Did you know that credit unions across the country have suffered substantial losses due to counterfeit checks drawing funds from home equity lines of credit (HELOCs)? Fraudsters are obtaining these funds leveraging various tactics. Counterfeit HELOC checks and counterfeit checks drawn on member checking accounts funded by unauthorized advances are a couple of examples. Often, they use social engineering schemes to target call centers, where they impersonate members and request a canceled HELOC check or order share drafts on member accounts.
The Impact of HELOC Fraud
The financial loss a credit union could experience due to HELOC-related fraud can be quite substantial. A single counterfeit HELOC check could incur losses up to $350,000, according to CUNA Mutual Group.
Because mortgages and HELOCs are public records, anyone can search for open HELOCs, which generally contain account numbers and borrower signatures. This information can be the starting point for criminals to execute on their scheme. The following scenario was shared by CUNA Mutual Group as an example of a HELOC fraud scheme:
A fraudster social engineered a call center employee into changing a member’s address and phone number. The fraudster social engineered the call center again two days later to reset the member’s online banking password. This allowed the fraudster to login to the member’s account to order share drafts which were delivered to the new address. The fraudster forged three share drafts totaling $407,000 and funded them through unauthorized advances against the member’s HELOC through online banking.
What You Can Do
There are many things credit unions can do to proactively mitigate the risk of member HELOCs being used to fund counterfeit checks, such as:
- Give members the opportunity to opt-out of receiving HELOC checks or implement proactive policies such as not routinely issuing HELOC checks.
- Train staff to watch out for requests for canceled checks drawn on HELOC accounts.
- Ensure identity verification policies are understood and being followed with every transaction.
- Ask questions that are account-specific, but not found on statements, to confirm member identity. These questions can be as simple as asking whether they receive paper or estatements, the year the account was open, or the branch that the account was opened at.
- Establish protocols for reviewing members checks, such as verifying signatures and check characteristics, and following up with the member to ensure they actually issued a check.
Credit unions who partner with Synergent have additional tools available to protect members from HELOC fraud. Some parameters can be decided by the credit union within the tools available. Actions you can take in Episys include:
- Employing more complex MICR number logic.
- Setting criteria such as warning codes and large dollar amount alerts to eliminate automatic clearing of HELOC checks.
Synergent is here to help. Contact your dedicated Account Relationship Manager or Rebekah Higgins, Payments and Fraud Consultant, at firstname.lastname@example.org.