Bank Account Fraud

1
Bank Account Fraud

• Kimberly Sidden, Vice President Government
  Banking, UMB Bank

2
Bank Account Fraud

• Fraud Intentional misrepresentation or
  concealment of information in order to deceive or
  mislead.
• Use of false identity and/or information to gain
  access to .

3
Payment System Fraud

• Check Fraud
• 1.2 million in fraudulent checks enter the
  payment system everyday
• Annual check fraud losses according to the
  Nielson Report
• 20 billion in 2003
• 12 billion in 1996
• 5 billion in 1993

4
Payment System Fraud

• The American Bankers Association reports fraud
  losses are increasing 25 per year
• Recent Uniform Commercial Code changes now have
  banks and their customers sharing responsibility
  for losses

5
Bank Account Fraud

• Attempted check fraud was 4.3 billion in 2001.
  Actual losses totaled 698 million.
• The number of incidents increased but the average
  loss per case has decreased.

6
Types of Fraud

• Check
• ACH
• Accounting

7
Check Fraud

• Types of Check Fraud
• Counterfeit checks
• Altered checks
• Unauthorized drafts
• Stolen checks

8
Fighting Check Fraud

• Internal Controls
• Account Reconciliation
• Positive Pay
• Paper Debit Block

9
Internal Controls

• Review account activity daily
• Reconcile accounts monthly
• Implement dual controls
• Destroy checks/deposit slips

10
Account Reconciliation

• Partial Recon
• Capture debit transactions posting to account
• Transactions consolidated and reported daily,
  weekly, or monthly

11
Account Reconciliation (cont.)

• 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

12
Positive Pay

• Standard
• Payee
• Teller Line

13
Positive Pay - Standard

• Checks presented for payment are compared to a
  file of issued checks
• Encoding and other errors are corrected
• Suspect items are reported to company daily for
  payment decision
• Invalid and fraudulent items are returned and
  credit is posted to the account

14
Positive Pay Payee

• This service works the same way as standard
  Positive Pay except the payee information is also
  validated
• Requires payee information to be included on
  check issue files
• Also requires paying bank to capture payee
  information

15
Positive Pay Teller Line

• Highest of check fraud occurs at the teller
  line
• When items are presented for payment the check
  information is compared to check issue files for
  validity
• Valid items that are paid are entered as paid so
  duplicates will be rejected

16
Future Products

• Secure Checks
• 3-D Barcoding
• Biometrics

17
Paper Debit Block

• For depository accounts only
• Blocks all paper debits from posting
• Any attempted postings are reported to customer
  to raise awareness

18
ACH Fraud

• Concerns
• Unauthorized ACH transactions
• Anonymity of WEB and TEL transactions
• Easier to access ACH network

19
Fighting ACH Fraud

• Internal Controls
• ACH Block
• ACH Filter

20
Internal Controls

• Review account activity daily
• Reconcile accounts monthly

21
ACH Block Filter

• Options
• Post no ACH entries
• Post only ACH credits
• Post only certain ACH debits and/or credit
  entries
• Features
• Incoming transactions continuously monitored
• Unauthorized items automatically returned

22
Future Products

• ACH Debit Review
• ACH Positive Pay

23
Conclusions

• According to the ABA, Positive Pay is the most
  effective check fraud prevention method.
• Identify potential fraud by reviewing accounts
  daily and reconciling statements monthly.

24
Bank Account Fraud

• THANK YOU!!