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McAfee Prepare for Blitzkrieg mass fraud campaign

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SANTA CLARA, Calif. (12/17/12)--While several big banks were fending off distributed denial of service attacks last week, security firm McAfee was warning financial institutions about a substantially higher risk--"Project Blitzkrieg," in which Russian cybercriminals would use  massive fake wire transfers to steal millions from 30 U.S. large financial institutions.

In a report released Thursday, McAfee said the mass cyberheist campaign could come before spring of 2013 and that the project is "a credible threat to the financial industry and appears to be moving forward as planned" (Christian Science Monitor and CNet Dec. 13).

The project was exposed in October when mastermind hacker "vorVzakone" (translated as "thief in law") posted notices in an underground criminal online forum seeking accomplices. The hacker posted pictures of his computer setup, screenshots of his malware, and a general description of the plan to organize an army of 100 "botmasters" to attack the banks, said the Christian Science Monitor.

The plot has progressed since it was first discovered in October by Bedford, Mass.-based RSA, the cybersecurity division of EMC, whose researchers wrote about it in a blog post. They said that thieves had been using their system since April, had transferred $5 million so far and had at the time infected up to 500 institutions.

"If the aims of Project Blitzkrieg, as vor Vzakone has claimed, become fully realized by Spring 2013, the financial industry needs to be fully prepared," said McAfee in Thursday's warning.

A key feature of the plot is to purchase computerized "phone flooding" equipment to prevent banks from calling or texting their customers to verify the wire transfer requests. The thieves, however, could call the bank and claim to approve the transfers.

However, instead of targeting thousands of people, the attackers may go after smaller, more select groups, McAfee predicted (The Huffington Post Dec. 13).  This would mean the attackers could transfer millions with fewer infections. The fewer infections, the less likely the thieves would be detected by defense networks, said Post.

Among the banks being targeted, the study indicated, were Fidelity, Charles Schwab, PayPal, Citibank, Wachovia, Wells Fargo, and Capital One.

Nearly half of Americans live paycheck to paycheck

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CHICAGO (12/17/12)--Nearly half of Americans surveyed--48%--say they are living paycheck to paycheck, while 44% indicate they are simply trying to stay current on bills or home payments and avoid excessive debt or bankruptcy, says a new survey from online lender NetCredit.

Credit unions can view that news as a warning that members living check to check could experience significant financial problems if something in their life changes. Warning signs can include any situation in which income is lost or sudden, unexpected bills. Many past bankruptcies have been attributed to lost income from a death, a divorce, loss of a job, or an increase in bills such as medical or legal bills.

Credit unions can also see the study as a marketing opportunity to make members aware of their savings programs and better rates, a financial counseling opportunity, or a chance to deliver financial education/money management information through a number of channels.

NetCredit collected some demographics, which could help credit unions know where to start. The population segments where concern about living paycheck to paycheck runs highest were:

  • Those in their 30s--62%;
  • Americans under the age of 60--54%;
  • Families with children--57%;
  • Families with five or more people in the household --64% vs. 45% for smaller households; and
  • Residents of southern states--53% vs.41% for those in the Northeast U.S.
"Living paycheck to paycheck puts many Americans dangerously close to their own personal fiscal cliff should they be hit with an emergency expense," said Stephanie Klein, who heads NetCredit's consumer lending. "An unexpected medical bill, car repair or higher than usual utility bill can easily push them beyond their ability to pay bills on time," she added.

The survey asked where the respondents would turn to if they needed money. Nearly 30% said they would turn to more than one of these options:

  • General savings, 61%;
  • Credit card, 23%;
  • Family/friends, 16%;
  • Separate rainy day fund, 15%;
  • Pawn or sell items--7%;
  • Bank loan--5%;
  • Short-term cash advances--4%; and
  • Installment loans--2%.
"But there might not be enough cash there to handle the crisis," said Klein. A recent study by the Federal Deposit Insurance Corp. indicates that nearly half of Americans cannot access $2,000 in 30 days to meet an emergency, she said, noting that consumers need more flexible options to get cash, especially during emergencies.

TNS Omnibus conducted the online survey in September with a nationally representative sample of 1,000 Americans age 18 or older.

Another man sentenced in St Paul Croatian FCU fraud

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CLEVELAND (12/17/12)--Another man has been sentenced in the loan fraud ring that helped bring the collapse of St. Paul Croatian FCU, an Eastlake, Ohio--based credit union liquidated in 2010 in one of the nation's largest credit union failures.

Ted Vannelli, 66, of Willoughby, Ohio, was sentenced Thursday to five years of supervised release for his role in the fraud. He pleaded guilty in April to aiding and abetting and conspiracy ( Dec. 14). In exchange for his cooperation with authorities, the U.S. Attorney's Office dropped charges of bribery, financial institution fraud and false statements to a financial institution.

