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The business of security.

WITH ALL THE TALK ABOUT security being a drain on the bottom line or, perhaps more accurately, not a revenue producer, Citicorp Global Payment Products Security and Investigative Services Department defies the stereotype. The department is leading the way in helping to change how top management perceives security.

Through some very creative uses of the talents of its 33-member security department, security at Citicorp Global Payment Products is run more like a business than like a typical security department. In fact, to hear Greg LaVann talk, one might easily mistake him to be the organization's marketing director rather than the senior security director.

To understand how the department is run like a business, one must first understand what the organization does.

Citicorp Global Payment Products is a unit of Citibank, N.A., the New York banking giant, that processes traveler's checks, money orders, official checks, and other instruments issued by the Citicorp financial organization. Citicorp Global Payment Products and the bank have their own, separate security departments.

However, the Citicorp Global Payments Products Security and Investigative Services Department is headquartered in Tampa, FL, and operates independently from its bank counterpart. Best described, the department is the investigative arm for possible fraud and theft involving these paper-based monetary products. It handles both domestic and international, cross-border investigations.

The 33-member staff, located in eight countries around the world, is a blend of individuals from various law enforcement backgrounds-including the Royal Hong Kong Police, the Belgium Police, Scotland Yard, the New York City Police Department, and the Drug Enforcement Agency.

LaVann estimates that among the staff, the department is fluent in at least eight or nine languages, possibly more. The Tampa office, where LaVann is based, is the largest. It is responsible for investigations in North America and Latin America. The London office handles Europe, the Middle East, and Africa, while the Hong Kong office is responsible for Asia Pacific.

Prior to 1986, the department focused mainly on the paper-based products it delivered to the marketplace for Citicorp. But in 1986 things changed.

Explains LaVann: "We found ourselves in a very good position of having some, for want of a better word, excess capacity. So we began to set our sights on other products."

The department's first endeavor was to seek out one of the major Citicorp entities. "Being the biggest international security provider for Citicorp, we sat down with Diner's Club International in 1986 and negotiated a contract where we would provide assistance in security matters. If a franchise didn't have security," says LaVann, we would provide it. If it had security but was lacking the global reach, we would supply that."

Diner's Club is a franchise organization similar to McDonald's, explains LaVann. Some franchises are owned by Citicorp, some are partially owned, and others are privately owned by individuals or corporations.

The Diner's Club operation proved to be such a success that the security department began looking at other ways to assist its parent company. At the time, Citicorp was expanding its Visa credit card operations into Europe and Asia. LaVann and his staff seized the opportunity to help out on the security end. And as was the case with Diner's Club, the Visa operation was a success.

LaVann decided that since these ventures proved so successful, why not expand and offer similar assistance to other businesses? The security department now does traveler's check investigations for two of Japan's 10 largest banks.

About a year and a half ago, the department marketed its services to the mortgage business, which LaVann knew was experiencing high fraud losses. He and his staff are now involved in mortgage fraud investigations.

"We're building the business slowly," says LaVann, "with the entree being to become not only a provider to savings to the bottom line but also a revenue generator. This is really our first year out of the box trying to promote our security services around the world."

Life hasn't always been so rosy for the security department, however. When he first joined the bank in 1964, LaVann says security was looked on as "a thing you sort of had to have." He recalls that in the late 60s and early 70s people in the banking industry wanted as little publicity as possible. "They didn't want the notoriety of airing their dirty laundry in the street."

But with the growth of financial products around the world, especially credit cards and traveler's checks, fraud became more prevalent, and LaVann says people in the banking industry realized something had to be done.

Today, security at Citicorp Global Payment Products holds a position in the organization that many others in security only dream of. "We're intertwined in every aspect of the business from production to distribution," LaVann explains. "The new-products individuals in sales and marketing work closely with us in developing new products.

"If the sales people want to open up a new market in Africa, for example, they come to us and ask what we think about shipping to what could be a potentially high-risk area. It is very rare," says LaVann, "that they say, I don't care what security says. We're going to do it our way.' We're wrapped around the entire process."

The fact that security holds such an esteemed position in the organization probably has a lot to do with how top management views the department's role. "It's an understanding of how fraud can impact Citicorp and how it can deteriorate the profitability of the company. A lot of senior executives at other companies don't understand that. I can't say my colleagues around the world don't get senior management support," says LaVann, "but it's not the same kind of support."

And the fact that the company is in the business of money no doubt is why top management recognizes security's importance. "Whether it's a traveler's check, money order, or credit card, the bottom line is that we sell it to the public as a product, but it's really money. As you know, anything that has to do with money, somebody's going to be out there trying to defraud it, trying to take advantage of the system."

