Why Financial Detection and Prevention Matters: Bank syste

Improvements in financial crime compliance systems, tools and training are helping institutions thwart $11 billion of the attempted $13 billion in deposit account fraud targeting banks across the nation, according to a survey released this week by the American Bankers Association.

That equates to institutions stopping more than $8 out of every $10 of attempted deposit account fraud in 2014, according to the 2015 American Bankers Association (ABA) Deposit Account Fraud Survey Report. The ABA is a powerful group that lobbies on behalf of the country’s banking sector.

The Association of Certified Financial Crime Specialists is also highlighting the report as part of a new initiative called, “Why Financial Crime Detection and Prevention Matters,” illustrating the broader contributions by financial crime compliance professionals against a broad array of crimes.

The findings in the latest survey also reveal the vital importance of several key compliance program components, such as anti-money laundering (AML) transaction monitoring systems, the partnering of those findings with fraud investigators and how cybersecurity professionals should be working shoulder-to-shoulder with those groups.

For example, the ABA stated that a surge in overall fraud attempts is mostly due to an increase in data breaches at operations outside the bank, such as retailers.

Overall, fraud against bank deposit accounts cost the industry $1.9 billion in losses, an increase from $1.7 billion in 2012. In the prior survey focusing on activities in 2012, banks stopped $13 billion in fraud out of a total attempted haul of $14.7 billion, or $9 out of every $10.

“Banks’ sophisticated fraud prevention systems and customer vigilance successfully stopped 85 percent of fraud attempts in 2014,” said Doug Johnson, senior vice president, payments and cybersecurity policy at ABA.

“We saw an increase in fraud losses in 2014 most likely due to the number of large-scale retailer data breaches, which resulted in a significant increase in attempted debit card fraud,” he said.

Debit card fraud accounted for 66 percent of industry loss, followed by check fraud at 32 percent, and online banking and electronic transactions such as wire and ACH at 2 percent, according to the report.

The leading types of debit fraud were counterfeit cards, card-not-present transactions, and lost or stolen cards. The most common check fraud categories were counterfeit checks and return deposited items.

Online banking saw a significant drop in losses in 2014 while attempted online fraud increased. The survey found that the proportion of active online banking customers affected by fraud remained low – fewer than one in 1,000.

The ABA survey was conducted between May and August 2015. The survey report is based on responses from 101 banks of all sizes.