Fraud prevention in the credit union movement requires compliance professionals to put on their detective hats. And few are better at sniffing out suspicious activity than Neil Kumar.
“Technology has brought some big changes to the industry,” says Kumar, assistant vice president of compliance for Alloya Corporate Federal Credit Union in Naperville, Ill. “Sure, payments are faster and available online or on a phone, but that also means more vulnerabilities.
“We routinely examine all of our processes,” he adds, “trying to see how someone would beat them. Then we try to fix those issues.”
Kumar is responsible for Bank Secrecy Act and antimoney laundering compliance monitoring, which includes reviewing wire transfers and identifying potential suspicious activity where the remitter might be a potential victim.
While Kumar says his department has been able to prevent fraud growth, criminals are getting smarter too, and it’s his job to stay a step ahead.
Kumar says that challenge is more difficult in the corporate credit union space, which lacks the member-to-credit union interaction that often serves as the first line of defense against money laundering and other criminal activity.
“The best chance of stopping fraud happens at the teller desks. Credit unions know their members and the habits of their members, so they should see when something out of the ordinary is going on,” Kumar says. “The best way to stop fraud is by asking questions.”
He’s been good at this, preventing losses of $241,800 in 2016 while recovering potential losses of $415,625 for Alloya Corporate Federal’s members.
In one instance, Kumar noticed that an 83-year-old from Illinois sent $27,300 to three individuals in New York and Florida, spread across four wire transfers. A call to the credit union led the remitting individual to say the funds were for investments. A follow-up call led the remitter to state the funds were going to Jamaica for work on a vacation property.
Kumar smelled a rat and added all involved parties to a watch list. Eventually, Alloya Corporate Federal canceled a subsequent wire for $20,000 from the same member. Ultimately, the remitter told the credit union the truth: He was told he won the lottery in a scam.
Kumar worked with his counterparts to recover $18,200 and prevented $20,000 in fraud, leading to a much smaller loss.