Independent Banker - October 2017 - 76

Nuts & Bolts
big problem for smaller ones, " says
Shirley Inscoe, senior analyst for Aite
Group. " Much of this fraud is fueled
by identity theft and the use of synthetic
identities. "
But why now, and why still? Inscoe
says many banking executives " attribute
much of the uptick to the rollout
of [more secure] EMV cards in this
country. Fraudsters are looking to
replace $4 billion in counterfeit card
losses, and application fraud is one
way they will do so. " Checking and
Gary Wagers, executive vice
president, retail products and
services at $10 billion-asset Banner
Bank of Walla Walla, Wash., says he
has seen an increase in fraud rings
convincing outside individuals to
open new accounts on behalf of
the fraudsters. The fraudsters then
manage those accounts and use the
accounts for further schemes and to
obtain information about legitimate
customers' accounts. These schemes
involve using a real person whom the
" Every day there's
a new version of
identity theft coming
from a different
angle. As all these
new processes come
through, banks are
not as proactive as
they are reactive. "
-PAUL SCHAUS, CCG CATALYST
CONSULTING GROUP
deposit accounts, credit cards and
other loans are all targets for application
fraud, she says.
Fake accounts
Account takeovers are also on the
rise. Here, fraudsters impersonate
bank customers and often use social
engineering methods in contact
centers to gain access to a customer's
account. Impersonating customers
is another form of identity theft, and
if the fraudster is successful, he may
drain the accounts, Inscoe explains.
Opening fake accounts using stolen
information or made-up identities
more than doubled between 2014 and
2015-from 700,000 cases to more
than 1.5 million, according to Javelin
Strategy & Research.
fraudster has manipulated regarding
the account-opening process.
" The bottom line is that this works, "
Wagers says. " They find a weakness
in the banking system and they will
exploit it until we fill it. "
Banner Bank has reduced fraud's
impact by finding patterns among
the fraudulent accounts. It found
many address changes were being
made from West Coast to East Coast
addresses, particularly to locales
in Georgia. Bank employees were
alerted to look out for this and other
telltale signs of potential fraud, and
also began doing more aggressive
screening on address changes.
" The combination of these
efforts has made a significant difference
for us, " Wagers says.
76 ICBA IndependentBanker October 2017
Galen Gough, IT director for
$350 million-asset Jonah Bank of
Wyoming, agrees that " identity theft
has definitely gotten worse over the
last two years, as the sheer volume
of data being stored online has
increased. " A determined attacker
can find almost all the information
needed to commit identity theft from
online resources, and the technical
skill needed to commit identity theft
is decreasing as black-market data
stores continue to sell " portfolios "
of individuals. The raft of big data
breaches makes it even more difficult
for customers to keep personal information
private, Gough adds.
By mid-2017, breaches are
nearly 30 percent higher than
2016, according to the 2017
CyberScout ITRC Breach Report,
cited by Adam K. Levin, chairman
and founder of CyberScout
(formerly IDT911) and cofounder
of Credit.com. " The [thieves'] purpose
is to monetize the information, "
he says. And, by using this breachstolen
data to commit identity fraud,
they can.
While community banks and their
customers may be smaller targets
in comparison to their larger rivals,
they are still targets, according to
Paul Schaus, president and CEO of
CCG Catalyst Consulting Group.
" Every day there's a new version of
identity theft coming from a different
angle, " Schaus says. " As all these new
processes come through, banks are
not as proactive as they are reactive.
And community banks are relying on
solutions that they don't control. "
Whereas big banks may operate
their own information security and
fraud systems and processes entirely
in-house, smaller banks typically
outsource much of these functions to
outside vendors, he explains.
" Community banks may face
a little higher risk, because their
solutions are lagging, " Schaus says.
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Independent Banker - October 2017

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