How You Can Prevent Fraud at Your Bank

With a Simple, Low Cost Tool

A Review of the Washington Mutual Case Study

How Peru Became the World's Counterfeit CapitalBy Lucien Chauvin / Lima

Company Background

• Founded in 2000• Pioneered Point Of Sale counterfeit fraud detection

in enterprise accounts• Company has transitioned into “fraud prevention”

specialist• Multiple layers of Fraud Prevention

– UltraViolet, Automated Currency Detection, Image Capture, Validation and Authentication

Counterfeit Fraud at the Bank Branch

Nearly Every Transaction Conducted in the Bank Branch Presents the Opportunity for Fraud to Occur•Accepting Negotiable Instruments (counterfeit, ID Fraud)

•Opening a New Account (ID Fraud)

•Granting Access to an Existing Account (ID Fraud)

•Application for Credit (ID Fraud)

•Other Bank Services– Wire Transfers (counterfeiting, ID fraud)

– Bill Payment (counterfeiting)

– Official Checks, etc. (Counterfeiting, ID Fraud)

Quantifying Counterfeit Fraud and Identity Theft Losses

• $400 million in counterfeit currency in the U.S. (2009 US Treasury) $182M confiscated by Secret Service in 2008

• $12.2 billion in losses due to check fraud(2008 American Bankers Association)

• $21 billion Identity Theft in 2011, 12.6 million victims Up 1 million victims from 2010

• $31 billion in US existing account fraud(2009 Javelin Strategy and Research)

• $221 billion worldwide per year due to identity theft (Aberdeen Group)

Javelin Strategy & Research Report

Identity Theft

In 2012 identity fraud incidents increased by more than one million victims and fraudsters stole more than $21 billion, the highest amount since 2009. The study found 12.6 million victims of identity fraud in the United States in the past year, which equates to 1 victim every 3 seconds.

Javelin Strategy & Research,

What Do Criminals Do with Stolen Identity?

• Launder Money– Wire Transfers

– Bank Checks (money orders and cashiers checks)

– Transfers between accounts

– “Loan Laundering”

BSA regulations designed to curb these activities

• Apply for Fraudulent Loans• Cash Stolen or Fake Checks• Account Hi-Jacking – accessing someone’s

account and draining the assets

Washington Mutual2007

• 2,239 retail branch offices operating in 15 states, • Pioneered casual “Occasio” branch designs –

kiosks instead of long teller counter• Targeted “lower-tier” customers with low credit

scores and other borrowing or banking issues– Became a leading issuer of “Sub-prime” mortgages and credit cards

• Forced into receivership by FDIC in 2008, assets assumed by J.P. Morgan-Chase (Now “Chase Bank”)

WAMUCase Study

• “Grass Roots” Movement– Branch Manager in O.C. started

the process

– Bought UV-16 Units with his own credit card

– Word spread around Southern California; eventually nearly 50 branches direct-purchased units

– Regional Loss Prevention Manager observed results

Ultra-Violet Detection in the Bank Branch

Ultra-Violet Detection in the Bank Branch

WAMUCase Study

• Initial Pilot Project– Early-Adaptor branch success impressed

management– Decision to pilot-test UV-16 in 70 branches in

Florida and California– 800 units shipped to “problem” branches - May

2005

WAMUCase Study

• Pilot Project Results– Within 90 days, WAMU project manager reported the

test had been “very successful”, with numerous stories:• One fraudulent HELOC loan prevented - $92,000

– Fake driver license detected in-branch

– Two perpetrators arrested in branch parking lot

• “Dozens” of fraudulent /stolen checks prevented

• Numerous incidences of counterfeit currency detected

Decision reached rapidly to expand roll-out to a wider cross section of branches

WAMUCase Study

• Expanded Implementation Project – 4 regional roll-outs with 200 branches in each region

were selected for observation. November 2005• Project control shifted to Seattle HQ, with C-Level support of

the operation

• 5,200 units shipped to roughly 800 branches within 3 months of pilot project completion

• Results to be observed for one year

WAMUExpanded Roll-Out Results

• Expanded Implementation Project – 11 months after roll-out of 5200 additional units, the

WAMU Strategic Sourcing Group provided the following results to us:

• Over $20,000,000 of fraud prevention savings were realized

• 5,200 units cost to implement less than $300,000

• ROI for the first 11 months almost 70-to-1

• Annualized ROI greater than 80-to-1

WAMUFinal Roll-Out

Within 6 months of completion of the Expanded Pilot Project, WAMU Strategic Sourcing prepared to make a purchase to equip all remaining branches.•On July 31, 2007, a purchase order for 21,800 additional UV detectors was received.

•In total over 29,000 UV detectors eventually installed in WAMU branch locations.

•$20M saved during first year of expanded roll-out more than paid for the entire deployment of 29,000 which cost approx $1.6M

Typical Washington Mutual Branch Equipment

• 10 UV detectors – divided between model POS15 and UV-16 units– POS15’s installed at kiosks– UV-16’s installed at desks and countertop

locations

• Average per-store cost of around $600, delivered

Summary

• Counterfeiting Activity across the Board is on the Rise– Losses from Counterfeit Fraud often more than 3 X the dollar loss due to

associated expenses

• Greatest Counterfeit Threat to Banks comes in the form of fake ID documents

• FraudFighter UV lights are:– Inexpensive, easy to use, easy to install, easy to train employees

• WAMU project showed that nationwide roll-out will produce break-even nearly immediately, and tremendous ROI over the life of the product

Thank you for your Time!

Any Questions?