Those who commit fraud are indiscriminate when it comes to which
bank, credit union or even industry to target. Wherever an opportunity
presents itself a determined fraudster will strike, and then simply
move on to the next opportunity. This behavior demonstrates why
it is of such importance that all financial institutions and various
industries work together to share their experiences and knowledge
One organization, which has long promoted early adoption of this
concept, is the Banking Industry Technology Secretariat or BITS.
Acting as a steering committee advising the financial services industry,
it concluded years ago that competitive concerns are immaterial
when it comes to fraud, and have advocated the sharing of fraud
The financial services industry benchmarked this concept through
two initiatives that are currently in place today --- one geared
towards preventing deposit fraud, the other towards preventing new
Overall losses have abated in recent years thanks in large part
to a community of extraordinary financial institutions that understood
years ago that by working together, they could achieve far more
than they could have ever hoped to achieve individually. By collaborating
and not regarding fraud as a competitive issue, their exposure to
losses has been and continues to be far less than for those not
According to the 2002 ABA Deposit Account Fraud Survey, regional
and super-regional banks prevented over 80% of check-fraud attempts.
At the same time, a dramatic increase in attempted fraud was seen
especially among small to mid-sized financial institutions with
growth rates ranging from 35%-51%.
How it works - On a daily basis, financial institutions contribute
and share information on accounts and transactions, creating a national
knowledge repository of account and transaction related data. Used
exclusively for the prevention of fraud, it contains:
- Account status information;
- Stop-payment records;
- Final return-item decisions; and
- Negative account & counterfeit item data
Today, nearly all of the largest financial institutions, and many
credit unions participate in this initiative giving them access
to valuable status information from over 200 million draftable accounts.
In 2002, there were in excess of one billion inquiries to this national
repository, resulting in approximately ten million warnings, valued
at nearly $70 billion dollars.
New Account Fraud
Preempting deposit fraud is the issue of identity fraud at the new
account's desk. Although account-opening procedures and front-end
screening tools provide a solid level of protection, the most determined
fraudsters still find ways to circumvent these efforts.
The expression, ''Fool me once - shame on you, fool me twice
- shame on me'' aptly describes the challenge. We may not be
able to avert an initial loss due to a new method or scheme, but
we can certainly develop systems to prevent offenses that are many
times repeated or even copied.
If you are not yet aware, there exists a solution known as the
Anti-Fraud Exchange that has been highly successful at facilitating
the sharing of fraud data. Rather than being restricted to a single
industry, this system involves sharing incidents of known fraud
across industries. In just the past 12 months, there have been nearly
4,000 exact matches to these incident records ---each match representing
avoidance of a potential loss.
There have been several contributing factors to the overall success
of the Anti-Fraud Exchange including:
- Rules: To maintain the highest data integrity, participants
agree and adhere to a common set of operating rules governing
data submission and usage policy.
- Historical File Search: To detect fraudulent individuals
that have already compromised an institution's defenses, the system
retroactively compares any new fraud incidents to an existing
- Dispute Resolution: Having this process in place gives
consumers an opportunity to resolve any mistakes and establish
that they are the victim, not the perpetrator.
- Victim Protections: Proactively protects individuals
from further misuse of their identity by providing a way to denote
their victim status.
Fraudsters will always seek the path of least resistance. If your
institution is not participating in a shared fraud initiative, that
path could very well lead to your front door.
Primary Payment Systems, Inc. (PPS) offers solutions to detect
high-risk identities, deposits, and payments.
- IDENTITY CHEK is a robust 'CIP' solution integrating identity
validation, logical verification, OFAC screening, and fraud detection
-- including participation in the Anti-Fraud Exchange.
- DEPOSIT CHEK, PRIME CHEK, and DECISION CHEK represent the
largest collaborative effort among financial institutions to prevent
deposit and payment fraud losses. On a daily basis, financial
institutions contribute and share status information on over 200
million draftable accounts, 16 million stop payment records, and
'return' decisions on nearly half of all U.S. checks returned
For additional information on PPS, visit the company web site
or call us toll free at 877-275-7774.
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