24 MAY / JUNE 2021 IBA INSURANCE SOLUTIONS This article, from my friend Craig Collins of Intact Financial Services, addresses how HELOCs have become a major target for fraud. He offers some excellent advice on how to help your bank be better protected. Chuck Maggard President/CEO IBA Insurance Solutions cmaggard@inbankersins.com IBA Insurance Solutions is a Preferred Service Provider and subsidiary of the Indiana Bankers Association. If you’d like for IBA Insurance Solutions to review your bank’s insurance coverages, just give us a shout or shoot us an email. We’d be happy to take a look. Home equity lines of credit have increasingly become targets for fraud. Given their infrequent transaction activity, as well as the higher dollar amount available for withdrawal, HELOC accounts have had a significant increase in fraudulent activity over the past few months. It’s crucial for banks to implement the same internal controls for HELOC accounts that they have in place for other accounts. What Is Happening? Fraudsters are obtaining sensitive bank information, including routing information and HELOC account numbers. Some of this information comes from public mortgage filings. Many times the fraudsters are creating counterfeit checks with different accountholder names and addresses. The fraudulent checks often look very different than the real checks. Because these checks are drawn on HELOCs and not standard checking accounts, however, current policies and procedures of some banks aren’t enough. They don’t require manual review of HELOC checks, even if written for amounts that exceed the standard threshold amount, which would trigger banks’ manual review of checks drawn on standard checking accounts. How to Help Mitigate Risk To start, banks should have a manual review protocol HELOC Accounts A fraudster’s target for HELOC checks that are equal to or greater than a certain dollar threshold amount. Criminals are looking for banks that fail to carefully review HELOC checks, and then searching for additional HELOC accounts in the trade territory to target. Accounts with large lines of credit and low existing balances are currently being targeted. Areas to Modify/Increase Internal Controls • Create a signature card for HELOC accounts. • Allow necessary employees access to loan documents to confirm signatures. • Manually review HELOC checks over a certain dollar amount: - Review high-dollar checks to see if anything is out of the ordinary. It may look different than the actual check or have different accountholder information. - Compare checks received for processing to other checks drawn on the account, or checks issued on the account. - Look at where the check was deposited (the bank and its location). If it’s different from where the customer resides, flag it and take the proper precautions, including following up with the customer. Lastly, now is a great time to continue the education of your customers about the need for them to be vigilant in monitoring their HELOC accounts in the same manner as they do their other accounts. HB
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