Banking Fraud

Introduction

 Bank fraud is a criminal act that occurs when a person uses illegal

means to receive money or assets from a bank or other financial
institution.

 Bank fraud is distinguished from bank robbery by the fact that the

perpetrator keeps the crime secret, in the hope that no one notices
until he has gotten away.

 The term bank fraud also refers to attempts by a person to obtain

money from a bank’s depositors by falsely pretending to be a bank or
financial institution.
 Reasons of Bank Fraud

 Poor Banking Governance

 Most frauds show that banks did not observe due diligence, both
before and after disbursing loans.

 Poor level of checks and balances in the banking system is one of the
reason.
 Reasons of Bank Fraud

 Poor Monitoring 

 Lack of technology and fraud monitoring agencies to detect frauds

makes the problem more complex.

 There is an absence of an effective mechanism to monitor the credit

flow.

 Flawed risk-mitigation design, which creates an excessive focus on

credit or market risks, but focuses less on operational risks also
leading to more breaches.
 Reasons of Bank Fraud

 Technological Backwardness

 Excessive dependence on manual supervision, at both external and

internal levels makes it impossible to manually control and supervise
the sheer volume of transactions.

 Immoral Behavior

 The disintegrating moral fibre of Indian businessmen, bankers and

other white-collar professionals, nepotism in internal committees of
banks, unnecessary political interventions lead to increased frauds.
 Reasons of Bank Fraud

 Political Interference

 The political pulls and pressures on investigating agencies, and long-

drawn processes of legal system act less as a deterrent.
 Impact of Bank Fraud

 This unhealthy development of rising fraudulent activities afflicting

the banking sector impinges their credibility adversely.

 Frauds add to Non-performing Assets and lead to loss of banks and

economy.

 Frauds and fraudulent activities wreak severe financial dilemmas on

banks and their clients, as well as cause a significant reduction in the
quantum of money accessible for economic development.

 Frauds have a significant impact on profitability of the Indian

banking sector.
 Fraudsters Access Bank Information

 Phishing

 Phishing occurs when someone tricks you into giving them your
personal information usually by posing as a business, your place of
work, or your bank.

 Fraudsters may send you personalized emails that come from email
addresses that mimic someone in your address book.

 Fake websites and personalized emails can appear very similar to

what you’re used to in order to trick you into entering your personal
information.
 Fraudsters Access Bank Information

 Examples of common phishing emails include:

 Requests for charitable donations

 Credit card applications
 Online shopping advertisements
 Seemingly important files, such as tax forms, that request your login
information in order to download
 Fraudsters Access Bank Information

 Malware

 Malicious software, or malware for short, is a type of virus usually

acquired through an email attachment, internet pop-ups or through
downloading bad programs to your device.

 This software is designed to give fraudsters access to a computer

without notifying the owner that their device has been compromised.

 These viruses are built to bypass normal security features and often
have the ability to record your keystrokes so called “keyloggers” and
may also crash your computer and phone while allowing another
person to monitor your activities online.
 Fraudsters Access Bank Information

 Malware can come in a variety of forms, but some examples include:

 Electronic greeting cards or e-cards

 Screensavers
 File attachments
 Links to infected webpages
 Fraudsters Access Bank Information

 Scams

 Rather than infect your computer, scams rely on bait that lures the
victim into giving up their information willingly.

 This can come in the form of get-rich-quick schemes, deals that are
too good to be true or a service that you feel is necessary, such as debt
repair or student loan relief.

 The scammer might convince you to complete a wire transfer, send

funds through a money transfer service, such as PayPal, Zelle or
Venmo, give up your credit card information.
 Reporting Bank Fraud

 If you suspect fraud in your account, you should immediately contact

your bank to alert them.

 Your next step should be changing your passwords, PIN and other
login information to prevent further damage.

 Finally, you can report consumer fraud.

 If you feel your Social Security information was compromised, you

may also consider contacting the Social Security Administration.
 Reporting Bank Fraud

 You will also want to thoroughly review your credit report.

 If you find any accounts that you did not open, you can ask the credit
bureau to remove it, contact the institution where the account was
opened and have it closed.
 Tips to Avoid Bank Fraud

 Read Email Carefully.

 To avoid phishing schemes, make sure you’re paying close attention

to the details of your emails.

