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Risk Management

FINTRAC, Cash Custody, Cash Holding Limits, Fraud, Forgery & Counterfeiting

Main Objectives

Main Objectives

The Main Objectives of ACU’s Risk Management Policy and Procedures are to:

  • Protect staff and members
  • Safeguard member and credit union assets
  • Ensure the integrity of ACU operations including its systems and data
  • Protect employees from unnecessary temptations or suspicions
  • Ensure the preservation of privacy and confidentiality
  • Ensure timely recovery from problem situations

Risk Managment Defined

Risk Management Defined

Risk Management may be defined as a conscious attempt on behalf of the credit union management to identify, to measure and to control all exposures to loss which are created by the activities in which the credit union engages.

Risk Identification

Risk Identification

Involves recognizing the various exposures confronting ACU by simply determining what can happen to cause a loss.

Risk Measurement

Risk Measurement

The process of determining how often a loss may occur, as well as the probable effect a loss would have on the credit union.

Risk Control/Loss Prevention

Risk Control/Loss Prevention

This is a major focus of risk management. A safe environment with sound operating policies and procedures is critical to preventing or minimizing losses.

Enterprise Risk Management (ERM)

Enterprise Risk Management (ERM)

  • Being aware of the risks in our business and taking action to reduce risks to an acceptable level
  • Risk is continually being evaluated and managed within our organization
  • ERM aims to have a healthy level of risk:
  • Risk is what we leverage to make money (ex. a higher risk loan has higher interest rate to make the loan worth while)
  • Money is lost if risk isn’t proactively managed (ex. If we didn’t charge a higher interest rate on high risk loans we would end up losing money)

Manager of Risk Services, Senior/Executive VPs and the CEO comprise the Enterprise Risk Committee, and assign certain risks to others in the organization to oversee.

All levels and staff within Access CU play a role in ERM

Cash Custody and Holding Limits

Cash Custody and Holding Limits

  • MSR’s have the responsibility to account for ALL cash, stamps and cash related items in their possession.
  • They must have sole control over them.
  • Controls must be carried out on a consistent basis to reduce and prevent losses caused by carelessness, error, dishonesty or robbery.
  • Substantial losses are possible when MSR’s do not follow their cash holding limits in their cash drawers.
  • Each MSR is assigned a MAXIMUM amount of cash they can have in their drawer and this needs to be carefully followed all the time. All MSRs have a 25,000 limit with 7,500 max in their cash drawers at a time.

*Lock up your Teller Stamp, Cash Drawer, and your Computer when you leave your wicket*

FINTRAC

FINTRAC

The Financial Transactions and Reports Analysis Centre of Canada or FINTRAC is an independent agency, reporting to the Minister of Finance.

FINTRAC’s mandate is to facilitate the detection, prevention and deterrence of money laundering and terrorist activity financing, while ensuring the protection of personal information under its control.

Large Cash Transactions

Large Cash Transactions

FINTRAC tracks any cash transaction of $10,000 or more in 24 hour period whether it is from an individual or a business, made in branch, with the ATM or through the night depository.

A large cash transaction is any transaction of $10,000 or more, or two or more cash transactions that are done within a 24 hour period that are less than $10,000.00 each but total $10,000.00 or more. This is tracked using Verifin software.

Many criminal organizations may “payoff” or “extort” legitimate businesses to “clean” or “launder” their illegal funds by depositing it to the legitimate business.

KNOW YOUR MEMBER;

KNOW THE TRANSACTION

Suspicious Transactions

Suspicious Transactions

FINTRAC also tracks any financial transaction that is suspicious, whether it was completed or attempted and where there are reasonable grounds to suspect it is related to the commission of money laundering offences or of terrorist financing offences.

“Reasonable grounds to suspect” is determined by what is reasonable in your circumstances, including normal practices for that member or business. This is another reason why it is very important to “know your member”.

Try to look for “red flags” that the person conducting the transaction is giving off; if they are in a rush, if they ask questions about our internal policies regarding cash deposits, if they are unconcerned about fees; if they are not able to provide details or hesitate when asked for more information, etc.

