Using technology to comply with regulatory requirements also can improve production in other areas of banking, as Frontier Bank (LaGrange, Ga.; $350 million in assets) has discovered. In addition to the fraud prevention benefits the bank gained with the implementation of an identity verification tool from eFunds (Scottsdale, Ariz.), Frontier has also improved customer service with the new solution.
In order to comply with the October 2003 deadline of the USA PATRIOT Act, the bank set out in May of 2003 to acquire an identity verification tool, according to Maria Roush, vice president, branch administration and compliance, Frontier Bank. "We had to have procedures in place to verify the identity of new customers," she says.
After vetting a number of vendor products, Frontier selected eFunds' Chexsystems offering, a suite of fraud prevention and risk management tools. The bank implemented the software in September, just ahead of the regulatory deadline. Because the application is Web-based, Frontier did not have to buy any new hardware or software to support it.
The bank was already familiar with Chexsystems' technology. Prior to installing the eFunds' product, Frontier had used an earlier version of the identity verification application, made by Penley. When eFunds acquired Penley, it incorporated the product into its Chexsystems solution. The previous version, however, required employees to run ID checks via telephone. Now, the identity manager is incorporated into the entire account processing system and is integrated with other tools, such as AccountChex, an account-opening service; FraudFinder, which determines the validity of customer data; and QualiFile, which is used to improve cross selling opportunities.
The Fraud-Prevention Forefront
The Chexsystems solution is linked to the Office of Foreign Assets Control's (OFAC) list of people who pose a potential threat, Roush says. Prospective customers' information is cross referenced against more than 20 billion aggregated data records, and the solution flags possible fraudulent information, such as an incorrect address or misspelled name. "It shows if there is a discrepancy and where the discrepancy is," Roush explains.
The tool's efficiency has allowed Frontier Bank to comply with the USA PATRIOT Act and prevent fraud, without detracting from customer satisfaction, according to Roush. "It has made compliance with that regulation so much easier that it doesn't overburden the new accounts people," she says.
In fact, Roush notes, the Chexsystems solution has actually improved Frontier's account-opening process. The time required to open an account has been reduced, she says, which has increased customer satisfaction.
Roush relates that small-town customers are used to dealing with the same banker for all of their needs, from opening new accounts to securing loans. Since they have a prior, often long-standing relationship with the banker, customers are puzzled by the need for identity checks, and they aren't accustomed to waiting for background checks. Because the Chexsystems solution processes new accounts quickly, however, customers are having an easier time adjusting to the new regulatory requirements, Roush says. "This system made it easier for individuals to accept the change."
Institution: Frontier Bank (LaGrange, Ga.).
Assets: $350 million.
Business Challenge: Comply with USA PATRIOT ACT identity verification requirements.
Solution: Chexsystems suite of fraud prevention and risk management tools from eFunds (Scottsdale, Ariz.).