 While email addresses that impersonate someone you know but are
slightly off can be a tip, keep in mind that scammers can hack
accounts of known senders.

 Pay attention to other things like typos, unfamiliar links, attachments

and any other awkward or urgent language.
 Tips to Avoid Bank Fraud

 Read Email Carefully.

 Do not click on any links in the email that appear suspicious or enter
any of your bank information.

 If you have a feeling that the email is fraudulent, contact your bank
immediately to verify.
 Tips to Avoid Bank Fraud

 Update your Computer and Mobile Security Software

 Avoiding a phishing scheme can also help you to avoid malware.

 One of the best things you can do is to install anti-virus software, and
keep your computer and mobile phone constantly updated with the
latest software versions released by manufacturers.

 Because hackers are constantly evolving, developers routinely put out

new updates with fresh security protections.
 Tips to Avoid Bank Fraud

 Avoid Suspicious Downloads

 Since no method of protection is perfect, you’ll want to double-check

the sources and validity of the content and apps that you’re
downloading while online, and always avoid suspicious pop-up ads.

 If you notice unusual behavior on your computer, such as sporadic

shutdowns or an increase in pop-up ads, you may be infected.
 Tips to Avoid Bank Fraud

 Avoid Suspicious Downloads

 If this is the case, the University of Texas at Austin Center for

Identity recommends the following approach: Stop using the
computer for shopping, banking or any other transactions that
involve passwords and other personal identification information.

 If you have security software, make sure it's updated and then run a
security scan.
 Tips to Avoid Bank Fraud

 Use a Credit Card or a Prepaid Card to Shop Online

 Avoiding all online shopping is becoming a more difficult objective.

Consider shopping online using a prepaid debit card loaded with
enough cash to complete your purchase but nothing more.

 If someone steals your account info, they won’t actually get access to
your bank this way.

 A credit card is an even better choice than a debit card for online
shopping, as it comes with lower liability limits, which means you
won’t be on the hook for stolen funds.
 Tips to Avoid Bank Fraud

 Be Skeptical of Unsolicited Emails, Text Messages or Phone Calls

 You should be suspicious of emails, texts or phone calls coming from

unknown senders and unfamiliar organizations.

 This is especially true if the emails contain links, attachments or

requests for personal information.

 Do not give any personal information until you are able to verify the
legitimacy of any claims that are made, and never open an
attachment from an unknown sender.
 Tips to Avoid Bank Fraud

 Keep Passwords Complex and Use Two-Factor Authentication

 Create complex passwords that are at least eight characters long and

include uppercase and lowercase letters, numbers and symbols.

 Avoid creating passwords that are related to personal information,

such as your birthday or mother's maiden name, and use a different
password for each account.

 Use a password manager tool if you have trouble keeping track of all
your passwords.
 Tips to Avoid Bank Fraud

 Keep Passwords Complex and Use Two-Factor Authentication

 Always choose two-factor authentication if the services or sites you

use online offer it.

 This security technique means a site will send you a text message or
an email to verify your identity before letting you log on.
 Tips to Avoid Bank Fraud

 Monitor your Credit Card and Bank Account.

 Sign up for a credit monitoring service, and make sure to check your
credit report once a year.

 Some credit monitoring services even provide a layer of identity theft

protection.

 On top of that, you should be checking your bank accounts regularly

to ensure your statements are accurate.
 Tips to Avoid Bank Fraud

 Be Suspicious of Phone Calls asking for Personal Information

 Often, callers will impersonate your bank, a familiar company or a

government organization, such as the IRS.

 They can even mimic a local phone number or a trusted organization

on your caller ID, a trick called "spoofing."

 Don't ever give up personal information like your Social Security

number or credit card number to these callers.
 Tips to Avoid Bank Fraud

 Freeze your Credit

 As a last resort, you may also freeze your credit, but this measure will
only prevent fraudsters from opening new accounts in your name.

 It does not prevent criminals from using your current credit cards or
prevent identity theft.
 Precaution of Bank Fraud

 The Crime: Wire Fraud

 While the specific method used by the criminals in 1873 would be

much harder to pull off (they forged physical banknotes), banks still
contend with the essence of their crime.