PERHAPS NOWHERE IS THAT MORE EVIdent than in the traveler's check end of the business, which makes up a major portion of the department's investigations.

While LaVann's role is to serve at the helm of the department, guiding employees and prioritizing tasks, the company's five regional security directors around the world are more involved in the day-to-day investigations. Traveler's check investigations are what the regional security director for North America, Pat Molloy, spends most of his time on.

Last year, Citicorp Global Payment Products received approximately 27,000 refund claims. Of that number, roughly 20 percent were investigated; 15 percent involved fraud.

Molloy's primary responsibility is to oversee investigations, but when dollar amounts are high or circumstances are unusual, Molloy becomes involved directly.

Some of the fraud tales he recounts sound more like scripts for a Hollywood movie. Take, for example, the following case, which sounds hauntingly similar to a scene from the offbeat comedy Raising Arizona.

"We got a call one day from a guy who fits the profile of someone to watch. He's a musician who's moving from California to Connecticut. He has taken his life savings-something like $1 1,000-out of the bank and converted it to traveler's checks.

"As he's driving along the highway, he gets a flat tire. Pulls over to the side of the road someplace in Kansas. The checks are in an envelope in his pocket. As he is changing the tire, the envelope becomes bothersome so he takes it out of his pocket and puts it on the roof of his car.

Finishes fixing the flat, gets in his car, and drives off, forgetting about the envelope on the roof. Two hundred miles away, the man realizes the checks are gone. Turns around and drives back the 200 miles to look for the envelope and can't find it."

The man calls the Tampa office and tells his story to one of Molloy's investigators. When Molloy gets word of what has happened, his reaction is this: "Give me a break! What does this guy think-I was born yesterday?!"

"I get the guy on the phone," says Molloy, "and the more I talk to him the worse his story sounds."

Under normal circumstances, refunds are promptly authorized-sometimes in as little as 30 minutes-because, states Molloy, it's good business. In this case, however, Molloy asked the man to call back the following day after he had had a chance to investigate his story.

"Three hours later, I get a call from another guy-a truck driver. He says he pulled off to the side of the road to relieve himself, finds this envelope, picks it up, and discovers $1 1,000 worth of traveler's checks inside. He asks me what he should do ! "At this point," continues Molloy, "I was beginning to think we were being set up. But I ask the guy if he would go to the local police station and turn the money in, which he does."

Despite his 28 years with the New York City Police Department and seven years as an investigator with Citicorp, "this is one case," says Molloy, "where I would have sworn we were being defrauded."

Molloy echoes LaVann's marketing-like philosophy. "Security is a lot of selling. You have a crime that happens, and you have to be able to convince some law enforcement agency that your crime is important enough for them to prosecute.

"You're not their first priority. If you bring them a case for say, $6,000, they may be thinking, What's $6,000 to Citicorp?' Well, to Citicorp as a whole," says Molloy, "maybe that's not much money. But when you bring it down to where it means something-to the managers who are responsible for budgets-is $6,000 a lot of money."

But it goes beyond that. As Molloy explains, it is what happens from a business standpoint when the $6,000 crime is ignored.

"Word spreads," says Molloy. So then every one of the guy's friends does you for another $5,000 or $6,000. We find ethnic groups will all of a sudden start hitting us from one area of the country. "

YEARS AGO, MOLLOY RECALLS, TRAVeler's check fraud involved an individual using his or her name over and over. The refund process was much different.

You just went into a bank and told them you lost your checks. You could go to 20 banks on the same day and get refunds. Most of our time," he says, was spent running around, putting in arrest warrants on the same guy who used his name 30, 40, 50 times for refunds."

Nowadays Molloy is noticing some new trends. One of the most notable is the high-dollar claims coming in, especially from Asia. Whereas a $25,000 or $30,000 refund would have caused "bells and whistles" to go off 10 years ago, today claims for $100,000 or $200,000 from a single individual are not at all uncommon, according to Molloy.

"There's a lot of money in that region," he explains. Also, traveler's checks are a common mode of buying things because currency in that part of the world fluctuates so much. Most banks here in the US wouldn't be able to handle that kind of sale because they don't keep that much [money] on hand at one time."

Investigating a high-dollar claim often can be sensitive. As Molloy points out, you aren't dealing with your average customer.

"When you start dealing with high rollers, these are people who had the money

to buy $200,000 worth of traveler's checks. You can't just tell these people to wait around until you're ready to investigate their case. You've got to jump."

