Risk alert: Mitigating ‘significant increase’ in fraudulent checks drawn on member accounts

Credit unions are experiencing a significant increase in losses from fraudulent checks drawn on member accounts, according to the latest CUNA Mutual Group risk alert.

Primarily due to the stolen mail problem throughout the country, fraudsters are stealing members’ issued checks and manufacturing fraudulent checks using information from the stolen checks, the risk alert states.

Fraudsters also manufacture fraudulent checks by obtaining members’ canceled checks, including canceled HELOC checks, or they are successful in ordering share drafts on member accounts. In some cases, the fraudsters fund the fraudulent checks through unauthorized advances against members’ HELOCs.

Risk mitigation tips for credit unions:

  • Establish formal procedures to perform a manual review of members’ checks, including HELOC checks, presented for payment that exceeds an established monetary threshold (e.g., checks exceeding $10,000);
  • consider offering positive pay to business members;  
  • allow members to opt out of receiving blank HELOC checks or avoid sending blank HELOC checks on an unsolicited basis;
  • don’t allow members to link overdrafts to their HELOC loans;
  • check the member’s account to ensure the address was not changed in the last 30 to 60 days before processing their orders for share drafts;
  • deploy an identity verification solution in the call center to authenticate members; and consider a layered security solution for the call center that includes phone analytics combined with voice biometrics.

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.

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