How Neighbors FCU Stymies Check-Kiters With Time-Saving Tool

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BATON ROUGE, La.-An automatic alert helped Neighbors FCU here catch a check kiter in the middle of a $145,000 scheme last year.

Similar alerts, coming from new anti-money laundering (AML) software, give Neighbors "a grasp on things we didn't have a grasp on before, including this case of check kiting over seven months," said Chrissy Viso, VP-compliance and BSA officer at the $442-million CU.

The Verafin AML software also automatically delivers risk-ratings for each member in compliance with BSA guidelines, making it clear as to which members and transactions to watch, Viso said. Verafin is a BSA and AML compliance and fraud detection software provider located in St. John's, Newfoundland.

It was "almost impossible" to assign a risk score to each member based on his transaction activity before Neighbors began using Verafin one year ago, Viso continued. Verafin automatically identifies high-risk members by considering factors such as the member's occupation, address and suspicious activity reports, said Andrew King, VP-client services, Verafin.

Past attempts to manually monitor money laundering activity were unrealistic, said Viso. "We had to pull together different data from Microsoft Access reports; canned CTR reports from several screens in the core system; and OFAC lists."

Verafin looks at all of Neighbors' 60,000 transactions every day, said King. "Verafin monitors all these transactions as a whole and looks for patterns of behavior. For example, if a member deposits $15,000 cash on Monday and three days later wires that money to Syria, Verafin analyzes those transactions together, assigns a risk score and can email an alert."

Alerts are listed according to risk score, and "I work through from the highest ratings to the lowest," said Viso. "When a new member pops up, I'm especially interested." Verafin searches transactions for fraud once a day and for money laundering once a week. Member risk scores are updated weekly.

Before Verafin, Viso said she had to notice, remember and correlate suspicious transactions in her mind or within multiple database reports. "Tracking transactions was a lot of extra work. Now all transactions are automatically logged for me in one place, and I don't have to track them."

In the case of the $145,000 kiting scheme, the fraudulent activity had gone undetected for a while because many of the transactions originated at shared branches or online and were of relatively small value. "We would have never caught the kiting until the person tripped up," by overdrawing an account or writing too many checks, she said. "By then, we would have been on the losing end." As it stands, Neighbors suffered "minimal" loss of less than $500.

Verafin recently rescued Neighbors from a member visiting seven branches on different days to cash checks tied to Internet scams. The added value, Viso said, is all the time saved by CU staff.

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