How to spot and stop bank fraud

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Reports of bank fraud is the US have doubled during the past five years according to the Wall Street Journal — and there’s no sign of a slowdown.

Fortunately for consumers, banks and other institutions shoulder most of the burden of this crime. It costs them an estimated $19 billion a year, with a further $15 billion that they actually spot and stop.

But for individuals who fall victim, there are some cases where banks refuse to pay up — for example, if they establish that the customer behaved irresponsibly or, occasionally, the crime was not reported until significantly later.

And there’s more. As well as any financial losses consumers suffer, they also can face a huge problem in trying to straighten out their financial records, especially with the credit reporting agencies.

It’s well known too that older folk are the biggest target for scammers, partly because they’re too ready to believe crooks and, often, because of confusion and misunderstandings.

What is Bank Fraud?

So, what exactly is bank fraud?

It’s a potentially wide-ranging crime, but for this report we’re using the Investopedia definition: “when someone attempts to take funds or other assets from a financial institution or from customers of that institution by posing as a bank official.”

This happens most commonly when people receive a text, email or phone message pretending to be from their bank.

The message may say:

  • Your account has been compromised in some way and that you should get in touch via a phone number the scammers control. Victims are asked to provide their account details, which the crook then uses to log onto their account and drain it.
  • An email purporting to come from the bank contains a link that the victim is supposed to click to check something in their account. But the link connects to a phony page that looks like the real thing and, once again, the victim is asked to input their credentials.
  • The bank suspects one of its employees is defrauding them. Victims are asked to cooperate by withdrawing a certain amount of cash, which they are supposed to hand over to this employee (who is really the scammer) who is supposedly being monitored by the bank. The meeting takes place in a public place away from the bank.
  • A victim is told that they need to transfer their money to a newly set-up account to avoid being defrauded. But the new account is controlled by the crooks who then escape with all the money in the account.  Banks don’t do this, so if you get such a request, it’s a scam. Period.
  • Someone looking for a job online is offered employment but told they need to provide their bank details so payment can be made directly to their account. The scammers don’t get the password this way, but they will try many commonly used passwords or they may be able to buy it on the black market if it’s been stolen in a data breach and the victim is using the same password for all their accounts.

Alternatively, a user’s computer is hacked; the hackers install malware that steals all the necessary banking information to enable them to access the victim’s account.

There are many variations of this crime, but the aim is always the same — to empty victims’ bank accounts.

One Simple Step

However, your chances of falling victim to most bank fraudsters can be almost eliminated with one simple step.

Whichever message you receive, don’t take any action or hand over any money or information without first phoning your bank and checking if they sent a message.

If the message comes by text or email, it’s almost certainly a scam, since banks don’t usually communicate that way on security matters.

They’re more likely to phone you if there’s a security issue and even then — even if caller ID suggests it really is your bank — take no action until you’ve spoken to the bank.

However, there’s a further word of warning about phone calls. You may hang up and then dial your bank’s phone number but if the other party (the scammer) didn’t hang up, at their end you may immediately reconnect with them no matter what number you keyed in. So, if you can, use another phone, like a cell phone or a neighbor’s landline.

Here are 7 more steps you can take to avoid bank fraud:

  1. Use a unique password for your online banking and change it regularly.
  2. Check your online account every day so you can spot any unusual transactions.
  3. Keep your security software up to date to avoid malware being installed.
  4. Don’t give your account details to anyone, including an employer, until you know they’re genuine.
  5. When visiting your online account, make sure you keyed in the address correctly. Scammers set up fake sign-on pages hoping that you mis-keyed the web address.
  6. Use a credit card or a service like PayPal when you shop online, so you never have to give out your bank details.
  7. If you feel uneasy about a message you received and don’t know what to do, talk about it with someone you trust — and contact your bank.

If you do fall victim, the most important action you can take is to contact your bank immediately. And if your account has been compromised, change it, and your password.

Sadly, bank fraud is not only here to stay but is rapidly on the rise. Be skeptical about any communication regarding your finances and then proceed with total caution.

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