 They make the bank think that large sums of money are coming from
a reputable source when they are completely fake. These days,
fraudsters commit this crime electronically, in the form of wire
fraud. 
 Precaution of Bank Fraud

 The Solution: Artificial Intelligence

 With so many transactions occurring simultaneously, banks cannot

look at each individual transaction and verify that each transfer of
money is legitimate.

 This would create enormous bottlenecks, destroying modern life’s

rapid pace and customer expectations for online banking.

 Instead, banks should use automated systems programmed to

recognize behaviors specific to fraudulent activity. These AIs
continuously scan the data passing through a system, flag suspicious
transactions, and alert humans to look closely. 
 Precaution of Bank Fraud

 The Crime: Credential Stealing

 It’s a lot easier to pretend to be somebody else when you have the

entire internet between you and your target.

 While doing this, fraudsters use many methods to acquire data that
uniquely identifies their users.

 Data possibilities include social security number, driver’s license

number, or birth date.
 Precaution of Bank Fraud

 The Solution: Biometric Data

 Multi-factor authentication acts as an additional layer and mitigates

some of the fraud that occurs when passwords are compromised. 

 Knowledge and preparation best protects users from phishing, but

biometric data proves useful, too.

 They add an additional layer of safety from a fraudster pretending to

be a legitimate user, aiding in banking fraud prevention.
 Precaution of Bank Fraud

 The Crime: Account Takeover

 In the best-case scenario, lost credentials lead to a bank account

password reset for the victim.

 The worst-case scenario for account takeover is plain old identity

theft, which puts the whole organization at risk. 

 As we’ve moved many in-person services we use online, we’ve found

that switching to cloud-based solutions enables more connectivity
than ever before.
 Precaution of Bank Fraud
 The Solution: Consortium Data

 The value of a system designed to detect fraud increases as the quality

and quantity of the data it accesses increases.

 Using data pulled from a wide variety of sources increases the

diversity of the information, multiplying security and analysis.

 This data is called consortium data, as it comprises collective

intelligence from multiple sources within the same industry or sector.

 When banks work together and share their data on fraud that has
been perpetrated against them, they create a database of known
threats
 Precaution of Bank Fraud
 The Crime: Money Laundering

 As long as people have been stealing money, or acquiring it illegally,

they’ve looked for ways to make the ill-gotten gains look legitimate.

 Whatever the illegal activities are, they usually involve gathering

currency stealing money from multiple possible sources.

 Fraudsters target banks for making dirty money clean because

passing currency from one account to another is one of the things
banks do extremely well.

 Banks that don’t take steps to prevent money laundering take a big
risk and face legal repercussions.
 Precaution of Bank Fraud
 The Solution: High Tech Standardization

 It seems simple, but the security of a business’s data increases

dramatically when every aspect of the business operates on the same
system.

 This rings particularly true for financial institutions, as many legacy

systems create big holes that fraudsters can exploit. 

 Legacy systems aren’t just old software (though they often are) – they
also include physical ledgers and paper records. The sooner these old
systems incorporate into a single solution, the better for everyone.
 Precaution of Bank Fraud
 The Crime: Accounting Fraud

 Accounting fraud primarily affects business lending.

 Businesses commit accounting fraud by falsifying data about

themselves in order to appear more than they actually are.

 Based on fraudulent bank statements, banks grant loans to these

businesses. 

 As a result, these phantom businesses never repay the loans, nor do

they intend to, leaving the bank with the balance.
 Precaution of Bank Fraud
 The Solution: Machine Learning

 Automation of data gathering and analysis has revolutionized the

world of banking.

 With greater and greater frequency, companies are learning that

simple rule-based AIs just aren’t cutting it in banking fraud
prevention.

 In comes machine learning, cybersecurity that updates itself to

protect against new threats, a solution Fraud.net offers as part of our
product suite. 
 Types of Bank Fraud
 Advance Fees Fraud

 An advance-fee fraud occurs when the victim pays money to someone

in expectation of receiving something. such as receiving a loan,
contract, investment, or gift and then receiving little or nothing in
return.

 Example – Fraudster doing calls as custom duty officer to random

people to pay this amount via bank and get your order clearance.
Sometimes, people get trapped by thinking they really got a gift but in
end, people end up losing the money and getting nothing.
 Types of Bank Fraud
 Phishing Fraud

 Phishing is an online scam that uses to steal private user data which
includes login details, OTP, Passwords, and credit card numbers.
Moreover, Phishing can be done by giving bank details to fake emails,
texts, phone calls.

