John Doe opens an account online. Deposits check for $100. Waits 30 days.....doesnt use the account. On day 31 deposits check for $3,000. after two day hold (no reason to doubt him, after all its been 30 days) funds become avail. Doe uses ATM to WD $1000.. On day 4 bank returns check NSF. Doe has flown the coop. Nothing in the account opening process, including the Super Chex report, raised any red flags.

Do you have any special account opening procedures/policies for DDA accounts opened online?

I just don't see what we could have done to prevent this from happening?

wish we did. We are reviewing the regs now to see what we can do. similar situation (but not online) - lost about $900.

I don't see how it matters if the account was opened online or in person - end result would have been precisely the same. There is always risk involved; even the best-designed and most stringent policies and procedures only mitigate - but don't eliminate - risk.

Even if you instituted a policy that new accounts opened online (or all new accounts, even) cannot obtain an ATM/Debit card for 60 days, this customer could have simply waited out the 60 days, deposited the rubber $3k check on day 60, then on day 62 withdrawn the cash and vanished. Then, even with the new policy you hoped would protect you, you would have received the chargeback on day 64, instead of day 34 since account opening. The new policy would have delayed, but not prevented, the exact same situation.

I have a couple of thoughts that, honestly, in this case may not have made any difference, but here goes:

1. What kind of customer due diligence occurs during online account opening, i.e. occupation, expected activity...

2. In hindsight, it was odd for a new account to have zero activity until after day 30. Do you have any reports that might give you a heads up on these accounts in the future?

Like I said, just some thoughts...

Zero activity on new account and then sudden larger dollar activity is a warning sign of money laundering or other fraud. That being said, I never put money I need into a new account - I have a transition time because of the new account hold.

Can you make it part of policy or even a policy suggestion that when you have a case like this and they place a hold to also call the bank and verify funds on the check? We had this happen this week also and if the new account person had of called the bank and verified funds she would have found out that the check was drawn on a closed account.

I think it is acceptable, even advisable, to take steps to control your risk by checking on newer accounts for which you have no history.

While we are talking about fraud... When we send them the close account letter do we have to give them 10 days or can we close it immediately and report to Chexsystems? Our guy has been to over 14 banks in less than a month...

Some good points here. Nice to know we are not alone. Re: New account due diligence sheet. Anyone care to share? As we are a community bank, where most of our legacy customers have been here for decades, we never got into the account opening questions mindset so many banks have adopted. need some help here. Suggested questions welcome....

Trees, you mentioned that you use ChexSystems. Do you use the Sentry Service portion? This gives you alerts on customers who have made other inquiries at other banks since your inquiry or who have been closed by other institutions since your inquiry. I view this report every day and if I see that one of my new customers has since gone to other institutions I code the account for all staff to use caution with any transactions they conduct. If they come across something suspicious they notify me and I will take the appropriate action including verifying checks and funds available or placing extended holds.

Virtually every bank deposit contract I've read includes language that allows the bank to bail out with virtually no notice in the case of fraud. In any event, if you smell fraud I would consider closing the account without worrying about such niceties. Particularly if there's a risk of getting hit hard.

For what it's worth, we would never give a new account holder this amount of ATM access. We would limit our new account holder to probably more like $200/day for the first 90 days. After that, maybe it would increase by $100. It would have taken our customer 3 - 5 days to get this amount of cash back. By then, hopefully we would have the check back with a smaller loss.

Agree with points made: We would find the large deposit after a 30 day absence of activity worthy of investigation and we also limit the PIN/Sig based limits on new account holders. A very old fashioned but safe way to collect funds on any deposited item that seems a bit out of the ordinary for your depositor or for a new deposit account holder, is to require they be sent for collection to the drawee bank. Seems these old habits from back in the day fit nicely into fraud prevention in the modern day.

More good poinst. Mocha's Mom -yup, we use that system. Its a good means to weed out serial online applicants. Which we do.

Bullseye, is this your current practice, i.e. $200. per day ATM/card for first 90 days? For walk ins and onlines?

pam P. More details on the limits you impose would be appreciated. i love specifics.

Most fraud detection software will also flag this type of activity automatically. Make sure your people reviewing the alerts know what this type of activity could mean.