Business Continuity Management / Disaster Recovery

BP Aftermath: Fear of Fraud

Phishing Scheme is First Sign of Fraudsters Targeting Gulf Coast
BP Aftermath: Fear of Fraud
Financial institutions in states along the Gulf of Mexico are taking action to prepare for the long-term financial impact of the BP oil spill - including fraud attempts against customers.

One Alabama bank last week reported a phishing scheme that enticed customers to click fraudulent links, using BP relief and recovery funds as a guise. All of the Alabama association's banks have been warned of this scheme, according to Dan Bailey, chief executive of the Alabama Bankers Association. Banks also have been urged to keep close watch out for a new wave of counterfeit checks, though no reports have yet been made, Bailey says.

In Florida, the state's banking institutions are prepared to identify and fight the fraud attempts that typically prey upon disaster victims, says Susan Johnson, senior vice president of service operations for Florida's Suncoast Schools Federal Credit Union.

"That's pretty common during a disaster," Johnson says. "We always see an increase in fraud attempts that try to take advantage of a disaster situation."

Regulators Provide Relief

This latest disaster began April 20, when the Deepwater Horizon drill rig exploded, killing 11 people, rupturing a pipeline and initiating the unprecedented oil leak into the gulf coast waters.

Last week, both the Federal Deposit Insurance Corp. and the National Credit Union Administration released a joint statement encouraging institutions to consider steps to help borrowers affected by the spill. The agencies also formally categorized the spill as a disaster - one that would allow federal examiners to take unusual circumstances into consideration where supervisory response and safety are concerned.

Alabama's Bailey says the financial impact on commercial customers and consumers won't be fully realized for several months, and banks along the Gulf of Mexico could be dealing with the aftermath for the next two years.

"We have not seen a lot of foreclosures yet, but we know this is going to have devastating effects on some the businesses and people in this area," Bailey says. "Our banks have to be ready to step in."

In Alabama so far, deposits have actually increased because of relief checks provided to businesses and fishing enterprises crippled by the spill. These increases are what open the door for fraud, Bailey says.

"Even if the spill is capped and it's successful, we'll be dealing with cleanup for at least two to three months, and financially for the next year," Bailey says.

Braced for Impact

Suncoast Schools FCU, with $5.25 billion in assets and a base of 500,000 members along the west coast of Florida, has not seen any of its members directly impacted by the spill, Johnson says. Nevertheless, the credit union is taking measures to prepare for recovery and member assistance. Financial hardship and fraudulent schemes related to recovery efforts are the focus now.

Two years ago, during the unfolding of the economic recession, Suncoast launched a program and department that specifically address needs of members facing economic challenges. The department, called Member Solutions, is preparing for the loss of jobs that result from the spill.

"We learned a lot about business continuity and disaster planning during Hurricane Charlie" in 2004, Johnson says. "During Charlie, we quickly developed some loan programs to help our members who were impacted that year, and that was a good stepping stone for this department."

Sid Seymour, chief examiner for the Office of Financial Institutions for Louisiana, says business continuity along the Gulf of Mexico has not been impacted. Incidence response plans have not been hindered by massive power outages.

"I think our institutions here in Louisiana are far ahead of all industries," Seymour says. "Unfortunately, it did take a [Hurricane] Katrina to push us in this direction."

Tourism is down, and Bailey estimates occupancy along the coast has been cut in half. "After Katrina, it took several years to build the tourism back up, and it will be the same here," he says.

About the Author

Tracy Kitten

Tracy Kitten

Former Director of Global Events Content and Executive Editor, BankInfoSecurity & CUInfoSecurity

Kitten was director of global events content and an executive editor at ISMG. A veteran journalist with more than 20 years of experience, she covered the financial sector for over 10 years. Before joining Information Security Media Group in 2010, she covered the financial self-service industry as the senior editor of ATMmarketplace, part of Networld Media. Kitten has been a regular speaker at domestic and international conferences, and was the keynote at ATMIA's U.S. and Canadian conferences in 2009. She has been quoted by, ABC News, and MSN Money.

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