Collaboration among competitors doesn't often make sense. Butwhen it comes to fighting fraud and protecting the broaderfinancial system, collaboration is a first line ofdefense.

Conventional wisdom suggests that check fraud should bein deep decline. After all, check usage has fallen somewhat inrecent years. But check fraud remains a very real threat to creditunions and banks of all sizes. The 2011 American BankersAssociation Deposit Account Fraud Survey Report revealed that,industry-wide, check fraud costs financial institutions nearly $900million annually, with the leading causes being counterfeit checks,returned deposit items and forgeries. Sixty-eight percent ofcommunity institutions and 95% of mid-sized institutions arevictimized each year.

In light of these disturbing figures, it is clear that all of usin the financial services industry share a common threat:fraudsters. This is important especially for small- and mid-sizedinstitutions because they are particularly vulnerable tolosses.

That vulnerability may have inadvertently increased last yearfollowing the implementation of the Dodd-Frank Act. Embedded inDodd-Frank was a provision that amended Regulation CC to requirebanks make $200, rather than $100, available for withdrawal on thebusiness day after deposit.

That provision of Dodd-Frank became effective in July 2011. Inaddition, in March 2011, the Federal Reserve Board proposed furtherchanges to Regulation CC intended to expedite the availability offunds and the collection of checks.

While the Fed's changes have not yet been finalized,institutions are now “expected to comply” with Dodd-Frank,according to a Federal Reserve memo issued Aug. 15, 2011.

Although credit union executives support improved efficienciesin the payment systems, many have voiced concerns that theexpedited availability of funds may leave them especiallyvulnerable because fraud losses could have a significant impact onthe bottom line of smaller institutions.

How can credit unions protect themselves from fraud losses,while staying within the new expedited funds-availabilityrequirements? It is vital that all credit union staffers – fromtellers to top-executives – review the six types of exception holdscurrently allowed by Reg CC, which are:

• New accounts
• Large deposits
• Re-deposited checks
• Repeated overdrafts
• Emergency situations
• Reasonable cause to doubt collectability

While most of these exception hold situations can be determinedsolely by the depositing institution, reasonable cause to doubtcollectability can best be determined through sharinginformation with the paying institution.

By sharing information through a collaborative network, creditunions can be in a better position to meet the regulatoryrequirements for exception holds by sharing “the existence of factsthat would cause a well-grounded belief in the mind of a reasonableperson” that the check isuncollectible.

With 95% of mid-sized institutions being victimized by checkfraud, credit unions must be proactive in protecting themselves.Today, it is common to find fraudsters working together acrossmultiple channels and business lines.

They work in sophisticated rings, establishing what appear to becredible relationships across a network of institutions and acrossvarious lines of business. When they do attack, they exploitnumerous channels including check, ACH, wire, online bill payment,cards and online account-to-account transfers.

In other words, fraudsters appear to support the value ofcollaboration in committing their crimes. If the creditunion community intends to outpace today's bad guys, then it mustalso come together and collaborate through the effective use oftoday's cutting edge technologies. Only by doing so can wecollectively create a safer and more secure financial system.

Lou AnneAlexander is chief market development officer for Early WarningServices LLC in Scottsdale, Ariz.