The United States Banking System is one of the most regulated and supervised industries in the Country. Yet, this industry still accounts for a median loss of $110,000 due to fraud. The Federal Reserve supervises the “Safety and Soundness” of banking institutions, however, fraud is at an all time high in this industry. In fact, 72% of banks state their employees are committing some sort of fraud according to an October 5, 2009 article on the banking industry. In that same article 60% of bank fraud is committed by employees.
What is bank fraud exactly? According to Wikipedia bank fraud is “the use of potentially illegal means to obtain money, assets or other property held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or institution”. Bank fraud is not the same thing as “holding up” or “robbing” a bank. Therefore, it is often viewed as a “White Collar Crime”. The most common types of fraud schemes in the banking industry include corruption (36%), cash on hand (23%), cash larceny (14%) and check/payment tampering (12%).
What does corruption in the banking industry look like? Current corruption scandals have involved money laundering, rate rigging and tax evasion. This sounds like something the mafia is involved with, and sometimes that is the case. Banks are countering internal corruption by implementing anti-bribery and anti-money laundering rules. They are also enforcing codes of conduct and giving employees incentives. I don’t know about you, but from the looks of things I see nothing here that is really going to stop someone that is intent on committing fraud.
Cash on hand and cash larceny schemes are somewhat similar in nature. In these types of frauds, a bank employee may short change a customer receiving cash back, or not notify a customer that their deposit is actually $20.00 more than what their deposit slip reflects. A supervisor may be making adjustments on the back end of end of shift/end of day reporting and misdirecting funds from one account to another. Many customers do not keep receipts of their banking transactions. It is fairly easy for a teller to record a different amount of a deposit and direct non-endorsed checks to their accounts instead of the customer account. This leads us into our next type of banking fraud.
Now that deposits are scanned, the opportunity for check tampering has greatly decreased. However, banks often have blank “bank” checks available for new accounts. Occasionally, these books go missing and a fraudulent account is setup by the fraudster. This type of fraud is also happening with false ATM/Debit Cards. Sometimes, tellers will receive incomplete checks without the name field entered, or even the amount. A dishonest teller can take advantage of this situation by directing those funds to their account. An easy target for this type of fraud is the elderly. Elderly individuals often need assistance in writing checks. The fraudster will take advantage of the elderly person by confusing them on who they are writing the check to and for how much.
Although the use of ATM’s and online banking has increased over the last several years, many of us develop relationships with our bankers when we visit the branch to make deposits, withdrawals or open loan accounts. So why would this trusted person steal from you, their favorite customer? In a February 2, 2016 New York Times article one reason cited as a trigger to commit fraud was that the tellers are often vulnerable because of their modest salaries. In 2014 the median income for a teller was $25,760, which according to the Prosecutors, is a wage that “does not match the high-risk nature of the job.”
A growing area of banking fraud is the hijacking of a customer’s personal information. A bank has access to your social security number, birthdate, addresses, user id’s and passwords along with your financial information. While the dark web is littered with everyone’s personal information, much of it is outdated and no longer valid. A low paid, dishonest bank employee with access to this information can easily make it available online. And, because it is current, reliable information, it will go for a pretty decent price.
I realize the information provided seems pretty bleak. What can you do to protect yourself from becoming a victim of banking fraud? Have you heard the phrase “document everything”? Make copies of your deposit slip with checks and cash you are depositing. Make sure the endorsement on your check is your signature. Sign your checks and fill them out completely. Doing everything the same way every time may seem redundant, yet it is that consistency that may save you your life savings when a fraudster deviates from a pattern you may have established over years of banking.
If you think you are a victim of fraud the first thing you should do is actually reach out to the banking institution. A manager or supervisor at the bank may be able to help. If that step does not seem to resolve the problem, you can contact local law enforcement. However, they are often under staffed and over worked and do not always have the time and resources for these types of cases. You can also contact the United States Attorney’s Office and report the fraud to them. They specialize in fraud related cases and may be your best resource to obtaining resolution and compensation for your losses.
I want to stress that the banking industry does take fraud seriously. The majority of banking employees are not out to steal your money. There is always a minority that makes the greater whole look bad when they commit a crime. The banking industry has taken numerous steps to try and prevent fraud from occurring within their branches. Banks are an important part of our economy and safe guarding its customers finances.