Credit Union Exam Solutions Presents With Flying Colors

Hey everyone.

This is Mark Trekel with a short
take of With Flying Colors.

Recently, we had an hour long
podcast on 10 risks identified by

the OCC, and we talked about how
that relates to credit union risks.

I am taking that and putting it in more
digestible sizes with one topic at a time.

And today's topic is fraud schemes.

Thanks for listening.

Okay.

Treichel: Fraud schemes targeting
traditional payment methods and

otherwise, Dennis, I know you and I
were chatting a little bit about uh,

a generic situation from a member
that that, that you worked with.

But any thought, anything you wanna
share about that example or anything

else on, on what you're seeing and
hearing about fraud or what you

did at, at your credit union to it?

Bauer: Yeah, and, and this was sort of
a, at the end of my career, is just all

the fraud that you, post the elderly.

That's, that, that happens quite a bit.

Particularly, and this one happened to
be a timeshare resale fraud scenario

where right, where we get a member.

Wants the wire off 25,000.

I get wind of it.

I, I, I was contacted saying, Hey, we
think there's something wrong here.

This doesn't really fit
the member's profile.

She's a retired school teacher.

You know, this doesn't fit her profile.

So, right.

So then we, we do a
little bit more digging.

Give her a call, ask her what's going
on, and she talks about, well, I can

sell my timeshare for a million dollars.

I forget the number.

Well, that's not how, there's
no way you're gonna sell a

timeshare for a million dollars.

It, it just doesn't work like that.

Maybe, maybe there are
some, but not for us.

Not for her.

Right.

Not for that type of individual.

Um, you know, she's elderly.

We're trying to talk to her and saying,
well, you know, if you take a look at

some of the, the latest scams, that's a
big scam going out out there right now.

You know, go to the
Attorney General's site.

We can show you that information.

'Cause this person wants to send, you
know, wants you to send them 25,000.

You're probably not gonna
get that money back.

Um, right.

So they, they call her, they, it
was an uns, probably unsolicited

type of offer that she received.

Say, Hey, we can sell your
timeshare for a million bucks.

All you gotta do is we'll just need
to wire us 25 grand and then you

can collect that back at closing.

And she, she was convinced
right, that it was the real deal.

So tried to talk to her, got her on the,
on the phone with, uh, attorney General.

So we sort of went well
beyond, 'cause I was right.

It was an elderly individual
don't want her to lose 25,000.

'cause once a wire is
gone or is out, it's gone.

You can't get that back.

I think finally at the end we were
able to maybe talk to her and maybe

a daughter of hers to have her stop.

'Cause we weren't gonna, we
weren't gonna do the wire.

We said, well, if you want this, you're
gonna have to, you're gonna have to take,

you're gonna have to do it someplace else.

'cause we know this is a, this is fraud.

Oh, that's great.

You're gonna be out 20 grand.

So, right.

There's a lot of that stuff.

Not only that, right?

You got the male bride.

We've seen those where, it's crazy what
goes on out there in, in the, in the, for

our members, what they're facing as far
as as far as these types of incidents.

So I just wanna share that one.

Miller: Yeah.

I have a question for you, Dennis.

Yeah.

Had you heard about ATM
Jack potting before?

I never heard that term
till I read this risk word.

I have.

Bauer: Yep.

I've heard of that.

That, yeah, I haven't seen
that happen in our area.

Maybe it has, but in our area where
we've seen a lot of ATM fraud was on

skimming and it, it's gotten a lot.

It was, there was a ring here
about two or three years ago.

I don't know.

There are a lot of financial
institutions that got hit.

It was pretty sophisticated.

So with skimming, they put a,
a device at the ATM and they

read the card, make stripe, and
then they have a little camera.

Up above getting the pin number, and
then they create these cloned cards.

Then four or five days later, we get
these phone calls right from our members

saying, Hey, here, you know, we got money
we got money leaking out of our account.

What's going on?

Then you, you, we take a look
at our cameras, sure enough,

you see the individuals messing
with our ATMs generally at like

two or three in the morning.

Um, so no one, no one's
necessarily is paying attention.

And so we've seen that.

But yeah, I've seen it.

I've heard of ATM jackpot jack
potting, but, uh, the skimming thing,

um, I've seen that that part, that
type of situation maybe should be

maybe diminishing just because of
the types of cards we're using today.

But those types of things happen
I think quite often to financial

institutions skimming and
possibly jack potting as well.

Treichel: What is ATM jack potting.

Miller: So they actually get
control of the, a TM using

a universal key or whatever.

And they install software to let them
just push a bunch of buttons and it just

spits out all the cash in the machine.

Oh my.

Farrar: So they're

Miller: actually getting into the
operating system of the ATM quite often

with Universal Keys, which means there's
probably somebody from inside the credit

union or somebody inside the, you know,
the bulk or the money transfer people.

Wells Fargo, the people that
pick up money and stuff.

Armored car services.

There we go.

They have Universal ATM keys.

Treichel: That's, that's just reminded me
of, it's like a, a different version of

stealing the key from the post postmaster
to, so you can go right, go to the corner

mailbox and then take all the checks.

And wash off wash off the ink
and rewrite 'em and all that.

Uh, yes, I hopefully,
hopefully have good tampering

Bauer: types of, of tools on your
ATMs that would, detect that someone's

messing around with your ATM and, you
know, get some kind of notification.

So

Treichel: Yep.

Miller: Add,

Treichel: add another layer

Miller: of cost

Treichel: to protect it.

Yep.

Miller: There's a lot of times
they'll hook a laptop or a palm like

raspberry to 'em and they'll put 'em
in like a supervisor mode or kind

of like almost your super user, like
you're, altering the software and

they literally take over the a TN.

That's wild.

That's wild.

Well, I said I didn't even know
it was an issue until we read this

risk report and I guess it's kind
of an ever-growing big issue big

enough that they spend a paragraph
talking about it in this risk report.

Good point.

Good point, Steve.

Treichel: Nothing to add.

Nothing to add.

He's very good.

Alright, so, um, B-S-A-L-M-A-A-L-M-A-M-L
compliance burdens are increasing is the