Vannelli, one of 19 people arrested in connection with the loan fraud ring,  is a business partner and father-in-law of A. Eddy Zai, a businessman who pleaded guilty Nov. 5 to bank fraud and who is scheduled to be sentenced on Feb. 5. They operated several business entities allegedly created as a haven for illegal proceeds from the credit union in the loan scams, said the court indictment.

The credit union's former CEO, Anthony Raguz was sentenced to 14 years in prison and ordered to pay $72 million in restitution for allegedly issuing more than 1,000 fraudulent loans, totaling more than $70 million, to about 300 accountholders, in return for about $1 million in bribes, kickbacks and gifts from the borrowers (News Now Nov. 27).

According to Vannelli's indictment, he and Zai gave about $5,000 to Raguz to approve false loan applications. It was also alleged that  Zai and Vannelli submitted false loan applications to Park View Federal Savings Bank, which lost $750,000 on its loans.

The National Credit Union Administration liquidated the credit union in early May 2010, saying it was insolvent. The collapse cost the National Credit Union Share Insurance Fund $170 million in losses, and NCUA has filed several lawsuits against individuals involved to recoup some of the losses.

Ohio CUs receive 825K worth of ad exposure

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COLUMBUS, Ohio (12/17/12)--Ohio credit unions received more than $825,000 in exposure from state media during the past year, according to the Ohio Credit Union League.

The league used software to track every print article or television news segment mentioning credit unions. Every article or segment is assigned an advertising value based on the positive impression left on viewers or readers, the number of likely readers or viewers and the item's placement (eLumination Dec. 12).

"This is a striking number, a testament to our continued work building stronger bonds with reporters," said Patrick Harris, league director of media and public relations."

Intuit New data democracy for the little guy

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MOUNTAIN VIEW, Calif. (12/17/12)--A new study from Intuit forecasts a future where consumers--including credit union members--are part of a "new data democracy" in which small business owners and consumers can access "big data" once available only to government and large corporations, helping the little guy make smarter, more informed decisions.

The challenge for credit unions in the future will be how to gather and present that data in a manner that adds value to members' lives.

"The New Data Democracy: How Big Data Will Revolutionize the Lives of Small Business and Consumers," was prepared by Emergent Research and is the latest in Intuit's 2020 research series.

"Big data have long been seen as a big opportunity for big business," said Brad Smith, Intuit president/CEO. "We actually think that the biggest opportunity is giving consumers and small businesses the power of data. We look forward to a new era where big data benefits the little guy."

The new report reveals three trends for consumers and small businesses, including:

  • The New Data Democracy--Data will become a new vital raw material for consumers and small businesses. As access to and the ability to refine a massive volume of information into powerful analytical tools grows, data will become a new type of resource, similar to capital and labor.
  • Data Empower Consumers--Data will help people navigate the maze of modern life. With people connected through the global grid and mobile devices, data will shape decisions both large and small, inform purchasing decisions, and create communities and relationships.
  • Data Drive Main Street Digital--Big data will move from Wall Street to Main Street. Small business will have access to insights and capabilities once only available to corporate giants. This will provide small business with opportunities to operate more efficiently, find new customers, improve their results and drive economic growth.
"We are at the onset of a data revolution that will provide new and meaningful ways for data-empowered consumers and small businesses to connect and engage with their communities, make decisions and simplify their lives," said Steve King, partner at Emergent Research, a research and consulting firm focused on the small business sector of the global economy.  

Data are the catalyst that powers innovative products to improve the lives of customers and help businesses grow, he said.

Griffiths returns as interim CEO at N J league

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HIGHTSTOWN, N.J. (12/17/12)--The New Jersey Credit Union League (NJCUL) has named former Iowa Credit Union League CEO Tom Griffiths to serve as interim CEO while the NJCUL board conducts a national search to find a permanent replacement for the departing Paul Gentile.

Griffiths served as the league's interim CEO for six months in 2007, prior to Gentile's hiring (Daily Exchange Dec. 14).

"Tom's long history of success and innovation as the Iowa CU League CEO gives us extreme confidence that he can keep us on the right path while the search is conducted," said NJCUL Chairman Lou Vetere.

Gentile will depart the league at the end of the year to join the Credit Union National Association as executive vice president.

NJCUL's Search Committee has also announced the hiring of O'Rourke & Associates as its search firm.

The league is on much firmer footing than it was five years ago during its last CEO search, Vetere said. Members have benefited from a number of aggressive advocacy efforts, such as the "Banking You Can Trust" consumer advocacy campaign, which is entering its fifth year. NJCUL also led a long grassroots campaign for the passage of municipal deposit legislation, which was signed into law by Gov. Chris Christie last year.

