E-Signatures Increase Fraud Risk
The risk of fraud has elevated over the last year with credit unions’ increased use of electronic signatures. More credit unions are using e-signatures for consumer loans now—although this is a convenient new service for members, it requires a new level of risk management.
The primary risk exposure in remote loan events that include e-signatures is the ability (or inability) to authenticate a signer’s identity. It’s now easier for criminals to secure loans when they no longer need to present identification in person. An electronic signature isn’t witnessed or notarized, and credit unions don’t see a wet-ink signature to compare with a previous signature.
The fastest growing loss area under CUNA Mutual’s Fidelity Bond coverage is remote transaction fraud, which includes unauthorized access to online banking.
How can you address this risk? Consider these steps:
Electronically signed documents can significantly streamline the lending process, in part because e-signatures can be validated more quickly than a signed paper document. Just be sure to manage the additional risk with secure procedures and up-to-date insurance.
What Is an Electronic Signature?
Vendors use digital signatures in different ways, which adds to the complexity. For example, some vendors issue individual digital certificates to each signer of a document, while other vendors use a common digital certificate to protect the document at the server level.
More credit unions are moving to emerging technologies, such as electronic signatures, because it improves their operations and member service. Unfortunately, technologies such as electronic signatures bring their own unique risks for credit unions to address.
Roger Nettie is a staff underwriting specialist for CUNA Mutual Group’s Fidelity Bond program. Reprinted with permission from the Texas Credit Union League (www.tcul.coop).
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