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How You Can Prevent Fraud at Your Bank With a Simple, Low Cost Tool A Review of the

How You Can Prevent Fraud at Your Bank With a Simple, Low Cost Tool A Review of the Washington Mutual Case Study . Counterfeit Currency Activity increases 160%. Financial institutions absorb $5 billion to $11 billion in total fraud losses associated with resolving unauthorized

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How You Can Prevent Fraud at Your Bank With a Simple, Low Cost Tool A Review of the

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  1. How You Can Prevent Fraud at Your Bank With a Simple, Low Cost Tool A Review of the Washington Mutual Case Study

  2. Counterfeit Currency Activity increases 160% Financial institutions absorb $5 billion to $11 billion in total fraud losses associated with resolving unauthorized retail transactions For every $1 of fraud, merchants on average are paying more than $3. How Peru Became the World's Counterfeit Capital By Lucien Chauvin / Lima Number of Victims Rises to 380 in Gas Station Fraud Los Angeles Times Police have identified 380 victims of credit or debit card fraud at a Sierra Madre gas station with losses exceeding $109,000, Police Chief Marilyn Diaz said Monday.

  3. 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

  4. 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)

  5. 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)

  6. 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,

  7. 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

  8. 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”)

  9. 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

  10. Ultra-Violet Detection in the Bank Branch

  11. Ultra-Violet Detection in the Bank Branch

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. Thank you for your Time! Any Questions?

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