Anti-Fraud Exchange Helps Fight Against Fraudsters
SCOTTSDALE, Ariz. - A little-known but rapidly growing database of incident records is a primary weapon against account fraud and identity theft that CUNA Mutual Group and Primary Payment Systems will soon be featuring access to in a new partnership. It's the Anti-Fraud Exchange, a cross-industry depository of records added...
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SCOTTSDALE, Ariz. – A little-known but rapidly growing database of incident records is a primary weapon against account fraud and identity theft that CUNA Mutual Group and Primary Payment Systems will soon be featuring access to in a new partnership. It’s the Anti-Fraud Exchange, a cross-industry depository of records added to constantly by participating members and managed by PPS as part of its role as the maintainer of the trademarked National Shared Databases. PPS offers a suite of automated check and identity fraud solutions that already includes more than 100 credit unions as customers. That number is expected to grow in the new partnership with CUNA Mutual Group, which will market those solutions in combination with its own loss-prevention solutions such as focused risk-management attention and front-line staff training. The three PPS solutions being promoted in the new pact with CUNA Mutual are DEPOSIT CHEK, DECISION CHEK MICR and IDENTITY CHEK Web service. The first two leverage information updated daily by most major financial institutions: the status of nearly 200 million draft accounts (about half of all U.S. accounts); more than 16 million stop-payment records, and return decisions on nearly half of all U.S. checks returned on an annual basis. The third, IDENTITY CHEK Web service helps credit unions screen new accounts online through comparisons to watch lists such as OFAC, and soon will include access to the Anti-Fraud Exchange. In addition, accessing the Anti-Fraud Exchange information can be done by credit unions already using PPS’ IDENTITY CHEK on-site version simply by enabling that feature within the software. They also can join the exchange by using standalone, in-house software. Incident records from the Anti-Fraud Exchange have already made their mark, according to PPS, a Concord Risk-Management Company. “Using a conservative industry estimate of $2,500 per occurrence, loss avoidance to date for the Anti-Fraud Exchange has exceeded $18 million,” says Laura Weinflash, vice president of product solutions for Scottsdale-based Primary Payment Systems. “One client recently had a single save of $750,000, which has paid for their use of the system for the next 35 years,” Weinflash says. It works like this: “When an institution participating in the Anti-Fraud Exchange detects a fraudulent account, that account is entered into its `hot file’ of confirmed or suspected frauds,” Weinflash says. “The organization will then upload those records to PPS, at the same time receiving an updated file with all known fraud across the Anti-Fraud Exchange community.” She adds: “The Anti-Fraud Exchange records also are used to perform automated screening of new accounts at the time of opening. In addition, records may be run against an organization’s entire historical `warm file’ to make sure that a known fraud is not lying in wait. “When there is an exact match to shared data, the user will call the participant who shared the incident record for verification. The user also may choose to contact the customer to determine there is no discrepancy in the data supplied at the time of the account opening and what was keyed in the system. “The Anti-Fraud Exchange also can be used to enable a person who has been victimized to clear his or her name by sharing that information with other participants, with the victim’s consent.” The exchange shares incidents of known fraud across industries. In just the past 12 months, there have been nearly 4,000 exact matches to these incident records, each match representing avoidance of a potential loss, PPS says. “Fraud is not a competitive issue, and banks, credit unions and brokerages are all vulnerable to the same risks. That is why it is so important for institutions and industries to share their information about known fraud,” Weinflash says. Jim O’Dell says access to such a system is a valuable technological tool that complements well the human element that CUNA Mutual helps credit unions bring to the anti-fraud process. “I think there’s a synergy here coming from the fact that PPS is one of the premier providers of risk-management technology solutions and CUNA Mutual can come along and help credit unions determine policies and procedures and methodologies for dealing with fraud attempts,” says CUNA Mutual’s manager of risk-management services. Gearing up to fight such crimes as check fraud and identity theft has become increasingly important for credit unions as technology and management techniques get better at the big financial institutions. “The fraudsters don’t go away. They migrate to other institutions, often smaller ones, and that puts credit unions in their scope. We have to put tools in the hands of credit unions to help fight that,” O’Dell says. In addition to fighting crime, such efforts can help a credit union’s bottom line, O’Dell points out. “CUNA Mutual insures 94% of all credit unions, and if a credit union’s loss experience goes down, that translates into a better bond experience rating and into lower insurance costs,” he says. “I’m not an actuary or statistician, but our early numbers are certainly encouraging and we think it will continue on this path.” O’Dell notes that other organizations also are developing such databases, including state banking agencies, but that he has not seen “a whole lot of credit unions really embracing these. There also are many, many good anti-fraud products out there. “The awareness should be going up.” -
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