Bank Account Fraud Kimberly Sidden, Vice President Government Banking, UMB Bank
Bank Account Fraud l Fraud: Intentional misrepresentation or concealment of information in order to deceive or mislead. l Use of false identity and/or information to gain access to $$$.
Payment System Fraud l Check Fraud l $1. 2 million in fraudulent checks enter the payment system everyday l Annual check fraud losses according to the Nielson Report: l $20 billion in 2003 l $12 billion in 1996 l $5 billion in 1993
Payment System Fraud l The American Bankers Association reports fraud losses are increasing 25% per year l Recent Uniform Commercial Code changes now have banks and their customers sharing responsibility for losses
Bank Account Fraud l Attempted check fraud was $4. 3 billion in 2001. Actual losses totaled $698 million. l The number of incidents increased but the average loss per case has decreased. Statistics from 2001 ABA survey
Types of Fraud l Check l ACH l Accounting
Check Fraud l Types • • of Check Fraud Counterfeit checks Altered checks Unauthorized drafts Stolen checks
Fighting Check Fraud l Internal Controls l Account Reconciliation l Positive Pay l Paper Debit Block
Internal Controls l Review account activity daily l Reconcile accounts monthly l Implement dual controls l Destroy checks/deposit slips
Account Reconciliation l Partial • • Recon Capture debit transactions posting to account Transactions consolidated and reported daily, weekly, or monthly
Account Reconciliation (cont. ) l Full • • • Recon Compare paid transactions to list of issued transactions provided by company Errors are researched and adjusted by the bank Paid and outstanding items are reported to the company
Positive Pay l Standard l Payee l Teller Line
Positive Pay - Standard l Checks presented for payment are compared to a file of issued checks l Encoding and other errors are corrected l Suspect items are reported to company daily for payment decision l Invalid and fraudulent items are returned and credit is posted to the account
Positive Pay – Payee l This service works the same way as standard Positive Pay except the payee information is also validated l Requires payee information to be included on check issue files l Also requires paying bank to capture payee information
Positive Pay – Teller Line l Highest % of check fraud occurs at the teller line l When items are presented for payment the check information is compared to check issue files for validity l Valid items that are paid are entered as paid so duplicates will be rejected
Future Products l Secure Checks l 3 -D Barcoding l Biometrics
Paper Debit Block l For depository accounts only l Blocks all paper debits from posting l Any attempted postings are reported to customer to raise awareness
ACH Fraud l Concerns • • • Unauthorized ACH transactions Anonymity of WEB and TEL transactions Easier to access ACH network
Fighting ACH Fraud l Internal Controls l ACH Block l ACH Filter
Internal Controls l Review account activity daily l Reconcile accounts monthly
ACH Block & Filter l Options • • • Post no ACH entries Post only ACH credits Post only certain ACH debits and/or credit entries l Features • • Incoming transactions continuously monitored Unauthorized items automatically returned
Future Products l ACH Debit Review l ACH Positive Pay
Conclusions l According to the ABA, Positive Pay is the most effective check fraud prevention method. l Identify potential fraud by reviewing accounts daily and reconciling statements monthly.
Bank Account Fraud THANK YOU!!
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