One of the differences between law enforcement and private industry that was difficult for Molloy to get used to when he first joined the organization was putting the business part of the investigation into perspective. "There's a certain line between customer service and investigations. You have got to balance that line so that you don't insult a good customer.

"When I was a cop and asked people questions they didn't like, too bad. Here," he says, "you have to worry. You never know who you're talking to. If it gets to the point where people have great difficulty getting refunds, they're not going to buy your checks."

Much of what Molloy is seeing are industry trends. Fraud is not just happening to Citicorp.

One professional organization Molloy is very much involved in is the Traveler's Check Fraud Control Committee, an organization of most of the issuers of traveler's checks in the United States. The group meets quarterly in different parts of the country to discuss common problems in the industry.

Members of the group often travel around the United States giving talks to businesses. Earlier this year Molloy traveled to Reno for a two-day meeting with casino cashiers to talk about what's new in traveler's check fraud.

A couple of years ago, the group gave a similar presentation to supervisors and training staff at Disney World. "A week after we gave our presentation," Molloy notes, "one of the cashiers picked up a counterfeit [traveler's] check-not from our company but from another company

We were able to recover $35,000 in counterfeit traveler's checks and arrest seven people."

ONE POINT MOLLOY is adamant about is prosecution. The department will not hesitate to spend more money to prosecute a case than the actual amount of the theft, according to Molloy. The reason: It wants to send the message that if people are going to defraud the company, Citicorp will send them to jail or at least try.

Molloy acknowledges that the approach the organization has taken is not an easy one. There's so much crime out there, and coming from a law enforcement background, I realize that. You go to prosecutors in Miami and tell them you've got a $20,000 case and their response is, Hey, we've got 50 million-dollar cases we can't even get to.' "

Yet Molloy refuses to let responses like that deter him. It all comes back to marketing, he says. "You're selling what you did. You're trying to make your case important enough and interesting enough for somebody to prosecute and take it through the whole system."

The real frustration for Molloy comes when he knows a crime has been committed but he just can't prove it. Molloy recalls with great anguish a recently settled case. The customer received a $50,000 refund, a refund Molloy is certain was not due.

The story goes like this: A man purchased $50,000 in traveler's checks in Detroit before going to Chicago on business. On his way, he got thirsty and stopped at a shopping mall in Detroit-in one of the most crime-ridden sections of the city, according to Molloy. He parked his van, went into the supermarket for a soda, then spent some time browsing. When the man came out 40 minutes later, he discovered his van had been broken into and the traveler's checks were gone.

"I got on a plane and flew out to interview the man," says Molloy. "I didn't believe any of his story. There were so many inconsistencies. The man said he didn't report the crime to the police for four hours because he couldn't find a phone or the police. I went to the shopping mall. There were phone booths everywhere.

"And then I investigated the customer he was going to see. The customer had never even heard of this man."

But because four years had passed since the checks were reported stolen and they were never cashed, the organization had no choice but to give the man a refund.

"Now I'm waiting for the checks to come in," says Molloy, "and they will."

MANY TIMES THOUGH, BY HOLDING OUT and not giving a refund in a suspicious case, events turn out in the organization's favor-like the case of the man in India who lost $186,000 in traveler's checks. Consider this: He didn't have any identification, and his signature consisted of simply a check mark. A lot of things were suspicious about this case, recalls Molloy, and a refund was not approved.

"One day the man called up and said somebody had mailed his traveler's checks to him. When we asked him how the person knew who to mail the travelers checks to and where they should be mailed, he said he didn't know, that it was a miracle."

Molloy laughs when he reflects on the case. "We agreed with him," he says. "It was a miracle."

Molloy doesn't think for a minute he's making honest citizens out of criminals. "What we're doing is maybe discouraging them from doing traveler's check crime, but then they're going to move on to something else."

In the end, though, it all comes down to the bottom line, notes LaVann. "It's the satisfaction of knowing that when you turn out the lights at the end of the day, you've made a difference to the entire corporation. We're a business, and we run it like a business.

And," he adds, "having to justify your existence doesn't become an issue when you have a specific return on investment."

About the Author ... Karen K. Addis is assistant editor at Security Management.
COPYRIGHT 1991 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:services provided by Citicorp Global Payments Products Security and Investigative Services
Author:Addis, Karen K.
Publication:Security Management
Date:Oct 1, 1991
Previous Article:The eye of the storm.
Next Article:Security Administration: An Introduction to the Protective Services, 4th ed.

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