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Financial Institution Fraud Statistics

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Question: 
What are the latest statistics for bank fraud in the areas of check fraud, new account fraud? How much are we losing each day/month/year?
Answer: 

You can get as many "guesstimates" on this as there are 'experts' guessing. Security people have known the FBI and the ABA figures are way, way low. What they report is what is reported to them. In the FBI's case, the only losses they have reported are those they prosecute. In many cities their office will not even consider cases with less than a specified amount - in the city close to me, for instance, they won't consider a case less than $50,000. On the west coast, I understand it can be much, much higher. As a result many (read most) losses are not reported - they are simply charged off.

About five years ago, U S NEWS and WORLD REPORT did the most in-depth study on this that we've had, and I've used their figures ever since. They probably are low by now. They said the financial institutions in the United States lose about $12 Billion a year in check fraud, and the retail industry loses a like amount. The total loss being $24 Billion as a result of check fraud. I think identity theft is getting a lot of publicity now - but it's been around for a long time. We just never gave it the designation of identity theft.

Close to 20 years ago, at a national conference when ABA had announced a total loss to fraud of $1.2 million for the previous year, a group of security officers had an informal, after-hours, private round table. At that meeting, which was attended by 12 of us, there were three very large banks represented. We decided we could share, with honest numbers, with each other for the sake of determining how serious a problem we were facing with check fraud. We were astonished at the outcome. As we went around the table and revealed what we had actually charged off to check fraud the year before, we discovered that EACH of the large banks had charged off more that $1.2 million to check fraud. That meeting was long ago, and most of the security officers who were in that room are now retired, so I feel safe in talking about it! But it proved to us that there is a great deal of guess work that goes into fraud loss figures. Understandably, financial institutions are reluctant to reveal their loss figures. And even with ABA's efforts to standardize loss categories, each shop has its own designations. For instance, an account opens with $10, is immediately overdrawn through an error, and the person who opened the account cannot be located. One bank will charge this as a new account opening fraud. Another may simply charge it off as a uncollectable overdraft. Bank fraud is a tough number to pin down. I'll stick to US NEWS' $12 Billion a year for awhile, until we come up with a better number ... probably bigger!

First published on BankersOnline.com 9/2/02

First published on 09/02/2002

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