A new risk alert from CUNA Mutual Group reminds credit unions that as remote online notarization (RON) continues to increase in usage, it also introduces the potential for fraud. Therefore, credit unions should be prepared to exercise adequate due diligence to authenticate members requesting the service.
In December 2021, Gov. Kathy Hochul signed into law legislation that allows for the permanent use of remote electronic notarizations in New York state, marking a major legislative victory for the New York credit union movement. The legislation was also a victory for the disabled, elderly, and those in rural communities and others who may find it difficult to obtain the services of a notary in person.
Risk mitigation for credit unions:
- Determine if other states allow RON services for members residing or credit union business locations in states outside of the credit union’s state of domicile.
- Understand which documents may be remotely notarized and which may not.
- Ensure RON services comply with state and federal privacy regulations, such as the Gramm-Leach Bliley Act, etc.
- Review data security practices for both the credit union and vendor to ensure compliance with federal and state requirements.
- Review notary recordkeeping obligations along with any state records requirements to ensure compliance with state record keeping provisions.
- Understand how records may be kept and the different formats such as physical or digital to ensure compliance with any state law requisites.
- Review cyber coverage for potential threats on notary data, online services and insurance or surety bond requirements and other insurance policy requirements.
- Examine business technologies to ensure that the credit union has all necessary systems and programs, updates, backups, and storage, reliable and secure network connections, and any other requirements.
- Review security controls for verification, virus and malware protections.
- Review current processes and procedures for notary and notary services to identify any changes needed or updates.
- Understand the RON process for credit union and notary, and member/signer.
- Talk with your data processors and loan origination system providers to see if they offer online notarization software.
- Understand your vendor management program and due diligence requirements.
- In addition to standard member identification protocol, consider including
- enhanced procedures like knowledge-based authentication, which requires the signer to answer a series of computer-generated questions based on their personal history, credit and financial information to help combat identity theft.
- Ensure staff is adequately trained to identify potential coercion or abuse attempts by looking for red flags.
- Consult with legal counsel.
CUNA Mutual Group’s risk alerts, in addition to additional risk-prevention resources, may be accessed in their Protection Resource Center. Log-in is required.