Gary Eaton brings knowledge, experience and skills derived from over two-decades in the RCMP and 17-years investigating and preventing financial crimes (fraud and money laundering) in the credit union system to his new role as Central 1’s Director, Risk Solutions Consulting. We sat down with him to discuss the implications of Canada’s Payments Modernization initiative on fraud and how Central 1 is working to alleviate fraud risk in a world of faster payments.

Fraud is currently top of mind at Central 1 as Canadian financial institutions (FIs) prepare for real-time payments and the Government of Canada issues warnings about fraudsters attempting to capitalize on pandemic-induced uncertainty by exploiting victims through fraud and cybercrime.

Amidst this backdrop, Gary is working to bolster Central 1’s existing Fraud Solutions team and fraud management capabilities by implementing  a robust technology-based fraud monitoring, detection and prevention solution. This fraud solution will support the broader credit union system while simultaneously providing individual credit unions flexibility in managing their fraud risks.

“We will shortly identify a solution that meets the unique needs of our members and clients at a reasonable price. We want their customers to feel confident in using these modern payments, knowing that a best-in-class fraud solution is being protecting them.” Gary comments.

His extensive experience of implementing fraud solutions and knowledge of how fraudsters target the credit union system are skills particularly in demand as Central 1 works to continue its two-decade tradition of safely and soundly moving money for the credit union system while modernizing its payments infrastructure.

A former RCMP officer, Gary spent 25 years on the force, culminating in the investigation of major money laundering investigations. After retirement, he began a corporate security role with Coast Capital Savings, where he was promoted to Director of Corporate Security and Compliance. In this position his responsibilities included being the Chief Anti-Money Laundering Compliance Officer (CAMLO) and Privacy Officer. In 2010-11 he was responsible for implementing a best-in-class fraud prevention program to protect the credit union against what were then current and emerging fraud threats such as debit skimming,  cheque fraud, and Interac e-Transfer fraud.

“Fraudsters are smart, innovative and always adapting their strategies to take advantage of vulnerabilities,: said Gary, adding: “The COVID-19 pandemic has produced an upswing in digital payments and online banking which has increased exposures for customers to different types of cyber fraud vulnerabilities such as phishing emails and various other ways to encourage you to share your banking credentials.”

“Canada’s Payments Modernization initiative is focused on faster payments,” said Gary. Referring to new e-Transfer functionality coming from Interac which will allow instant payments with a much larger dollar amount, Gary comments: “That significantly increases the fraud risk because the current window between sending and receiving Interac e-Transfers – which allows more time to identify potential fraud – will be greatly reduced in the faster payments environment.”

Canada’s new real-time payments system (the Real-Time Rail) will provide 24/7/365 payments that are final and irrevocable. At launch the system will feature account number-based routing and ISO 20022 messaging to support data-rich payments. “This will likely lead to other payments products and services in the marketplace which will provide instantaneous transactions over the internet, thereby creating additional risk,” Gary continues.

Having worked on major RCMP domestic and international money laundering investigations, and from his knowledge fighting fraud, Gary is familiar with mule networks whereby people involved in an organized crime network set up accounts for the express purpose of moving the proceeds of crime through the network in order to obscure their source, extract funds and make recovery by FIs nearly impossible. He points out that COVID-19 has also resulted in an increase in fraud against the Government of Canada, whereby fraudsters claimed the Canada Emergency Response Benefit (CERB). “In these instances, fraudsters set up FI accounts using a false identity and once the CERB payment comes from the Government of Canada, the fraudster will send it to another FI where they’ve set up another account using a false identity, therefore the Government doesn’t know who to go after,” said Gary. He adds: “In that case, the Government of Canada may attempt to recover the funds, but usually the money is gone quickly.” This type of activity will become more prevalent in a world of faster payments, as experienced by the U.K. which has already modernized its payments systems (discussed in this FICO report.)

“My time with Coast Capital Savings furnished me with a deep understanding of the credit union system and the challenges credit unions and smaller FIs face regarding financial crimes (fraud and money laundering) particularly the small to mid-size credit unions which may have a lack of resources and/or expertise to deal with these challenges,” said Gary, adding: “I intend to utilize my prior experience to help provide an enterprise fraud service to the credit union system to help support credit unions as they travel along Canada’s payments modernization journey.”

To discuss current Fraud and Anti-Money Laundering solutions and potential future offerings, feel free to contact Gary.

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