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Privacy liability coverage
One way to guard against security breaches is with information security and privacy liability coverage, which defends credit unions from financial loss, penalties, and defense costs, says Nick Grant, CEO of SWBC’s property and casualty division.
He says common causes of this type of loss include lost or stolen portable computers, computer hacking, employee misuse, improper disposal of paper documents or computer equipment, and vendor negligence. “Not only can these situations wreak havoc on your ability to keep data safe and secure, it can be expensive to restore security and consumer confidence afterwards.”
SWBC’s information security and privacy liability coverage offers:
- Electronic media liability, which covers the display of content on a credit union’s website;
- Financial damages arising from unauthorized disclosure or general corruption of personal data;
- Defense costs and damages for regulatory agency investigations or requests associated with control and use of personally identifiable information; and
- Coverage for regulatory penalties.
Mundine says credit unions make four common mistakes when trying to mitigate risks:
1. Assuming an insurance policy covers all losses. Credit unions should know what a policy does and doesn’t cover.
2. Assuming third-party vendors take on all risk. Outsourcing certain functions doesn’t transfer all risk to the third party.
Also, it’s important to conduct proper due diligence on vendors.
3. Being complacent. Don’t adopt the attitude of, “it can’t happen to us.” Globalization and remote threats can circumvent security even at small, tight-knit organizations.
4. Not knowing where fraud is likely to come from and what patterns to look for.
The most common culprits for internal fraud, Slagel says, are collections staff, tellers, and loan officers. Even tellers can abscond with a surprising amount of cash.
“One credit union with a small staff couldn’t segregate functions,” Touhey recalls. “The head teller, who was in charge of verifying money amounts, buying and selling cash, and making ledger entries, had full control over the credit union’s money. As a result, over a three-year period she walked out with $1 million.”
He says the greatest internal control over employee theft is one most credit unions no longer use: the compulsory two-week vacation.
“That two-week period allows the credit union to detect anomalies the vacationing employee would otherwise cover up,” says Touhey. “If a fraudster knows he can be detected during his vacation, the two-week requirement is a huge deterrent.”
Next: CPI rounds out protection