In the North West we are seeing a new scam.

A person will approach an individual (sometimes they know each other, sometimes they don't) and offer them a quick way to make some money. Our shady customer gives this individual (fraudster) their debit card and pin and allows the fraudster to make several deposits of either empty envelopes or fraudulent checks through the ATM. The fraudster then withdraws the available funds and pays our customer a certain dollar amount of the earnings. The fraudster then tells our customer to go to the branch and file a fraud claim under Reg E.

What can we do?? We know what is going on, but we can't prove that the transaction was done with fraudulent intent because the customers swears up and down that they don't know who did this and that someone must have stolen their card. It seems that under Reg E, unless we can PROVE otherwise, that we would be required to pay out the claim since the transfers were unauthorized. Is this a loop hole that we are just getting stuck with or is there something we can do to combat this?

We have not experienced this, but I have heard of it. I am curious too what a strategy is to prevent this and are you required to pay out to your shady customer.

Research camara footage at the ATM. You should be able to match, customer, date, time, and withdrawl amounts!

If you're not able to avoid refunding under Reg E, you have every right to close the account immediately under a no tolerance for this sort of account behavior policy; even if your customer is being 'taken' by a scam, do you really want to keep divying out for dumb?

First, remember that Reg E is not a court of law - you don't have to prove it beyond a reasonable doubt to deny a claim. It is nice when you can, but not necessary.

Second, definitely close out their accounts ASAP. You don't want these customers.

finally, I'd review your ATM deposit processes. Why are they able to W/D all that money before you get a chance to see that the envelopes are empty? Definitely follow Reg CC for holds on these deposits. We changed our system so that ATM deposits don't memo post at all. We have an employee get the deposits daily and they are manually run through by a teller. This particular approach may not work for your institution (depending on ATM locations, deposit volumes, etc.), but I would definitely review the entire process to see where you can eliminate some of these risks.