If your credit union accepts remote requests for wire transfers, make sure you’re taking steps to thwart criminals who are exploiting these transactions.
These criminals are targeting high-dollar home equity lines of credit (HELOCs). They impersonate members, requesting a large transfer from a HELOC to a checking account, then request a wire transfer from the checking account to another account, usually overseas.
Credit unions reported more than $25 million in losses from 2007 to 2012 due to wire/HELOC claims, according to CUNA Mutual Group. The average loss reported in 2012 was $175,000—but some totaled nearly $1 million.
Limiting this risk is a balancing act: You must weigh your desire for convenient service to members against your duty to protect their accounts from the bad guys.
As you weigh service against security, factor in the value of the trust you’ve built among your membership and community. Even if this type of loss is covered by insurance, losses that gain publicity through word of mouth, social media, or traditional news outlets can deal a significant hit to your credit union’s reputation.
Make criminals’ job harder
Depending on the needs of your membership, you may be able to virtually shut off this risk exposure by requiring members to make HELOC transfer requests and/or large dollar wire transfer requests in person.
This practice is heavily weighted toward safety and away from convenience—it simply may not be feasible for your membership.
But even if you choose not to cut off remote funds transfer requests, you can significantly reduce the risk exposure. Consider these steps:
►Set a dollar threshold for remote funds transfer requests. You can either require the request to be in person above the threshold, or implement more strict verification procedures above the threshold.
►Replace simple callbacks with a more rigorous verification system. Simply calling the phone number listed on the member’s account and asking to verify a funds transfer is no longer sufficient.
Thieves have found a number of ways to get around callbacks by call-forwarding the member’s phone numbers. The same holds true for emails, faxes, or internal messaging systems.
Scammers can reproduce signatures and notary seals with ease. They can even uncover the answers to your online banking security questions.
►Seek expert advice on secure identity verification programs and consider passwords in addition to callbacks. This is called layered security.
►Elevate high-risk transactions for management review and approval, and use a real-time fraud detection system to augment manual reviews (if you don’t already).
Also, train staff to monitor funds transfer requests for red flags. Signs of a potential scam include:
- A wire transfer involving funds recently transferred from a HELOC;
- The transfer is going to a foreign account;
- The member has no history of funds transfers; and
- The account’s password, email, or phone number has been changed recently.
Your procedures for handling funds transfers should be in writing. Employees who may handle these transactions should review the procedures at least once a year.
Unfortunately, safety isn’t always convenient—for employees or for members. But most members will understand that you’re acting in their best interest.