Fraud Growth Ramps Up International Prevention
Lose a few million dollars on a wire transfer to Toledo, Ohio, and procedures are in place to get it back in many instances. But when that transfer is to Kiev, kiss the money goodbye.
“Unlike domestic fraud, losses from international fraud are nearly impossible to recover,” said Robert Coyan, senior vice president of Corporate One Federal Credit Union in Columbus, Ohio, which received NCUA approval earlier this year to merge with Southeast Corporate Federal Credit Union in Tallahassee, Fla.
“Much of the international fraud that credit unions encounter occurs in countries where the local law enforcement authority is either unable, or in some cases unwilling, to detect and deter the fraud, or to prosecute the offenders,” Coyan said.
There is a significant and growing interest in international payments fraud, said Mike Urban, a fraud expert with Fiserv, a financial services company in Brookfield, Wis. Be it bogus wire transfers, deceptive check transactions or bad credit and debit card charges, thieves are using a number of tools to carry out fraudulent acts around the world.
Lately, the criminals have gotten even more sophisticated, said Darren Berkovitz, a co-founder of TeleSign, a provider of authentication tools based in Marina del Rey, Calif.
“Our banking clients tell us that their most challenging issue in regards to international payments has to do with account takeovers,” Berkovitz said. “A fraudster takes over the account of a user via malware or a keylogger and then sends a payment to an unauthorized user.”
The result can be an account that is quickly emptied of money, which leaves the credit union on the hook and in many instances, a complete take of a member’s account occurs.
Fueling the rise in international fraud is simply that in an Internet economy, cross-border commerce has become commonplace, experts note. There are plenty of legitimate reasons for transferring money from Des Moines, Iowa to Dubrovnik in Croatia, and financial institutions, including credit unions, have had to adjust.
At the same time, institutions need to put in place policies that minimize inconvenience for legitimate transfers while attempting to stop the fraudulent behavior, Berkovitz suggested.
Coyan said there are many ways to protect the credit union and members against international payment fraud. Corporate One sees its list of best practices as one method to stopping international payments fraud.
“ACH system access should use multifactor authentication and user restrictions should include daily and/or transaction dollar limits. Origination files should require two staff members for release,” Coyan said.
Financial institutions should also know their customers. Coyan said if the credit union allows businesses to originate ACH through them, they must perform appropriate due diligence and ongoing monitoring to ensure only legitimate transactions are being originated.
Another Corporate One best practice involving checks is to train staff to recognize and question unusual activity.
“We are aware of several instances of tellers recognizing and protecting potential victims of lottery scams when members deposited unusually large checks,” Coyan said. “These scams entice the victim to deposit a large, fraudulent check from the perpetrator and immediately wire a portion to them. The check is returned and the victim is responsible to the credit union for the loss.”
If the credit union accepts foreign checks for deposit, consider sending large items for collection and defer passing credit to depositors until collection is complete, Corporate One said.
With credit and debit cards, members should be reminded to report any sign of fraud to the credit union immediately. The sooner the member notices any fraud, and reports it, the more likely it can be minimized, Coyan said.
Regarding wire transfers, Corporate One questions those that are right below the $10,000 reporting threshold and if multiple wire payments are being sent to the same financial institution in a business day. Ask why the funds are being sent. Ultimately, ensure that the money is legitimate and funds and goods are collected before payment is sent, Coyan said.