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At a time when revenue growth is top of mind for many credit unions and budgets are tight, finding and deploying resources to battle financial fraud can be challenging. But, information solutions companies are providing credit unions with comprehensive, enterprise-wide approaches to combat identity theft and credit fraud that spur bottom-line, process efficiency and customer relationship benefits. These Fraud Management solutions leverage rich data sources as well as analytic and decisioning capabilities for fraud prevention, loss mitigation and regulatory compliance strategies. And, because of their higher levels of sophistication, these platforms are less likely to disqualify legitimate applicants (a `false positive’), thereby enabling more satisfied consumers to access credit as quickly and safely as possible. Tools for Combating Identity Theft and Credit Fraud The number one responsibility of a credit union marketing director is to build and retain that institution’s membership base. Anything that may negatively affect member retention is therefore a significant concern. Because a large number of today’s consumers demand fast service, and many are annoyed or even offended when questioned regarding their identification – it creates fertile ground for would-be fraud perpetrators. Taking advantage of this particular quirk of human nature, identity thieves use other people’s identifying information to persuade or trick unsuspecting customer service representatives at your credit union into opening a new account. The savvy criminals will then often let the account sit for a period of time. More than likely, once good-standing is established, your credit union will begin to market new services to that “customer.” The fraudster then jumps at the opportunity to open a credit card or initiate a other types of loans; and thus is able to do a great deal of damage in a very short amount of time. So what can credit unions do to stop themselves from becoming victims of this crime, while at the same time ensuring legitimate applicants a speedy and more customer-friendly process? In addition to training your employees to be more aware of fraud occurrences, the answer lies in implementing advanced identity verification, authentication and fraud detection technologies – a Fraud Management Platform for your credit union. A Fraud Management Platform combines multiple applications to provide an end-to-end solution for combating fraudulent activity at all stages of the account lifecycle. These advanced tools work by accessing multi-source databases that contain known and suspected fraudulent data, thereby verifying a consumer’s identity at the time he or she submits a new account application. In addition to verifying standard identifying information such as social security numbers and street addresses, vendors of fraud prevention products are also looking at unconventional information sources not previously used in the credit approval process. These additional databases of information could help determine whether a consumer’s information is legitimate. For example, some credit unions could require applicants to be authenticated by answering “challenge” questions based on information that should only be known to that applicant. For instance, a credit grantor would provide the consumer with a list of house numbers from previous addresses and then ask them to choose the correct one. Finally, credit-related “challenge” questions may also be utilized, such as asking the consumer to identify their most recent mortgage was established. The advanced solution ultimately generates a fraud score that determines the legitimacy of the applicant. Authentication brings value by providing an interim step to assist in verifying more good applicants that may have been sent home to retrieve more “documentation” to prove their identity. Applied Analytics is another key element in an effective fraud detection / prevention solution. Typically, analytic experts work with credit unions to determine the appropriate mix of analysis applications and identity verification tools by testing different technologies to determine which are best suited for a particular organization. At the same time, strategies are developed to address different business unit or geographic needs within the credit union. This type of analysis helps ensure that even the most sophisticated criminals find it either more difficult or impossible to perpetrate their crimes. Since the passage of the USA PATRIOT ACT in 2001, financial institutions have been required to take reasonable steps to verify a consumer’s identity utilizing external databases. They must also check whether that person appears on any lists of known or suspected terrorists or terrorist organizations provided to that financial institution by any government agency. One such list is maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). To help financial institutions comply with this law, leading industry vendors have developed advanced screening solutions. For example, tools are now available that automatically check a consumer’s application information against the OFAC list – as well as enhanced information gathered from a variety of other sources – when a credit report inquiry is processed. Embedded in these solutions are technologies that employ unique matching logic, which assists credit grantors in minimizing the number of false positives. The ultimate benefit of fewer false positives will be reduced fall-out rates. On-going Member Education: The Ultimate Anti-Fraud Weapon Employees that have received training can be one of a credit union’s most effective anti-fraud weapons. These “employee counselors” advise customers who believe they may be victims of identity theft to immediately contact one of the credit reporting companies to have a fraud alert placed on their individual credit file. This precautionary notice informs a credit grantor that the consumer is concerned about fraud and would put that credit grantor on notice that a more thorough review of application information may need to be conducted. Consumers can also be asked to mail in copies of information that could help verify their identity. While both practices are important in fighting the long-term problems associated with identity theft, they do slow down the credit approval process, which may in turn have customer retention implications. At a time when U.S. law enforcement is preoccupied with serious domestic and international issues, financial fraud perpetrators are taking advantage of this more weakly patrolled system to victimize consumers. Because of this situation, it is important for financial institutions to take proactive steps – including employee education and employing state-of-the-art fraud prevention technologies – to stop these criminals in their tracks.

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