 For example- Fraudsters often call people to renew their bank

account or credit card, to get bank account details and OTP from
their victims so they can commit fraud.
 Types of Bank Fraud
 Card Skimming

 Card skimming is a method used by fraudsters to record information

of people’s payment cards like debit and credit cards to conduct
fraudulent transactions.

 Example- Fraudsters do this type of fraud by capturing your payment

card information by way of copying is known as a skimmer. The
information will be stored and transferred to an appointed computer
so can be used later for fraudulent activities.
 Types of Bank Fraud
 Accounting Data Fraud

 In order to hide some serious financial problem. Some companies use

fraudulent bookkeeping to overstate the sales, profit, and worth of
the company. When the company is operating at a loss. These fake
records can help the company to get loans from a bank etc.
 Types of Bank Fraud
 Account Opening Fraud

 Account opening fraud means opening a bank account to deposit and

cashing fraudulent cheques. This fraud is one of the most common
frauds in the world. Moreover, mostly these accounts are opened with
fake proofs so no one can get busted.

 Example:- An bank account opens to send illegal money to another

account or a fake account to get benefits from the government like
the name of the old aged person to take advantage of pensions.
 Types of Bank Fraud
 Cheque Kiting

 Cheque kiting is the illegal process of writing a cheque off to a bank

account with inadequate funds to cover that amount. This relies on
the fact that it takes banks a few days (or even longer for
international checks) to determine that a cheque is bad.

 Example- Deposit 1000 in one bank, write a cheque on that amount

and deposit it to your account in the second bank, you now have
2000 until the cheque clears.
 Types of Bank Fraud
 Cheque Frauds

 Counterfeit- a simple paper made into the same as bank cheque

paper to make a real cheque but it relates to a real bank account,
which has been created and written by a fraudster.

 Forged- This fraud is related to a stolen real cheque and not signed by

the account holder. The fraudster has signed the signature on the
cheque themselves.

 Altered- a cheque that has been properly issued by the account holder
but has been altered or changes made by fraudsters like the payee
name or the amount of the cheque have been altered.
 Types of Bank Fraud
 Counterfeit Securities

 Documents, securities, bonds, shares, and certificates are forged,

duplicated, adjusted, or altered are presented to a bank to get a loan
by using these securities as collateral.

 Bank Hacking Fraud

 Hacking and tampering with a Computer to gain access to bank data

for illegally transferring money, deposits, removing any transactions
entry. Though, Computer fraud can be happened by spreading
malware or by hacking bank computers or systems.
 Types of Bank Fraud
 Loan Fraud

 Loan fraud means when funds are lent to a borrowing customer that
has exceeded his credit limit or a non-borrowing customer.

 Example- When individuals present false information in order to

obtain a loan, that is loan fraud. Similarly, if a thief uses someone’s
identity to get a loan in name of that person, that is another type of
loan fraud.
 Types of Bank Fraud
 Money Laundering Fraud

 Money laundering is illegal obtained money and deposits the money

in banks by converting the cash into untraceable transactions.
Fraudsters try to make the funds look as though they have come from
a legal source.

 For example– If someone is selling drugs, they may try to pretend

that the cash is from a business, and they may deposit the funds in
that business’s account. For more detail Visit- Stages of Money
Laundering
 Types of Bank Fraud
 Money Transfer Fraud

 Scammers use a lot of schemes to get your money by using money

transfers through companies like Western Union and Money-Gram.
Scammers create pressure on people to use money transfers as
quickly, so fraudsters can get the money before that victims realize
they’ve been cheated.

 Money transfers are online cash transfers same as sending cash and
there are no protections for the sender. At last, there is no way any
person can reverse the transaction or trace the money.
 Types of Bank Fraud
 OTP Fraud

 The OTP messages that are passed through telex in form of codes
could be altered to divert the funds to another account so that code
could help fraudsters to make fund transfer.

 Letters of Credit

 Letter of credit is generally used for taking importing goods on credit.

This is mostly used in international trading. Letters of credit fraud
are mostly tried against banks by providing false documentation
showing that goods were shipped but In fact, no goods were shipped.