What Credit Unions Need to Know About Fraudulent Wire Transfers


Wire transfers. Wires are one of the most secure and efficient ways of transferring money between parties. But what happens when it isn’t—what happens when the wire is fraudulent?

HELOC and LOC advance wire transfer scams are on the rise, again. Generally, the fraudulent wire scheme has two components

First, an individual contacts the credit union via the phone or other electronic means and asks to transfer funds from a HELOC or LOC to one of their deposit accounts. Once the transfer is completed, the individual will then request to send a wire transfer. The person making the request may have some information about the member they are impersonating, meaning they can answer questions that the true member would be able to answer.

Additionally, the individual will have some excuse as to why they cannot make it into the credit union to complete the wire in person. These excuses can range from being out of town, stepping into a meeting, to being at the airport waiting for a flight. Frequently, the impersonator will create a sense of urgency — if the wire isn’t sent right away, they might lose a great deal, won’t close on a house, etc. Here, you might say, wait, the credit union has to obtain the member’s signature before the wire can be sent and surely the impersonator cannot provide a matching signature for the legitimate member.

That is where the issue lies. The impersonator does have the member’s true signature, and they can provide a copy of it upon request — they will happily fax or email a signed wire authorization form to the credit union since it is impossible to detect that the signature was copied from another legal document. This makes it very hard for the credit union to know if they received a legitimate wire request or not.

So, what can credit unions do?

First, identify the risk to the credit union for this type of fraud. Does it accept wire transfer requests over the phone? Does it have a dollar limit in place for the maximum amount allowed to be transferred via a phone authorization? Does it have additional safeguards that must be followed before sending the wire?

Next, contact the credit union’s bonding agency as they will not only have information on what the policy will cover, but it will also have risk mitigation strategies that the credit union can deploy. Think about sharing information with the credit union team as well — if the credit union has taken a loss from this type of fraud in the past, don’t hide it. Discuss it with the team and share the learning experience with everyone to help prevent it from happening again.

For additional information on how to mitigate wire fraud risk, contact the NWCUA’s Compliance Department at compliance@nwcua.org or 800.546.4465.

Question of the Week

Are there any tools out there for detecting and reporting fraud or misuse of funds by a representative payee?

Yes. The Office of the Inspector General for Social Security has both of these tools.

You can find the fraud report here: Report fraud, waste, or abuse. You can find information on misuse here: Misuse of Benefits by a Rep Payee

This is a great resource for the credit union and for any of your members that may inquire about what they can and can’t do with Social Security funds if they are a fiduciary for someone else.

Legal Briefs

National Credit Union Administration (NCUA)

NCUA Chairman McWatters delivered a speech regarding the critical role that minority credit unions play in reaching the underserved and the additional ways that the NCUA can provide “support through training, grants, and other initiatives.”

NCUA Chairman McWatteres delivered a speech regarding financial literacy and the role it places in protecting service members.

Consumer Financial Protection Bureau (CFPB)

The CFPB issued a final rule that updates the 2015 statutory amendment to the GLBA, providing an exception to the annual notice requirement for financial institutions that meet certain conditions.

The CFPB announced that, in conjunction with 11 financial regulators from around the world, it is creating the Global Financial Innovation Network (GFIN). The network is aimed at helping innovative firms interact with regulators in a more efficient manner.

Federal Deposit Insurance Corporation (FDIC)

The FDIC issued a Special Anniversary Edition of its Consumer News. The issue contains a compilation of articles appearing in the past 25 years of the FDIC’s publication.

Financial Crimes Enforcement Network (FinCEN)

FinCEN announced that it has extended the limited exceptive relief to covered financial institutions from the obligations of the Beneficial Ownership Rule for certain financial products and services (CDs and loan accounts) established before the effective date of the rule. The original exception expired on August 9, 2018 but FinCEN is extending the limited exception through September 8, 2018.

Federal Housing Finance Agency (FHFA)

The FHFA announced the release of the annual stress test results for Fannie Mae and Freddie Mac required under the Dodd-Frank Act.

U.S. Department of the Treasury (Treasury)

The Treasury issued new proposed regulations implementing a provision of the Tax Cuts and Jobs Act. The provision allows owners of sole proprietorships, partnerships, trusts, and S corporations to deduct 20% of their qualified business income.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of August 13, 2018. The last update prior to this was August 3, 2018.

Questions? Contact the Compliance Hotline: 1.800.546.4465; compliance@nwcua.org.

Posted in Compliance News.