CU System briefs (12/14/2012)

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  • INDIANAPOLIS (12/17/12)--Dallas Bergl, CEO of the INOVA FCU, Elkhart, Ind., has received the 2012 Millie Cox Scholarship Award, announced the Indiana Credit Union Foundation. The award recognizes one individual each year for political involvement efforts that protect and further credit union interests.  Bergl has served on the Indiana Credit Union League's Governmental Affairs Committee and been a key participant in the league's Legislative Affairs Forum and the Credit Union National Association's Governmental Affairs Conference. He was a key contact for former U.S. Rep. Chris Chocola, serving on his finance committee and hosting fundraisers in this home for Chocola. Bergl also has worked with former State Rep. Jackie Walorski during two campaigns for the U.S. House seat, which made credit unions more visible. He organized a credit union fundraiser last spring. Walorski was elected in November. "It is every credit union CEO's responsibility to do all that they can to advocate for candidates that will carry the credit union torch for all of us," Bergl said. "It does not matter what side of the aisle they are on; what matters is ensuring that there is a viable financial alternative to big banks so that consumers do not get exploited," he added. The late Millie Cox was a former league vice president of governmental affairs …
  • COLUMBUS, Ohio (12/17/12)--
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    An annual "Money War" competition between University of Michigan CU and Credit Union of Ohio has benefitted two local children's hospitals. The war is a competition to see which credit union can raise the most funds for their local hospital during the week leading up to the Ohio State University and University of Michigan football game. This year's competition raised $4,400, a significant increase over the amount raised in 2011. C.S. Mott Children's Hospital in Ann Arbor will receive about $2,800, and the Nationwide Children's in Columbus will receive about $1,600, the amounts raised by each respective credit union.  Last year, Credit Union of Ohio, whose members include students, faculty and staff of Ohio State, was the winner and received a photo of University of Michigan Credit Union's staff dressed in Ohio State's  team colors, scarlet and gray, the opposing team's colors. This year, Credit Union of Ohio staff are dressed in Michigan's colors, and the credit union will return the roving war trophy to the Michigan group  Pictured are Credit Union of Ohio staff, from left: front row Jill Gerschutz, director of marketing; Greg Moss, vice president of information technology; Tonya Keaton, vice president of lending; and Bill Mascari, chief financial officer; back row Tammy Jones, chief operations officer; Rich Capuano, CEO, and Tami Peyton, vice president of human resources.  (Photo provided by the Credit Union of Ohio) …
  • BILOXI, Miss. (12/17/12)--A Louisiana couple wanted for the Dec. 6 robbery of the Diamondhead branch of Biloxi, Miss.-based Keesler FCU, were arrested Thursday morning in Bogalusa, La. Jessie Landry, 42, and Aleisha Dyaz Landry, 33, husband and wife from Picayune, were arrested at her mother's home in Bogalusa without incident. They are charged with possession of marijuana, possession of marijuana and receiving stolen property, and are awaiting extradition to Hancock County, Miss., where they face armed robbery charges (The Sun Herald Dec. 13) ...
  • LINCOLN, Neb. (12/17/12)--Billy Johnson, 25, of Omaha, Neb., was arrested in Phoenix and charged with robbing the Liberty First CU in Lincoln, Neb., last July (Associated Press Newswires and Lincoln Journal Star Dec. 14).  He has been returned to Lincoln to face the robbery charge. The robbery occurred on July 9 when a man entered the building and passed a note to a teller. He escaped with nearly $22,700.  Investigators found a fingerprint on the note and allegedly matched it to Johnson, said the court documents …

IN Y TimesI Hampel analyzes CUs mortgage explosion

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NEW YORK (12/17/12)--Credit unions have benefited from the home refinancing explosion and membership growth, said The New York Times  in an article Thursday that included an analysis by Credit Union National Association (CUNA) Chief Economist Bill Hampel and others.

For the first time in history, credit unions are on track to surpass $100 billion in mortgage loan originations, said the article, entitled "The Credit Union Alternative." It attributed the growth to home refinancings and credit unions' record growth in membership due to consumer disillusionment with big banks.

At the end of the third quarter, the credit union market share of mortgage originations totaled about $89 billion nationwide, a $7 billion increase from all of 2011,  Bob Dorsa, president of the American Credit Union Mortgage Association, Las Vegas, said. He told the Times much of the growth in mortgage business is concentrated among giant credit unions but added the industry is reaching out to younger generations who may overlook credit unions or consider them outdated.

Credit unions have aggressively gone after mortgage business, resulting in a 45% increase in first mortgage originations this year from 2011, CUC Mortgage Corp., which serves 220 credit unions, told the Times.

CUNA's Hampel noted that credit unions as portfolio lenders keep at least half of the new loans in their own investment portfolios. This allowed them to continue lending and build market share as the secondary market for mortgage loans collapsed during the housing crisis.

He said credit unions can offer slightly lower closing costs than banks and most retain their servicing or work with companies like CUC. As member-owned cooperatives, they have an incentive to be responsive to their members. "The people working at credit unions know that they'll keep their jobs if they keep their members happy," Hampel told the Times. "There are no divided loyalties."