Bank Deposit Fraud Growing Rapidly

According to a recent study, bank deposit fraud, which used to be considered a significant issue mostly for large banks in urban areas, is encroaching on all geographic areas and sizes of financial institutions and is growing at alarming rates. Such fraud includes identity theft, counterfeit checks produced by personal computers, internal theft of information and other employee fraud, manipulation of available balances at automated teller machines, and kiting using the automated clearinghouse system.

KPMG, which conducted the study for the Consumer Bankers Association, interviewed fraud management teams at 17 banks of various sizes. What the research discovered is that banks of all sizes have significantly increased their investments in deposit fraud risk management by hiring people assigned to that area, by using new technologies, and by training employees. The study also reported that executive involvement in setting deposit fraud prevention priorities has increased and some banks have upgraded the caliber of security staff. Other findings and some responses include:

The number of individuals seeking employment for purposes of stealing bank information has increased. Several banks also identified a rise in fraud from long-time employees, a situation motivated by the current economic climate.

Criminals are identifying "red carpet" customers, then notifying banks of changes of address and obtaining new checks and credit cards. Bank responses have included increased signature verification, authentication at the teller line, and procedures revisions at call centers.

Skimming of debit card numbers has increased. One bank reported criminals placed devices on the vestibule door to the automated teller machine that skimmed the card number, then placed cameras above the machines to capture personal identification numbers. Customers falsely believed the cameras were security devices.

Technology use is increasing. Thirteen of the banks surveyed used some type of back office or teller modules that included kiting detection software. Eight used positive pay systems that can catch fraud before it occurs by matching checks written with those being cashed to catch items such as voided checks, stolen checks, altered amounts, or duplicate serial numbers. Banks not currently using such systems said they planned to in the future.

For information on the study, contact CBA at www.cbanet.org.

Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 9, 12/02