Question

What is bank fraud protection? Give Example of bank fraud ,what influence bank fraud and bank fraud protection history

Answer 1

Answer:-

Protecting public funds is a high priority for all governments. The Uniform Commercial Code (UCC) regulates and defines the responsibilities of counterparties in business and banking transactions. The UCC states that, in certain situations, liability and monetary loss in a fraudulent transaction is split between the counterparties in a transaction based on each party's due diligence and negligence. Consequently, to reduce liability in the event of a fraudulent transaction, it is important to have proper controls in place.

Advances in technology have reduced the effectiveness of traditional fraud protection techniques and have even enabled new forms of fraud. For example, in the past, many governments relied upon physical security features embedded in check stock to protect check fraud. These included watermarks, unique colors, and graphical designs. Advanced duplication technology and remote deposit capture have reduced the effectiveness of these physical measures to protection fraud.

The banking industry has developed the following fraud protection tools:

Positive pay is a type of account reconciliation service provided by banks. In positive pay, a bank compares checks that it receives for payment against the record of the checks issued by the government. If the bank receives a check that does not match the information (date, check number, and amount) in the government's record, it identifies it as an exception item (i.e., a non-conforming positive pay item). Payee positive pay is an enhanced positive pay service that requires the validation of the payee name in addition to validating the date, check number and amount.

ACH blocks and filters stop any attempt by an outside entity to process an ACH transfer and remove funds from a checking account without prior permission. ACH blocks prevent all disbursements from an account. ACH filters prevent disbursements that do not match a list of pre-authorized transactions or identification numbers. ACH filters involve: (a) giving prior permission to certain approved business partners to draw upon the account, (b) establishing an approval process for pending ACH transmissions, and/or (c) setting maximum dollar limits on ACH debit transactions.

Reconciliation tools allow governments to extract information from their bank or have information sent from their bank that assists the government in performing the period-end reconciliation of bank accounts. The bank may also provide a tool that completes a full reconciliation of the account and produces detailed reports of reconciled items.

Intra-day access allows a government to see bank account transactions that occur at various times throughout the business day. The information may be accessed via online systems provided by the bank, as well as through other methods including fax, email, and direct transmission of data from the bank to the government's computer systems.

Universal Payment Identification Codes (UPIC) may be used instead of the government's bank account numbers so that the government's account numbers are not disclosed.

Examples of Bank Fraud

Some of the most common forms of bank fraud involve fraudulent use of checks to obtain cash or other assets. ... A type of bank fraud that targets depositors in bank theft. A bank fraud scheme may involve the theft of checks from mailboxes, mailrooms in offices, or post offices

Owen and Nichole go in together in a scheme of stealing, altering, and cashing checks. By the time they are caught, they had swindled consumers and three different federally insured banks out of more than $220,000. While Nichole takes a plea bargain to provide information on how the two accomplished their crimes, in exchange for a lighter sentence of 8 years in federal prison, Owen holds out and goes to trial.

After being convicted of several counts of bank fraud by a jury, Owen is sentenced to 22 years in federal prison, and ordered to make restitution in the amount of $110,000, his half of the total stolen by bank fraud.

Fraudsters are inflicting huge financial and reputational losses to businesses and customers alike, using multiple avenues to monetize their exploits.

Loans: Fraudsters are misusing the fake new accounts to seek loans. These can be any loans. However, an FTC report states that fraudsters are targeting student loans the most, probably because the credit requirements are comparatively lenient.3 In 2017, fraudulent student loans rose 121% over 2016, says FTC. The modus operandi is simple. A fraudster uses the good credit standing of the compromised customer to get approved for a loan. The credit standing does not really matter to the fraudster, as it is the customer that bears the brunt of high-interest rates. Once the loan amount arrives in the new fake account, the fraudster escapes with the money, leaving the customer to repay the debt and interest, obliterating her financial life.

Credit Card Accounts: New accounts are often used to create new credit card accounts, as they are the easiest to open and can be monetized quickly. Pre-approved credit card emails sent to prospective customers from card-issuers are a treasure trove for fraudsters. When a card-issuer gets a filled-in application from a ‘customer’ with most of the information looking genuine, the card is issued. The genuine customer, on the other hand, is held responsible for payment of the outstanding bills. Non-payment or delayed payments can damage her credit rating and affect future lines of credits that are either not forthcoming or come at a much higher interest rate.

Instant Credit: Fraudsters also exploit stolen personal details of the customers to gain instant credibility. All it takes to get instant credit is SSN and an identification proof. The fake new accounts help fraudsters to mimic genuine customers and get quick approvals, often taking lesser than 30 minutes.

Money laundering: One of the most vicious ways the new fake accounts are used is for money laundering to fund criminal enterprises such as drug cartels and global terrorist activities. Fraudsters route the stolen money to various countries through mule accounts. Money mules are usually ‘recruited’ by luring unsuspecting people through fake job postings and social media posts about quick money-making gigs. Once ‘recruited’, money mules are asked to withdraw the amount and wire it into a new account, keeping some portion of the money themselves.

The Commonwealth Fraud Control Framework outlines the preventions, detection, investigation, and reporting obligations set by the Australian Government for fraud control. The framework includes three documents called The Fraud Rule, Fraud Policy and Fraud Guidance

The Fraud Rule is a legislative instrument binding all Commonwealth entities setting out the key requirements of fraud control.

The Fraud Policy is a government policy binding non-corporate Commonwealth entities setting out the procedural requirements for specific areas of fraud control such as investigations and reporting.

The Fraud Guidance preventing, detecting, and dealing with fraud, supports best practice guidance for the Fraud Rule and Fraud Policy setting out the government's expectations for fraud control arrangements within all Commonwealth entities.