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Bank Fraud Issues
Discussed on Bankrate.com
Fraud growth is greatest at community banks:
Bank fraud is becoming serious business for banks,
according to The Rising Tide of Bank Fraud,
an article seen on Bankrate.com, a financial information
Internet site (Dec. 3, 2002). The article addresses
the fact that community banks represent a new frontier
for bank fraud perpetrators. While fraud detection
technologies like those offered by Carreker Corporation
are allowing banks to prevent a high percentage of
losses due to fraud, fraud attempts are way, way up – especially
at smaller banks – so all banks must make fraud
prevention their highest priority.
Regions Bank in Birmingham, Ala. employs 20 full-time
fraud-detection specialists. Dick Clausen, senior vice
president of liability and risk management at Bank
of America in Concord, Calif., expressed concern that
at community banks, the fraud growth rate for small
banks is 51 percent. New account fraud makes up 32
percent of total losses at small banks, 23 percent
of losses at mid-sized banks, and 18 percent of losses
at both regional and large banks.
These trends are creating a growing demand for fraud
detection equipment and software that is affordable
to smaller banks. In the future, banks of every size
will be judged according to how well they manage risk.
 In the article, Carreker’s
Tom Vleisides, Director of Alliance Management, explained
that fraud-detection technologies rely on sophisticated ‘rules’ about
what constitutes normal behavior for a bank’s
customers. These rules are tailored to a bank’s
size, location, and the types of fraud that are most
likely to occur.
Kite fraud less common, but more devastating than
other types of fraud:
Bankrate.com also talked with Tom Vleisides for its
informative article, Anatomy of Kite Fraud (Dec.
3, 2002). While check kiting is less common than other
types of fraud, it can be more devastating in terms
of losses. In one case, a $4 million kite loss caused
one credit union to fold. But smaller kiting incidents
are a problem at most financial institutions.
Vleisides explained how Carreker’s Fraudlink
Kite™ software helps banks identify
the distinctive pattern created by kite fraud incidents.
He added that banks must work together to shut down
a kite involving several banks, so that none of the
banks experience losses. |
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