*You are required to seek approval from your Branch Management before submitting a suspicious transaction report. *

We MUST Report

We MUST Report

FINTRAC may disclose cases of non-compliance to law enforcement when there is extensive non-compliance or little expectation of immediate or future compliance.

Here are some examples:

  • Failure to report suspicious transactions: up to $2 million and/or 5 years imprisonment.
  • Failure to report a large cash transaction or an electronic funds transfer: up to $500,000 for the first offence, $1 million for subsequent offences.
  • Failure to meet record keeping requirements: up to $500,000 and/or 5 years imprisonment.
  • Failure to provide assistance or provide information during compliance examination: up to $500,000 and/or 5 years imprisonment.
  • Disclosing the fact that a suspicious transaction report was made, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation: up to 2 years imprisonment.

Fraud, Forgery and Counterfeiting

Fraud, Forgery and Counterfeiting

Fraud is defined as an intentional deception to cause a person to give up property or a right.

Forgery is a crime of fraudulently making, counterfeiting or altering any written record.

Counterfeiting usually refers to the imitation of money, although it also refers to the imitation of any documentation or negotiable cheque, money order or bank draft. This also includes the production or reproduction of ID; including driver’s licences, birth certificates, passports, or any other identification.

Situations

Situations

  • Cashing cheques for non-members without proper ID and procedures followed.

  • Failure to hold funds on cheques deposited to a new account.

  • Impersonation of a member. Forging a member’s signature to withdraw cash or to cash a stolen cheque.

  • Kiting Cheques: taking advantage of the clearing time between different banks or CU’s.

  • Forged signatures on documents such as loans.

  • Cashing counterfeit items e.g.: trading counterfeit currency (money) for legitimate funds, duplicated primary orders/money orders or altered information on cheques (payee, dollar amount, dates, signatures).

There may be a time in your career where you will be presented with counterfeit money.

With the right training and experience you will be able to spot or “feel” counterfeit money.

If you have been presented with a counterfeit bill, take the following measures:

  • Do not return the bill to the presenter, even if they offer to exchange it with a genuine one.
  • Try to keep the person in the branch for as long as possible; or verify their true identity.
  • Let your supervisor know immediately, they will contact the police.
  • If it is a non-member, take a good look at the person who gave you the bill so you could give a description later if you needed to.
  • If the person leaves, try to get a license plate number if you are able to safely do so.
  • Never give the counterfeit bill to anyone but CUDG or the police and always request a receipt. If the bill turns out to be genuine, it will be returned to the credit union.
  • Never put counterfeit bills back into circulation. Anyone knowingly doing this is breaking the law

Security Features

Security Features

Feel. Look. Flip.

Feel, Look and Flip is a phrase that reminds you how to check security features on polymer notes. These notes have innovative security features that are easy to check and hard to counterfeit. All five denominations have the same security features.

There have been attempts to counterfeit these new bills.

https://www.youtube.com/watch?v=Mr1kk7cGbus&list=PL0F99C5ACBEE1346C – BOC Counterfeit cash and security features

Which is the fake?

How to Spot Counterfeit USD

Portrait – genuine portrait is lifelike, counterfeit is lifeless and flat

Federal Reserve and Treasury Seals – clear, distinct seals Counterfeit are uneven and blunt.

Border – clear, unbroken lines. Counterfeit may be blurred

Serial numbers – evenly spaced and printed in the same ink as treasury seal. Counterfeit may differ in color and shade, may not be evenly spaced

Paper – genuine currency paper has tiny red and blue fibers throughout. Counterfeit has lines printed on the surface, not embedded throughout

Kiting & Cheques

Cheque Kiting

Cheque kiting is a form of check fraud, involving taking advantage of the time it takes to clear a cheque to make use of non-existent funds in a chequing or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.

The term "cheque kiting" first came into use in the 1920s. It stemmed from a 19th-century practice of issuing IOUs and bonds with zero collateral. That practice became known as flying a kite, as there was nothing to support the loan besides air.

