NCUA consistently urges all federally insured credit unions to perform routine reviews of their disaster preparedness and response plans. During times of emergency, credit unions need to have heightened awareness of related fraud schemes and scenarios.
Disaster recovery plans help credit unions minimize service interruptions and maintain member confidence. They also should address the increased potential for fraud.
The National Center for Disaster Fraud (NCDF) identified fraudulent activity red flags to inform financial institutions. The Department of Justice established NCDF to investigate, prosecute, and deter fraud in the wake of any natural or man-made disaster.
More than 30 federal, state, and local agencies participate in NCDF, which acts as a centralized clearinghouse of information related to all types of disaster relief fraud. The Financial Crimes Enforcement Network (FinCEN) highlighted NCDF’s red flags in a 2017 advisory (FIN-2017-A007).
Common schemes that arise include benefits fraud, charities fraud, and cyber-related fraud. Credit unions should consider the following fraud indicators as they fine-tune their preparedness and response plans for the 2018 hurricane season—June 1 to Nov. 30—and beyond.
Benefits fraud occurs when individuals apply for emergency assistance for which they are not entitled. These individuals use financial institutions as a conduit for fraudulent transactions, such as depositing or obtaining cash derived from emergency assistance payments.
Fraudsters typically use wire transfers to request withdrawals, wire funds to accounts, and immediately withdraw the funds.
Red flags include:
►Deposits or electronic fund transfers of multiple emergency assistance payments (e.g., Red Cross, Federal Emergency Management Agency) being made into the same account. Dollar amounts are similar or identical.
►Cashing of multiple emergency assistance checks by the same individual.
►Deposits of one or more emergency assistance checks, when the accountholder is a retail business and the payee/endorser is an individual other than the accountholder.
►Opening of a new account with an emergency assistance check, where the name of the potential accountholder is different from the check depositor.
Charities are a vehicle for donations to assist victims of man-made and natural disasters. Criminals, however, use bogus charities to exploit the public’s generosity for their own gain. Both legitimate and fraudulent charity solicitations can originate from emails, social media, websites, phone calls, mailings, and more.
Disaster-related charities fraud may occur when a credit union notices that a payee organization’s name is similar to—but not exactly the same as—those of reputable charities. It also may recognize the atypical use of money transfer services for charitable collections. Legitimate charities don’t solicit donations via this channel.
The following tips may help credit union officials, employees, and members avoid bogus charities:
►Don’t respond to any unsolicited incoming or spam emails or click links in those messages because they may contain computer viruses.
►Be wary of individuals asking for donations via email or social networking sites.
►Beware of organizations with names similar to but not exactly the same as those of reputable charities.
►Rather than follow a link to a website, verify the legitimacy of a nonprofit organization before providing any payment information.
►Be cautious of emails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
►Don’t rely on others to make the donation on your behalf. This ensures contributions are received and used for intended purposes.
►Donate directly to the charity.