud Threats From Many Sources

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COEUR D'ALENE, Idaho (9/19/13)--Difficult economic times create opportunities for good organizations, but also for criminals, which is why credit unions must adopt loss controls to mitigate the most serious risks, CUNA Mutual Group President/CEO Jeff Post said Wednesday.
 
Click to view larger image Credit unions cannot become complacent in fighting fraud, because criminals continually devise new ways to steal, Jeff Post told attendees at the 2013 National Association of State Credit Union Supervisors' State System Summit Wednesday. (Photo provided by CUNA Mutual Group)
Speaking at the 2013 National Association of State Credit Union Supervisors' State System Summit, Post discussed the five most serious fraud risks CUNA Mutual has identified facing credit unions and offered loss prevention recommendations. They relate to employee dishonesty, funds transfer, plastic cards, data breaches and electronic crime.
 
"Perhaps the biggest takeaway from this session is there is no single fraud loss area," Post said. "Criminals seem to continually devise new ways to steal or defraud."
 
Employee dishonesty ranks low in number of insurance claims, but is by far the leader in claim dollars paid. Most losses are caused by cash theft, loan fraud and ledger manipulation. Employee dishonesty fraud lasts a median of 18 months before being detected, with a median loss of $140,000, Post said, citing the Association of Certified Fraud Examiners' 2012 Report to the Nations on Occupational Fraud and Abuse. However, the study showed more than one-fifth of these cases caused losses of at least $1 million. The longer a perpetrator works for an organization, the higher the fraud losses.
 
"For credit unions, there is no immunity to this exposure based on geography, asset size, or employee tenure. The one common denominator has been that the credit union either lacked the controls to catch fraud from the beginning or got more relaxed about the controls over time, which provides the ideal environment for a dishonest employee," Post said.
 
He recommended three "Ds" to reduce employee dishonesty:
  • Deter--Vet job applicants and establish a written fraud policy.
  • Detect--Segregate duties, require mandatory vacation and reward whistleblowers.  Conduct surprise internal audits and institute specific controls on cash handling, loan processing and access to member accounts.
  • Discipline--Develop a fraud policy that includes detailed procedures for handling these situations and guidelines for terminating or suspending dishonest employees. Train employees regularly on the fraud policy. 
Another large loss area for credit unions involves fraudulent transfers from home equity lines of credit. Credit unions reported more than $25 million in losses from 2007 to 2012, with an average loss of $175,000. Some approached $1 million.
 
"Telephone callbacks are too easily defeated by criminals, who hijack the member's home phone number through call-forwarding. So don't rely only on callbacks," Post said. Credit unions should be wary of large-dollar home equity line of credit transfers, limit the dollar size of transactions not requested in person and implement layered security, such as requiring passwords in addition to callbacks.
 
Regarding plastic card fraud, which was rampant when he became CEO in 2005, Post said credit unions have made good progress in managing fraud, but sophisticated crooks are still identifying weaknesses. Targeted payment fraud exposures, card data breaches, phishing scams and system intrusions continue to be legitimate threats.
 
Migration to Europay, MasterCard and Visa (EMV) chip technology provides added security by making the skimming of magnetic stripe data more difficult, but credit unions should plan their migration to EMV carefully. "The new cards will contain a chip, but it will still have a magnetic stripe for a while," Post said. "Educate your members about using chip technology at merchants and ATMs that offer that capability."
 
As for data breaches in the credit union, the biggest concern is exposing members' personal identifiable information, Post said.
 
Electronic crime also is increasing. CUNA Mutual is seeing more outgoing funds and account takeovers. "I would characterize data breaches and electronic crime as not necessarily being high-loss areas yet, but they are definitely high-risk and have the potential to produce significant losses," Post said.
 
He urged credit unions to not get complacent. "Just because you may not have had a loss doesn't mean you should curtail your fraud prevention efforts. Know that CUNA Mutual Group will be here so we can work together to help prevent fraud."

