The US PATRIOT Act has pushed two credit unions to better protect their members from fraud, according to CU representatives.
"Even though the PATRIOT Act is controversial, it has given us the opportunity to tighten our identity verification process to our advantage," said Charlotte Norton, vice president of member service operations at Randolph-Brooks FCU in Universal City, Texas.
And if members are properly identified, there's less chance that other members will suffer from new account fraud, added Linnea Benedict, project coordinator at Affinity Plus FCU in St. Paul, Minn. "Our members' safety is the main concern in the long run."
Both Affinity Plus and Randolph-Brooks FCUs now verify applicant identity for new accounts and account changes using The PATRIOT Act Connection solution, offered by St. Cloud, Minn.-based Bankers Systems, Inc., provider of compliance resource solutions.
The CUs started using the automated identity verification and compliance platform on Oct. 1, 2003, the compliance deadline for Section 326 of the Act.
"By implementing an automated tool and revamping our member identification policy, we have been able to avoid opening some of the fraudulent accounts that we might have opened in the past as well as comply with the regulation," Norton explained.
Now, the $2.2-billion Randolph-Brooks FCU has a strict Member Identification Program, which requires new account applicants to produce appropriate identification cards, such as a driver's license or U.S. passport in English, or a state, military or matricula identification card, Norton said.
"We have awakened to the fact that if we had used a tool like this in the past, we could have avoided some of the loss we've taken," she said. Randolph-Brooks opens about 24,000 new accounts per year, Norton said.
In the past, the credit union accepted alternative forms of identification, including college identification cards and employee badges, Norton added.
The same was true for $958-million Affinity Plus, which also accepted account applications from foreign students who had no social security numbers, said Benedict.
"We had a very loose identification policy, allowing different forms of ID for different areas," said Norton.
In addition, Randolph-Brooks used only a credit report to verify an individual's records and eligibility for new products, she said.
Now the CU also automatically checks applicants against the Office of Foreign Assets Control's (OFAC) Specially Designated Nationals and Blocked Persons list, Norton added.
The Bankers Systems solution helps verify ID using an automated, risk-based approach. Based on the credit union's ongoing risk comfort-level, the tool may prompt employees to obtain additional verification before opening a new account.
"If the application comes back with a name or address that doesn't match, for example, the tool provides us with guidelines for what steps we should take next," said Benedict. Affinity Plus may also require the applicant to provide utility bills to verify street address, for instance.
Added Norton: "It's interesting how often we ask an applicant for additional verification and never see the applicant again."
Randolph-Brooks uses the solution even when employees accept account applications or changes face-to-face, Norton said. Even though the member supplies an ID, Norton said that she is surprised at how often the information on the ID is incorrect.
By automatically archiving each account verification, the solution has also saved Randolph-Brooks FCU about 10 hours per week of employee time, said Norton. She said she hopes that soon the Bankers Systems solution will be integrated with the CU's core system, reducing redundant data entry.
Benedict sees the verification tool as providing one piece of the information needed for employees to make decisions about opening or changing accounts. "We're trained to look at the whole picture. In the end, the employee is still going to make the determination."