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.