Fighting Fraud Through The Power Of Collaboration

A group of Northeastern Pennsylvania credit unions are strengthening their cyber defenses through the power of collaboration.

After spotting a spike in check fraud — and particularly checks that appeared to come from the federal government — leaders at NET Credit Union ($320.8M, Scranton, PA) reached out to area cooperatives and discovered they faced the same challenges. Armed with that knowledge, NET worked with representatives from CrossState Credit Union Association, which serves credit unions in Pennsylvania and New Jersey, to convene a group of leaders to tackle the problem head on.

The result was a one-time dinner and discussion that brought together executives from Choice One Community Federal Credit Union ($126.9M, Plains Township, PA), Service 1st Federal Credit Union ($746.7M, Danville, PA), Penn East Federal Credit Union ($269.6M, Scranton, PA), and NET, for a panel discussion moderated by Nick DiFrancesco, member engagement consultant at CrossState. All four credit unions are part of the league’s Northeast chapter.

“We wanted to discuss fraud as a chapter because a lot of us were seeing an uptick in our credit unions,” says Janelle Kaczmarek, NET Credit Union’s chief of risk management, who helped organize the event.

The volunteer panelists represented a range of roles, including not just fraud and IT but also branches, member experience, and executive leadership. All four credit unions had dealt with similar fraud issues, so the discussion was relevant to all.

Some of the discussion questions included:

• What are the most common types of financial fraud that businesses and individuals face today?
• What are the red flags that organizations and individuals should look for to detect potential fraud?
• How can businesses implement effective fraud prevention and detection strategies?
• How can financial institutions leverage data analytics to identify and prevent fraudulent activities?
• What are the key challenges in prosecuting financial fraud cases, and how can these challenges be overcome?

New Tools And Tactics

The event wasn’t just about sharing ideas, it drove real solutions, as well. For example, as part of the  discussion, NET shared that it had put in place BioCatch, a behavioral biometrics tool to help detect fraud, as well as a tool aimed at stopping synthetic account creation and account takeover, Socure.

The conversation also led NET to alter some of its operations policies, including reducing limits on external transfers for new members. Although the policy for existing members won’t change, new, lower limits are now in place based on a member’s tenure with the credit union up to 180 days. Limits vary by channel, but policies are now in place around ACH transfers, Zelle, EFT, and more.

Fostering Collaboration

In addition to reinforcing the value of collaboration among credit unions, the panel also highlighted the importance of working with local law enforcement. Kaczmarek notes that NET regularly works with police when it detects fraud, in part because insurance claims require a police report. Two high-level staffers at NET are ex-bankers, and NET — despite being a credit union — participates in a quarterly community bank forum in the area. That helps foster relationships throughout the market and also helps NET stay abreast of the challenges other institutions face.

“As a financial institution, you don’t look at yourself as a bank or a credit union at that point,” Kaczmarek says. “We all discuss the fraud situations that are occurring and we definitely provide our perspective from NET.”

Although uncovering new tools and strategies at the CrossState panel benefitted NET’s bottom line, Kaczmarek says the collaborative factor was just as important.

“We have our own fraud committee and procedures in place, and we shared our ideas with the other panelists, but they shared similar ideas of what they’re doing in their credit unions,” the risk chief says. “The biggest value came from the collaboration and everybody learning what one another was experiencing at their credit union.”