The Inside Threat

It seems that almost every time we talk to a bank that is dealing with a substantial account takeover issue - it usually comes back to an internal compromise. This is typically some fraudulent employee who has access to account level information.

When you think about this - it makes perfect sense. To successfully takeover an account is not trivial. Not only do you need customer information and account numbers - but also things like Pins and security codes. You typically don't find this out in cyberworld. To get at this - requires internal access.

Of course, once the information is compromised, the typical next step if to change the address on the consumer account and then requests the checks and cards to complete the crime.

With the economic meltdown in full swing, we are estimating that we are going to see a substantial increase in account takeover fraud in 2009. People with access to internal information that normally wouldn't have thought about committing fraud - are much more susceptible to committing fraud as their financial situation rapidly deteriorates.

I hope I'm wrong.

Compliance Humor

The following was written by Anita Garrett, CRCM of Jefferson Wells International and printed in the Bankers Online Guru newsletter. Enjoy!

"The Creation"

In the beginning

Was the proposed rule

And then came the assumptions

And the assumptions were without form

And the proposed rule was completely without substance

And the darkness was upon the face of the bankers

And they spaketh amongst themselves, saying

"It is a crock of crap and it stinketh."

And the bankers went unto their Associations and sayeth,

"It is a pail of dung, and none may abide the odor thereof."

And the Associations went unto the Sub-Committees

And sayeth unto them,

"It is a container of excrement, and it is very strong

Such that none here may abide by it."

And the Sub-Committees went unto their Congressmen & Senators and sayeth,

"It is a vessel of fertilizer, and none may abide its strength."

And the Congressmen & Senators spoke amongst themselves, saying one to another.

"It contains that which aids plant growth,

And it is very strong."

"It promotes growth and is very powerful."

And the Congressmen & Senators went unto the President and sayeth unto him,

"This new rule will actively promote the growth

And efficiency of all banks, and these areas in particular,

And will serve as a comfort and protection for our constituents."

And the President looked upon the rule and saw that is was good

And the rule became

Regulation X.

What is the Real FACT Act Opportunity?

Dear Readers,

Well - here we are - now one month after the FACT Act compliance deadline. For those of you that expected fireworks and smoking computers - I am sorry to disappoint. While we definitely saw many banks scrambling at the last minute to get their plans in place - November 1st was, in many ways, a non-event. I guess in hindsight, this should not be overly surprising. We saw similar activity back when the USA Patriot Act went live. It was months and years before many banks got fully into compliance.

However - we have learned a few things since November 1st that are coming to fruition that I thought I would share.

First of all, most banking institutions took the easy route and deployed existing solutions in the new account environment to screen address discrepancies.

In doing so - these banking insitutions are now seeing their fraud queues nearly quadrupling. This is already ending up in double digits reductions in account approval rates. While many banks are now seeing this, most are looking at it as the cost of compliance and doing business.

On the address change front, most banks opted for sending letters to the old and new address to become compliant. These institutions are now realizing the overall cost and impact - and are now expressing a desire to tighten up these processes in early 2009.

We have been sharing this reality for the past 12 months about this impending 'pain' and that pain is now being realized. In a time when banks are closing the doors, cutting expensese at every turn and looking for ways to increase revenues - you sure would think they would be interested in ways to minimize the pain and grow the top line.

It will be interesting to see what happens when the first few banks go through their first post FACTA audit in the coming weeks and months.

More to come,

A.E>>>