WEST JORDAN, Utah-Imagine sifting through 1,000 red flags before you find one financial transaction that is actually fraudulent.
That's what Mountain America Credit Union (MACU) here was trying to do every couple days, until it switched out fraud detection systems in July, according to Rob Woellhaf, fraud risk manager at the $3-billion CU. With the new system that delivers better filtering, staff needs to analyze fewer than 75 potentially fraudulent transactions for every actual instance of fraud, he said.
MACU's new enterprise fraud-management platform allows the CU to do something its previous system couldn't do: automatically identify what Woellhaf calls "fraud situations," which may result in fraudulent transactions across transaction channels. In addition, like many fraud prevention solutions, the platform identifies anomalous transactions, said Woellhaf.
MACU uses software from Burlington, Mass.-based Memento Security, which facilitates fraud detection, case management and compliance across the credit union. The solution scans for all types of fraud-deposit, ACH, check, ATM, debit and credit card.
"We've seen a dramatic increase in fraud prevention," even as the CU continues to grow, said Woellhaf. "And it's difficult to express the magnitude of the dollar loss we've prevented."
Although MACU is measuring the exact amount of loss avoided, Woellhaf said he isn't at liberty to release figures. Memento Security has already paid for itself by preventing actual loss, he added.
"A lot of fraud solutions take a purely statistical approach of filtering anomalous transactions," he explained. "Looking for anomalous transactions is not a complete approach, and it results in a lot of false positives. Buying a big-screen television may be anomalous, but people do actually buy big-screen televisions.
"The more complete approach combines the statistical with the situational," Woellhaf continued. "Although the combined approach is not foolproof, it increases the efficiency of our rules dramatically."
Situational rules help the system detect transactions that are performed outside of the member's usual travel distance, for example. MACU has determined that most members perform transactions within a 200-mile radius, said Woellhaf. A complete analysis of MACU fraud history helped inform additional parameters, including the top 10 high-risk states for fraud. MACU then goes a step further, singling out the top 10 high-risk merchant categories within each of the high-risk states.
MACU can ask the software to watch for customized scenarios, including card transactions that occur at the same merchant with the same card on the same day, or a line of credit payment at an ATM followed by a withdrawal, Woellhaf said.
Memento is stored and run in-house at MACU, he continued. "In order to be successful, fraud prevention solutions have to be in-house and hands-on. We know our members, fraud and transactions better than a third-party does."
Beyond detecting transaction fraud, MACU will eventually use Memento to support quality assurance on loans; critical file maintenance; and evaluate account inquiries for internal fraud, he said.
Members perform about 500,000 transactions per day, which are uploaded from the core processing system into Memento Security every half-hour, said Woellhaf.
MACU's previous system spit out 300 to 500 alerts per day, which 3 or 4 MACU investigators tried to sort through, Woellhaf added. "We never made it through all of the alerts that were published everyday, so most alerts had to be resolved without an investigation."