Minnesota Maxwell, Herring, Desjardins Awards Announced

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ST. PAUL, Minn. (9/19/13)--The Minnesota Credit Union Foundation honored 10 credit unions with 13 social responsibility, philosophy/member service and financial education awards.
 
First-place winners by asset size in the state-level Dora Maxwell Social Responsibility Community Service Award category included:
  • Star Choice CU, Minneapolis, $20 million to $50 million in assets;
  • Minnesota Valley FCU, Mankato, $50 million to $100 million in assets;
  • Greater Minnesota CU, Mora, $100 million to $200 million in assets;
  • City & County CU, St. Paul, $200 million to $500 million in assets; and 
  • SPIRE FCU, Falcon Heights, $500 million to $1 billion in assets.
First-place winners in the Louise Herring Philosophy in Action Member Service Award category included:
  • St. Paul (Minn.) FCU, $50 million to $250 million in assets; and
  • TopLine FCU, Maple Grove, $250 million to $1 billion in assets.
First-place winners in the Desjardins Youth Financial Education Award category included:
  • Greater Minnesota CU,  $50 million to $150 million in assets; 
  • TopLine FCU, $150 million $500 million in assets; and
  • Postal CU, St. Paul, $500 million or more in assets.
First-place winners in the Desjardins Adult Financial Education Award category included:
  • Greater Minnesota CU, $50 million to $150 million in assets;
  • TopLine FCU, $150 million to $500 million in assets; and
  • US FCU, Burnsville, $500 million or more in assets.
Each first-place winner's entry progresses to the Credit Union National Association's national award competition. The winners are honored at the 2014 CUNA Government Affairs Conference in Washington, D.C.

20 Michigan CUs To Support Local Biz In CU Lunch Local

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LANSING, Mich. (9/19/13)--More than 20 Michigan credit unions have pledged to support the second annual CU Lunch Local, Oct. 15. The event is a cash mob that pumped tens of thousands of dollars into the state's economy through its small businesses, said the Michigan Credit Union League.

During the daylong CU Lunch Local program, credit unions and their employees support local businesses by dining, shopping or buying local (Michigan Monitor Sept. 16). The event increases cash flow at local businesses and offers exposure for credit unions and local businesses.

CU Lunch Local is inspiring credit unions across the country to facilitate local cash mobs. Two new states are finalizing plans to join MCUL in the CU Lunch Local effort, the league said. 

Raising awareness about the value credit unions provide their members and communities, fostering service excellence and removing barriers are the foundation for the Credit Union National Association's, state credit union leagues' and credit unions' Unite For Good campaign toward a vision in which Americans choose credit unions as their best financial partner.

Did You Wear Jeans To Work Wednesday?

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MADISON, Wis. (9/19/13)--Credit union employees across the country donned their denim at work Wednesday to support their local Children's Miracle Network Hospital on Miracle Jeans Day.
 
Click to view larger image Staff at Northwoods CU, Cloquet, Minn., combined fundraising for the Children's Miracle Network Hospitals on Miracle Jeans Day Wednesday with their efforts to preserve credit unions tax status by donning jeans with Miracle Jeans Day t-shirts and "proudly wearing our Don't Tax My Credit Union buttons," said the credit union in a tweet. (Photo provided by Northwoods CU)
Each employee donated $5 for the privilege of wearing jeans Wednesday. The annual fundraiser by Credit Unions for Kids for Children's Miracle Network Hospitals raises funds and awareness for 170 children's hospitals throughout the nation.
 
About 500 credit unions registered to participate in yesterday's event, said Felicity Guerin, development manager of Credit Unions for Kids at the Credit Union National Association. The final amount raised will be announced in early 2014 after all the funds are in, she said. Funds are raised both in the credit union community and online.  For those who want to make a Miracle Jeans Day donation or participate later, visit the links.
 
This year credit unions had the option to donate $25 and receive a free T-shirt. "Credit union employees donated enough for us to distribute 1,800 CU4Kids Miracle Jeans Day shirts," said Guerin.
 
