SCOTTSDALE, Ariz. – A little-known but rapidly growing databaseof incident records is a primary weapon against account fraud andidentity theft that CUNA Mutual Group and Primary Payment Systemswill soon be featuring access to in a new partnership. It's theAnti-Fraud Exchange, a cross-industry depository of records addedto constantly by participating members and managed by PPS as partof its role as the maintainer of the trademarked National SharedDatabases. PPS offers a suite of automated check and identity fraudsolutions that already includes more than 100 credit unions ascustomers. That number is expected to grow in the new partnershipwith CUNA Mutual Group, which will market those solutions incombination with its own loss-prevention solutions such as focusedrisk-management attention and front-line staff training. The threePPS solutions being promoted in the new pact with CUNA Mutual areDEPOSIT CHEK, DECISION CHEK MICR and IDENTITY CHEK Web service. Thefirst two leverage information updated daily by most majorfinancial institutions: the status of nearly 200 million draftaccounts (about half of all U.S. accounts); more than 16 millionstop-payment records, and return decisions on nearly half of allU.S. checks returned on an annual basis. The third, IDENTITY CHEKWeb service helps credit unions screen new accounts online throughcomparisons to watch lists such as OFAC, and soon will includeaccess to the Anti-Fraud Exchange. In addition, accessing theAnti-Fraud Exchange information can be done by credit unionsalready using PPS' IDENTITY CHEK on-site version simply by enablingthat feature within the software. They also can join the exchangeby using standalone, in-house software. Incident records from theAnti-Fraud Exchange have already made their mark, according to PPS,a Concord Risk-Management Company. “Using a conservative industryestimate of $2,500 per occurrence, loss avoidance to date for theAnti-Fraud Exchange has exceeded $18 million,” says LauraWeinflash, vice president of product solutions for Scottsdale-basedPrimary Payment Systems. “One client recently had a single save of$750,000, which has paid for their use of the system for the next35 years,” Weinflash says. It works like this: “When an institutionparticipating in the Anti-Fraud Exchange detects a fraudulentaccount, that account is entered into its `hot file' of confirmedor suspected frauds,” Weinflash says. “The organization will thenupload those records to PPS, at the same time receiving an updatedfile with all known fraud across the Anti-Fraud Exchangecommunity.” She adds: “The Anti-Fraud Exchange records also areused to perform automated screening of new accounts at the time ofopening. In addition, records may be run against an organization'sentire historical `warm file' to make sure that a known fraud isnot lying in wait. “When there is an exact match to shared data,the user will call the participant who shared the incident recordfor verification. The user also may choose to contact the customerto determine there is no discrepancy in the data supplied at thetime of the account opening and what was keyed in the system. “TheAnti-Fraud Exchange also can be used to enable a person who hasbeen victimized to clear his or her name by sharing thatinformation with other participants, with the victim's consent.”The exchange shares incidents of known fraud across industries. Injust the past 12 months, there have been nearly 4,000 exact matchesto these incident records, each match representing avoidance of apotential loss, PPS says. “Fraud is not a competitive issue, andbanks, credit unions and brokerages are all vulnerable to the samerisks. That is why it is so important for institutions andindustries to share their information about known fraud,” Weinflashsays. Jim O'Dell says access to such a system is a valuabletechnological tool that complements well the human element thatCUNA Mutual helps credit unions bring to the anti-fraud process. “Ithink there's a synergy here coming from the fact that PPS is oneof the premier providers of risk-management technology solutionsand CUNA Mutual can come along and help credit unions determinepolicies and procedures and methodologies for dealing with fraudattempts,” says CUNA Mutual's manager of risk-management services.Gearing up to fight such crimes as check fraud and identity thefthas become increasingly important for credit unions as technologyand management techniques get better at the big financialinstitutions. “The fraudsters don't go away. They migrate to otherinstitutions, often smaller ones, and that puts credit unions intheir scope. We have to put tools in the hands of credit unions tohelp fight that,” O'Dell says. In addition to fighting crime, suchefforts can help a credit union's bottom line, O'Dell points out.“CUNA Mutual insures 94% of all credit unions, and if a creditunion's loss experience goes down, that translates into a betterbond experience rating and into lower insurance costs,” he says.“I'm not an actuary or statistician, but our early numbers arecertainly encouraging and we think it will continue on this path.”O'Dell notes that other organizations also are developing suchdatabases, including state banking agencies, but that he has notseen “a whole lot of credit unions really embracing these. Therealso are many, many good anti-fraud products out there. “Theawareness should be going up.” -

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