An FBI lead investigator suggested financial institutions stepup efforts to prevent fake online account openings following theannouncement of a fraud scheme authorities said involved hundredsof credit unions and banks.

Michael Thoreson, the FBI special agent in charge of thePittsburgh-based case, told CU Times the investigation isexpected to lead to new charges against more suspects after fivepeople were indicted last month.

The FBI said at an April 23 news conference that five peoplewere indicted for allegedly stealing the personal IDs of thousandsof people – including credit union members and employees.

The five-person ring used stolen IDs to open more than 1,000bogus accounts at hundreds of banks and credit unions across thenation, the FBI said. The defendants, who have all pleaded notguilty, used those accounts to deposit more than $10 million infraudulent federal income tax returns since 2005. Some of thosefunds had been transferred to Nigeria, authorities alleged.

Although nine credit unions from seven states and the Districtof Columbia were named in court documents detailing the nationwidefraud, few CEOs are acknowledging their cooperatives were affected,while others said their credit unions weren't involved at all.

Thoreson said because of the FBI's limited resources not all ofthe credit unions referenced in the indictment were contacted. Thecredit unions named in the court documents were randomly selectedin the FBI's efforts to show that the fraud was occurringnationally and not just on the East Coast where the accused fivewere living, Thoreson said.

He added that he has seen what he called “irregular activity”occur related to this fraud case even after it had been publiclyexposed.

While financial institutions do a very good job at detectingfraud every day, Thoreson said, criminals have figured out a way toanswer questions during the online account opening process thathelp credit union determine membership eligibility. Online accountapplicants are asked questions that presumably they would only beable to answer.

But that apparently is no longer the case.

“These guys (the accused) have figured out how to answer thosequestions,” Thoreson said. “I don't want to reveal how they havefigured it out. I have seen hundreds and possibly thousands ofcredit reports these people have run and have gotten informationfrom. They are really that organized and they are really thatgood.”

Because of this, Thoreson recommended financial institutionsreview their fraud detection systems to see if they can takeadditional steps to prevent fake account openings.

Read more: Some credit unions dispute the FBI'svictims list …

The $4.1 billion Pennsylvania State Employees Credit Union, one of the ninecooperatives named in court papers, processes about 3,000 onlineaccount applications every month.

Even though the Harrisburg, Pa.-based credit union invests inexpensive fraud detection technology, at least one bogus accountrelated to the FBI case was opened. In April 2011, the credit unionnoticed the account was receiving more than $41,000 in federal taxreturns, said Gregory Smith, president/CEO of PSECU.

PSECU reported the fraud to the IRS, a year before the $252 million Widget Financial FCU in Erie, Pa. reported 10suspicious accounts to the FBI in December 2012. Federalinvestigators credited Widget Financial's tip for cracking thefraud case wide open.

“I never want to rain on anyone's parade and Widget FinancialCredit Union deserves credit for what they did,” Smith said. “Wefiled our Suspicious Activity Reports with the IRS in 2011 as wetypically do when we uncover these types of scams. We were able toseize $11,000 of that ($41,000) and returned it to the IRS.”

Smith said the credit union also blocked five other accountsassociated with the fraud, but its impact on PSECU wasnegligible.

In addition to Widget Financial and PSECU, court documents namedthe $169 million Treasury Department Federal Credit Union in Wash.,D.C., the $361 million Air Force Federal Credit Union in SanAntonio, the $581 million Red Canoe Credit Union in Longview,Wash., the $78 million Rutgers Federal Credit Union in NewBrunswick, N.J., the $3 billion Lake Michigan Federal Credit Unionin Grand Rapids, Mich., the $83 million Winward Community CreditUnion in Oahu, Hawaii, and the now-merged CWA Long Island FCU.

The CEOs of Air Force Academy and Red Canoe said their creditunions were not involved in the case.

“It's news to us being named in the indictment,” said JimSpaulding, president/CEO of Red Canoe. However, it is conceivablethat the credit union took a loss of an account or two but didn'tknow they were attached to the massive fraud case, he added.

“I checked with my staff,” said Bob Glenn, president/CEO of AirForce FCU. “We are not the credit union referenced in theindictment.” He suggested federal investigators may have meant AirAcademy CU in Colorado Springs, Colo.

“We don't see anything that ties us to that whole (fraud)thing,” Air Academy FCU President/CEO Glenn L. Strebe said.

Other credit unions declined to comment when contacted by CUTimes.

“I have nothing to add to what has already been published,” saidAlfred Scipio, president/CEO of Treasury Department FCU.

Rutgers FCU, Lake Michigan FCU and Winward Community CU did notreturn phone calls and emails.

Paul Young, COO and security officer at Island FCU, said he wasnot aware that the fraud case involved CWA Long Island FCU. Thatsmall cooperative merged into Island FCU in July 2013.