Indications of a potential cheque-kiting operation include the following:

(1) several accounts owned, or controlled, by the same individual,

(2) identifiable patterns of transactions, including deposits, transfers, and withdrawals between those accounts,

(3) deposits drawn on other institutions by the same holder of the accounts that the funds are being deposited to,

(4) frequent inquiries into account balances, collected items, and cleared items.

Cheque Kiting

Example:

Sally has chequing accounts at Access and RBC. Initially, she deposits $500 in her Access account and has $0 at RBC. She then writes a $10,000 cheque on her Access account to deposit at RBC. RBC immediately gives her credit on her account.

During the three business days it takes RBC to clear the cheque on her account at Access, Sally writes a $10,000 cheque on her account at RBC and deposits it into her account at Access to cover her first $10,000 cheque. Access immediately gives her credit on her account, and RBC clears Sally's first $10,000 cheque.

Sally continues writing bad cheques between her accounts. By doing so, she illegally obtains a $10,000 interest-free loan.

Cheques

There are several things to remember when negotiating a cheque:

  • Watch for dates,
  • Body and figure differences
  • Name of the payee matches the account holder who is presenting the cheque.

*These are ways that criminals will try and pass a bad cheque.*

If a cheque is presented payable to cash, from a legal standpoint it does not need to be endorsed (signed on the back of the cheque), but it is best to have it endorsed.

ACU wants you to get the item endorsed and account number recorded on the back of the cheque. If the item comes back NSF we can better determine who presented it and where to charge the item back to.

Common Fraud Schemes

Common Fraud Schemes

Emergency

A family member or friend has been hospitalized or stranded and needs you to send them money to help.

Mystery Shopper

You get a job evaluating a money transfer service. Fraudsters send a cheque to the member asking them to deposit and send them a portion of the cheque. The money is sent, fraudster gets the funds and when the cheque bounces the victim has to pay the full amount.

Relationship

Member believe they are engaged to or in a relationship with an individual living in another area. They mainly speak through internet chat or text messages

Common Fraud Schemes

Advanced Fee/Prepayment Scam

Asked to pay fees upfront for services which are never provided such as: credit card, grants, loans, inheritance or investments. Victims will send several transactions to cover upfront fees.

Internet Purchase

Member sends money to purchase an item online from Craigslist, eBay, Kijiji, etc. After the money is sent the member never gets their merchandise.

Overpayment Scam

Member is sent a cheque for something they are selling online. Typically the amount of the cheque exceeds the amount the member is asking for. The fraudster tells the member to send the exess amount back using money transfer. The cheque bounces and the member is out the money.

Red Flags in Member Conversation

  • "I won a prize! I just need to pay some fees before I get my winnings"
  • "My family member is stranded and I need to send money"
  • "A relative I didn't know about died and left me a fortune!"
  • Member is asked to transfer funds but doesn't know who the recipient is
  • "I need to send money now or I'll be arrested!"
  • Member says they got a new job evaluating services at different businesses or transferring funds
  • Any time the member has been told to not talk to others about their activity

If you suspect a scam

Ask clarifying questions applicable to the situation

For example: If a member is depositing a cheque from a business or out of province and does not usually get these, ask if they were selling something online or if they personally know the issuer of the cheque.

If the answers are cause of concern or the member asks why you're asking

Let the member know that you are concerned this may be a scam and that we want to protect them. Explain what is specifically concerning about the transaction request/situation. Having the member realize it is a scam is the best way to protect them.

If you suspect a scam

If you still feel fraud is involved and the member still believes it is legitimate tell your supervisor. They will most likely have a closed door conversation to gain more details about the situations.

If it is still feared the member is falling for a scam it may be appropriate to refuse certain services. For example: sending wires or giving them access to funds of an item we can't verify. A restriction should be placed on their profile explaining the concern so all staff are notified even if the member tries at another branch.

Resources:

https://www.westernunion.com/us/en/fraudawareness/fraud-types.html

https://www.fbi.gov/scams-and-safety/common-fraud-schemes

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