Trusted News for Credit Union Leaders
Credit Union Times
AUGUS T 15, 2018 | VOL. 29 | NO. 28 | CUTIMES.COM
FOCUSREPORT:
FRAUD
Must Reads
CYBERSECURITY
Cyber Insurance Is Changing
With its July 2017 ruling in Medidata Solutions v. Federal Insurance, the U.S. District Court
for the Southern District of New
York became the first federal
court to rule that losses due to
phishing scams were covered
under a cyber insurance computer fraud policy.
The Medidata ruling stood
apart from other rulings on similar cases in district courts in the
Fifth, Sixth and Ninth circuits.
In those cases, courts found
that such policies did not cover situations where employees
are tricked by cybercriminals
into transferring funds to false
accounts.
Travelers Contended Loss
Didn’t Fall Under Computer
Fraud Policy
Since then, however, the Sixth
Circuit has reserved course. This
July, the U.S. Court of Appeals
for the Sixth Circuit overturned
a lower court ruling in American Tooling Center v. Travelers
Casualty & Surety that exempted
phishing scam losses from coverage. The ruling by the appeals
court will likely impact how cyber insurance policies are crafted in the future, and underscores
how the nascent cyber insurance
industry is still finding its footing
in the market.
The overturned case was first
brought by tool and dye manufacturer American Tooling Center, Inc. in U.S. District Court for
the Eastern District of Y15
CUs Swelter
in Summer
of Scams
FRAUD
TINA OREM
torem@cutimes.com
arlier this summer, a
woman wearing scrubs
walked into a branch of
Railway Credit Union
in Mandan, N.D. It wasn’t her first
time there – the day before, she’d
opened an account at the credit
union, which has $109 million in
assets and about 7,300 members.
Now she wanted to cash a payroll
check from a health care company
with a Bismarck, N.D., address.
But an eagle-eyed credit union
employee got suspicious about
the timing of the transaction and
decided to verify the funds with
the issuing bank. Bingo: The check
wasn’t from a valid account. And
the supposed employer’s address
didn’t check out either.
It wasn’t the first time someone had tried to cash a fake payroll check at a credit union, said
Katie Dressler, who
is chief officer of
member engagement at the Credit
Union Association of the Dakotas, which sent out
an alert about the
scam in June. In
fact, there was a
second attempt soon after. But the
timing was notable, she said – another example of the fake-check
rings, phishing enterprises, Y18
Dressler
Teaming With
Fintechs
Ensure your
partnership checks
all the boxes. Y12
Fighting
Fallback
Fraud
Implement a
secure EMV
strategy. Y8
Credit unions continuously seek the
best possible solution to shield their
members’ data from cybercriminals.
For one credit union, that turned out
to be a set of Visa payment card
enhancements that allow members
to take control of fraud mitigation
themselves. Learn more in this
Focus Report. Y6
COMPLIANCE
Math Gets Tough for Loan Losses
he nation’s accounting board recently gave
credit unions another
year to meet a tougher
standard for accounting for loan
losses, and credit unions will need
every second.
Trade groups have regularly
complained about more detailed
reporting required by regula-
tors, but extra data will be gold
for credit unions trying to meet
the demands of the Financial Ac-
counting Standards Board.
This isn’t a case of meddlesome government bureaucrats or
overreaching lawmakers; it’s just
business.
FASB is a private, not-for-profit
group whose mission is to set and
improve the Generally Accepted
Accounting Principles used by
businesses. Regulators, including
the NCUA, defer to its standards
for regulatory benchmarks.
The U.S. standard for estimating
credit losses was revised in June
2016 from one that used losses
from the previous 12 months to
estimate losses for the next 12
months. The new standard for
Current Expected Credit Loss
would reflect all losses that were
likely to occur during the lifetime
of the loan based on loan history,
current conditions, and “
reasonable and supportable” forecasts.
In July, FASB clarified its calendar, stating credit unions
JIM DUPLESSIS
jduplessis@cutimes.com
Y16