Criminals are chameleons. They adapt and change to avoid detection. Nobody knows this better than Bank Secrecy Act and Anti-Money Laundering (BSA/AML) professionals and fraud investigators.
Most of today's criminals are smart enough to realize that investigators at credit unions will catch blatantly suspicious activity. There are two things of which we can be certain: criminals will continue to use the financial system to obtain and move ill-gotten gains and they will look to avoid jail time at all cost. Whether we are talking about a lone criminal or a member of a much larger crime syndicate, they have figured out a way to achieve their two goals — break their activity into smaller pieces and spread it across multiple institutions. You cannot investigate what you cannot see.
When it comes to investigating member activity, credit unions are wearing institutional blinders. You can dig into what a member is doing at your credit union, but what are they doing at the financial institution down the street? What about the one across town or even on the other side of the state?
Digging Beyond 'Normal'
What a member is doing at your credit union may look normal. No problem. But there is a bigger picture here. What that member is doing at your institution, combined with what they are doing at 10 other financial institutions, paints a much scarier image. You can only see what is happening within your own four walls and criminals are targeting that isolation.
The solution is to break out of your institutional silo by working together with fellow credit unions and banks.
Cross-institutional collaboration gives you the opportunity to gain a wealth of important information.
It allows you build a more complete view of member activity, which impacts the quality of your investigations.
This improved visibility not only has a positive effect on uncovering criminal activity, it also helps clarify when activity does not require further investigation.
Being able to share information early in the investigation life cycle helps investigators avoid losing valuable time to the indecision that comes from a lack of information — letting you focus on criminals, not the innocent.
A Prime Example
Ask Lindsey Anderson, compliance officer at RiverLand Federal Credit Union in New Orleans, who used cross-institutional collaboration to stop a member from committing costly criminal activity affecting one of their branches in Texas and multiple other financial institutions.
"We recently uncovered a member that scammed a lot of credit unions and small banks out of hundreds of thousands of dollars," Anderson related.
After discovering a member was performing potentially suspicious activity, Anderson used RiverLand's transaction monitoring software to initiate collaborations with other financial institutions where that person was a member.
These initial collaborations started the ball rolling — and it turned out what at first appeared to be an isolated case of fraudulent activity was discovered to be a much larger criminal scheme affecting multiple institutions.
Cross-institution collaboration helped RiverLand build a complete picture, something that would have been impossible otherwise. With a wealth of valuable information now available, RiverLand was able to work closely with the Houston Police Department to provide what law enforcement needed to take action.
While working with law enforcement RiverLand was contacted by another credit union through its transaction monitoring software with questions about the member, who had recently opened an account there.
Not only was Anderson able to warn them about the potentially fraudulent transactions, the collaborating credit union was able to provide even more information to Houston PD, further enhancing the ability to complete a successful arrest.
Minimizing Losses
"After collaborating with the other institutions we were able to restrict her account and minimize our losses. We were also able to help another credit union that worked with police to set up a sting that caught the criminal in the act. We've received notice from the police department that this person is arrested," Anderson said. "She confessed to the crime, and it looks like she's heading to jail. I don't think the police could have caught her without help from the institutions that were collaborating."
RiverLand FCU's story perfectly illustrates how much all FIs can gain by working together. Without the full picture obtained through information sharing, the member's activity likely would have continued, with the affected institutions continuing to lose large amounts of money. Additionally, without the wealth of information gathered together through the collaborations, law enforcement may not have been in the position to make such a concrete arrest.
When speaking with Anderson about the case, one thing becomes very clear—her sense of pride in having helped stop this person from defrauding both RiverLand FCU and the other institutions she worked closely with. "We are so happy we were able to minimize our losses and help [the other institutions]. Just think how many more institutions she won't be scamming now!"
Jamie Rowsell is a market researcher at Verafin Inc., a provider of behavior-based fraud detection and anti-money laundering software.