In Montana, nearly all credit unions were expected to participate, according to Alana Listoe of the Montana Credit Union Network, who wrote a guest column about the event for the Missoulian.com (Sept. 17).  That would be an increase from last year, when half of Montana's 56 credit unions participated, she said.
 
The Pennsylvania Credit Union Association said this year's participants included 23 credit unions from that state as well as PCUA (Life is a Highway Sept. 18). Guerin also reported that 43 credit unions from California, plus the California and Nevada Credit Union Leagues and CO-OP Financial Services participated, as did 33 credit unions from Texas and the Cornerstone Credit Union League; 29 credit unions from Michigan, and 29 New York credit unions and the Credit Union Association of New York.
 
Last year on Miracle Jeans Day, thousands of employees from more than 600 credit unions raised more than $300,000 for member hospitals in 47 states. That was a 74% increase in participation over 2011 participation. They were the biggest supporter of Miracle Jeans.
 
The credit union community is one of the largest fund raisers for Children's Miracle Network Hospitals, raising funds under the Credit Unions for Kids brand since 1996. It has collected more than $110 million for children's hospitals.
 
The events also help raise awareness of the value of credit unions to their communities and members, one of the pillars of the national Unite for Good campaign, in which CUNA, the leagues and credit unions aim toward a strategic vision in which Americans choose credit unions as their best financial partner.

Equifax: Diversify Strategy To Restore Credit Line Increases

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ATLANTA (9/19/13)--Card issuers have seen as much as a 90% decrease in credit line increase (CLI)-eligible card accounts since regulatory changes introduced by the CARD Act in 2010. A new white paper from Equifax advises card issuers how to restore credit line increases with a diversified data strategy.
 
Card issuers face a conundrum: how to overcome regulatory hurdles to restore the credit line increases that consumers and card issuers want, said the report, "Recapturing CLIs: How a Diversified Data Strategy Can Help Card Issuers Restore Credit Line Increases--and Boost Revenue."
 
In the past, card issuers used in-house data, credit bureau data and analysis to determine a cardholder's ability to pay. Those who met the criteria received an automatic CLI. Cardholders who received a 10% to 30% CLI boosted their balance by about 3% within one year, while consumers who received no increase cut spending by about 4% during the same period, said the paper. With consumers paying down their debt during the period studied, the results would be more compelling today, said the Atlanta-based Equifax.
 
The credit information company offered these tips to assessing consumers' ability to pay:
  • Create an internal income hub of information by consolidating income data across all portfolios the card issuer has access, such as mortgage records, auto loans student loans, personal lines of credit and data from other credit cards.
  • Institute a consumer outreach program to consumers whose credit profiles make them likely candidates for CLI increases and invite them to apply for a CLI.
  • Leverage annualized income data via the Big Data approach with companies that provide data that are instantly accessible and viable and verify income data that indicate a person's ability to pay.
  • Extend the shelf life of the consumer's stated income. Many card issuers avoid presenting regulators with information older than 12 months, but some Big Data statistics can demonstrate accuracy and stability of stated income over time, said Equifax's paper. Equifax noted that if card issuers could extend the viability of stated income to 18 months and use it for automatic CLIs, their CLI recapture rate could increase from 18% to as much as 27%.
For the full report, use the link.

NCUF Working With MWCUA To Assess Relief Funds Needed

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MADISON, Wis. (9/19/13)--The National Credit Union Foundation is working with the Mountain West Credit Union Association to assess the need for flood disaster relief beyond current CUAid general funds.
 
There is some need in Colorado for financial assistance, which may be covered by remaining funds in the NCUF's CUAid general disaster relief fund, NCUF said Tuesday on its Facebook page.
 
Several Boulder, Colo.-area credit unions closed branches last Thursday and Friday as a result of massive flooding in the area. While flooding did not affect most credit union facilities, the homes of some members and employees sustained damages. Credit unions have for the most part been fully operational since Saturday, but recovery will be ongoing.