Anatomy Of A Bank Fraud


By WRITTEN BY RACHAEL VAMOS. EDITED BY COLIN MAY, CFE, AND MARK F. ZIMBELMAN, PH.D., CPA, EDUCATOR ASSOCIATE MEMBER
Starting Out 

Bank fraud involves the use of fraudulent means to obtain something of value from a financial institution. There are numerous types of bank fraud including identity theft, account takeover, loan fraud, wire transfer fraud, and check fraud. In this issue, an experienced bank fraud investigator, Rachael Vamos, CFE, describes a case study involving these types of bank fraud that led to the bank suffering a loss of nearly $200,000. She also discusses how the bank instituted several policies to prevent these frauds. This column is adapted from a paper Rachael completed for her graduate fraud examination course at Stevenson University near Baltimore, Md. She's the fraud manager at a Maryland financial institution. 

 
BUILDING THE FOUNDATION: IDENTITY THEFT AND ACCOUNT TAKEOVER 
It was late October when an account holder, let's call him Jim, was out of the country on vacation. That's when a fraud perpetrator took over his account and identity by possibly finding his bank statement in the trash or by stealing the information from Jim's workplace -- a local university. 

 
The fraudster found that Jim didn't have an online banking account so the fraudster visited the bank's Web site and submitted an application on Oct. 24, and the bank approved it two days later. The bank then accepted the fraudster's answers to the online "challenge questions” (for example, "What is the name of your pet?"), which gave the fraudster access. The fraudster now could view Jim's balances; his transaction history including cleared checks; and the balances in his savings, checking, and money market accounts, plus a home equity line of credit of $100,000.

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