Page 18 - Contact Q1 2016 - final

Credit Union Time Capsule
Card fraud emanating from Eastern Europe is depleting the
accounts of unsuspecting credit union members in the
United States.
Sound familiar? It should—it’s a problem today and it was a
problem 20 years ago when it was the cover story for the
Winter 1996 edition of Contact.
In this issue’s Credit Union Time Capsule, we offer a brief Q&A
with card professionals on how things have changed in the last
two decades and why the problem doesn’t seem to be going away.
What’s the biggest difference between card fraud today
and 20 years ago?
Robert Jarosinski, Senior Consultant–Risk Management at
CUNA Mutual Group: The difference today is that technology
has made it easier for fraudsters to siphon off funds and to
perpetrate fraud. The technology and access to the technology
has moved things along. Twenty years ago you had to be a
programmer; there were fewer people who had that skillset, and
now that skillset has proliferated throughout the marketplace,
not only in business but in criminal activity as well.
John Best, CUNA Payments Consultant and CEO of Best
Innovation Group: Twenty years ago the biggest thing in card
fraud was people figuring out how to duplicate cards. It was
just so unheard of—it seemed unachievable from a technology
standpoint and now the technology has progressed to a point
where making a magnetic stripe is trivial.
Is most card fraud still emanating from Eastern Europe
or has the geographic center of fraud changed?
Jarosinski: It’s hard to pinpoint the true source of it because
there are a lot of parties involved. What seems to be true is that stories for possible inclusion in future issues, please email
Eastern Europe has really become an incubator for this activity.
18 First Quarter 2016 I Contact
Fraudsters in Eastern Europe perpetrate and infiltrate directly, and
through cybercrime try to siphon money from large organizations
or mine it indirectly and sell that information to others.
Best: It’s become more global. Now, it’s not just about getting
money to get money—it’s about funding geopolitical causes
like terrorism and drug operations. The Russians figured out
how and then organized crime realized there was money in it.
Today, we see it out of South America, some Asian countries
and Middle Eastern locations. It’s much more around funding
geopolitical interests rather than just taking cash.
How can credit unions protect themselves?
Jarosinski: With card-present fraud, EMV was built to try to
mitigate some of that risk. There are still some loopholes
because it’s a liability shift and not a mandate. Protecting
yourself means really being proactive when managing fraud.
If you’re watching fraud come in, work to address it. Don’t let
it build up. Then you have to deal with an even larger issue.
It’s about creating engagement with your membership,
because they’re the ones identifying fraud on their statements.
For example, on the card-not-present side, credit unions need
to be validating that three-digit number on the back of the
card. A lot of credit unions still have that feature turned off
and aren’t checking for it, and by not checking for it, they
have to eat the cost of the fraud.
Best: Tokenization is the number one thing you can do.
You’ve got to implement a mobile payments strategy.
The Credit Union Time Capsule is a regular feature of Contact,
offering glimpses into the history of Michigan’s credit unions with
vintage photos of people, places and events. To submit photos and
Aaron.Passman@mcul.org.