NEWARK, N.J.-Federal authorities have charged 20 individuals around the country they believe are responsible for draining millions of dollars from credit unions and banks around the country by tapping into home equity lines of credit.
The suspects conducted fraudulent wire transfers or gained unauthorized access to the victims' on-line accounts to drain HELOCs, then wired millions of dollars in proceeds overseas, according to prosecutors.
The scheme is reminiscent of the TJX credit card breach, where stolen credit union and bank account information was sold over the Internet and used to siphon millions from U.S. shoppers from sites all over the world.
"Home equity lines of credit are an expanding front in the battle against mortgage fraud," said Christopher Christie, U.S. Attorney for the District of New Jersey. ""Homeowners should carefully review their statements to make sure their hard-earned equity is not disappearing from under their noses."
Among the credit unions the suspects targeted were U.S. Senate FCU, Navy FCU, Pentagon FCU, State Department FCU, Affinity FCU, Financial Resources FCU, First Financial FCU, as well as JP Morgan Chase, Wachovia, Washington Mutual, Bank of America and dozens of smaller banks and credit unions.
Between Dec. 6, 2007 and Jan. 14, 2008 the following credit unions were also hit: BMS FCU, FDU FCU, L'Oreal USA FCU, New Jersey Gateway FCU, North Jersey FCU, Novartis FCU, Picatinny FCU and Self Reliance FCU.
In the scheme, identified in a series of articles last summer by Credit Union Journal, suspects used personal information they stole and then called unwitting member service representatives or loan officers at credit unions and directed them to transfer HELOC funds to accounts they control. In one case, the thieves convinced Woodstone CU, in Federal Way, Wash., to transfer $665,000 from an elderly couple's HELOC, which was rapidly sent overseas and out of the reach of U.S. law enforcement.
In another case last Dec. 7, the suspects impersonated a member of U.S. Senate FCU during a call to a member service rep and convinced the rep to wire $280,000 to an account in Korea. One of the suspects who pleaded guilty in Virginia last month had $110,000 of those funds transferred back to him from an account in Indonesia.
While credit unions typically verify the authenticity of a wire request by contacting the member at a telephone number on file, the suspects used one of two techniques to reroute the verification call. Either they would persuade credit union officials to change the account holder's number on file to one they set up; or they would contact the local phone company to report a fake technical problem and have the calls forwarded to one of their own phones.
The suspects are part of an international ID theft ring operating in the U.S., the United Kingdom, Canada, China, Japan, Vietnam and Korea and have successfully drained more than $4 million from legitimate HELOC accounts, according to authorities. The proceeds from the scheme were wired to Japan, Nigeria, Canada, South Korea and other countries.
