Mortgage Fraud: What Your Bank and You Can Do to Protect Your Interests

Today's technology allows money to travel from one account to another instantly. It's convenient, safe, and most of us wonder how we lived without it. But these conveniences are also used by dishonest people to essentially rob banks and their customers. In 2010, a single financial institution lost over $4,000,000.00 as a result of Home Equity Line of Credit (HELOC) scams. According to the Federal Bureau of Investigation (FBI), these types of fraud are on the rise.  

HELOC accounts are usually accessed by their actual owners via certain personal data that is now more easily compromised than ever by hackers and scammers who target them.

Where is the data found?

The data is found on pulblic records, online databases, and even extracted from bank officials themselves after partial information is provided. Commercial databases with information about HELOC accounts are used by some scammers to target those with high balances. After that, gathering personal data like names, addresses, dates of birth, and mother's maiden names, and social security databases is as simple as researching a commercial database like a background checker.

Large scam rings work together to gather pieces of information, interact with bank officials, re-route phone numbers, and even collect signatures on public record to cut and paste onto forms. The ringleader of one scam was responsible for nearly $3,000,000.00 worth of bank fraud, money laundering, and fraud with identification documents over three years.

How is the data used?

The information gathered is used in multiple ways. Fake drivers' licenses have been paired with the audio response system to transfer funds. Call forwarding has been used to prevent detection via call-back confirmation. Caller ID spoofing blocks caller ID. Phone and address changes are implemented months in advance.

How to protect your institution.

Reducing HELOC fraud risk is an important way to increase customer service and customer confidence in your institution. It can also decrease the cost paid in deductible amounts for covered losses and out-of-pocket expenses for uncovered losses. Here are some strategies you can implement to help reduce the HELOC fraud risk borne by your institution. (These are also applicable to you as the homeowner!).

--Ensure the full account number comes from your caller, not from your representative, and ensure your verification questions don't provide any information to the caller.

--Ask for authentication options that don't include public information data easily obtained from commercial databases or social networking websites. PIN numbers, passwords and other data are usually not easily retrieved.

--Instead of calling one number you have on file, require two numbers for call-back verification in the case of member-not-present wire transfers.

--Your telephone representative or bank teller is the gatekeeper to all the accounts in your bank. Provide training so employees can help detect fraud.

--Get copies of drivers' license or other identification to compare.

--Request that telephone service providers alert your institution whenever a call forwarding order is requested. Educate them about the security risk and coordinate with them to verify the request.

--Require transfers of a certain amount be made in person, and limit the amount that can be transferred by members who are not present.

--Hold funds that are requested to be transerred to a foreign bank account from an HELOC account. Use the holding period to complete your verification process.

--Educate your customers about HELOC fraud and encourage them to be vigilant about their records.

Why it matters to your institution.

Although banking is now so much more convenient for both you and your customers, HELOC fraud schemes can create costs, headache, and decreased customer confidence in your institution. Implementing some of the above policies and procedures can protect your customers and your institution.

Ask an insurance agent for more information about risk-mitigation techniques you can implement to prevent fraud, the types of scams to be aware of, and how you and your employees can detect fraud.

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