Reducing Bank Fraud at XYZ Bank through Enhanced Due Diligence Essay Example
Reducing Bank Fraud at XYZ Bank through Enhanced Due Diligence Essay Example

Reducing Bank Fraud at XYZ Bank through Enhanced Due Diligence Essay Example

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  • Pages: 4 (838 words)
  • Published: April 17, 2022
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According to the New York Times, the once respected tellers are now lowly paid and occasionally criminal (1 Feb. 2016). TD Bank, JP Morgan’s Chase Bank and Wells and Fargo have been recent victims of fraud committed by the employees (New York Times, 2016). Occupational fraud in organisations has been on the rise where an average corporate loses 5 percent of its revenue to fraud (DiNapoli, 2008). Instances of fraud that affect banks can range from occupational fraud to cheque kiting, fraudulent loan applications, forged documents and stolen checks.

The Fraud Triangle is a classic model coined by American sociologist Donald R. Cressey that describes and explains the nature of fraud (Ramamoorti, 2008). The first stage is a perceived need solvable by illegal means such as gambling debt. The second stage is an opportunity to commit fraud, which gives a means to defraud the ban


k even by abuse of their position. The final stage is the ability to rationalise the crime, where the criminal justifies fraud as acceptable to his moral compass or his current situation.

According to a Kaspersky Lab Survey, consumers store sensitive personal information like bank account numbers and passwords on their mobile devices, which are vulnerable to phishing. Malware from Google Play that comes as Trojans like Svpeng target Android mobile operating system and makes phones vulnerable to fraudsters.

Mastercard and Visa suppliers are pushing retailers to accept chip and pin cards. Hackers can easily find vulnerabilities in the magnetic strip and exploit the consumers. Skimmers alter information on the card by reproducing the magnetic strip.According to the July 2015 Nilson Report, US accounted for 48.2% of the global payment card fraud.

Scammers use customers’

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naivety including online dating, debt relief scams and money transfer to ask for bank account related information. Banks like ICIC Bank in India have lost customers from phishing related cases, where fraudulent websites look like official websites at first glance.

Executive Summary

Due diligence is an ongoing process that reduces banks reputation, transaction and compliance risks. A customer's business activity, actual type’s transaction and business structure are determinants of the risk they pose to the bank (Council, 2005). To reduce the upsurge of bank frauds at Republic Bank (Grenada) Limited it is crucial for a bank to obtain information from the customer about the purpose of the account, sources of funds and wealth, type of their business and business operations, organisation domicile, banking references or a customer’s occupation. The bank can even seek explanations for noted changes in account activity. IBM SPSS predictive analytics solutions offer predictive capabilities to detect online transaction anomalies (IBM Software, 2010)

The January 2008 Red Flags Rule enforced by the Federal bank regulatory agencies required institutions to implement a written Identity Theft Prevention Program (Federal Trade Commission, 2009). The program was a four step process of identifying relevant red flags, detecting the red flags, preventing and mitigating identity theft and updating/ reviewing that program to determine the warning signs in daily operations
Some EDD responses according to the interviewed members of the Business Support Services and Compliance Departments to cases of fraud can be contacting the customer, closing an existing account, reopening an old account with a new account number, notifying law enforcement or refusal to sell an account to a debt collector. The ABA Deposit Account Fraud Survey indicated that banks prevention measures

in the US stopped $11billion from fraud-related loss.

Fraud starts small, gradually grows until something becomes noticeably unusual (DiNapoli, 2008). However, when auditors, employees, and management of XYZ Bank notice red flags, they should take corrective action immediately to avert possible losses in the future. They can communicate to appropriate personnel without fear of losing their jobs. Additionally, XYZ Bank can also have anonymous forms where employees can tip the employer.

XYZ Bank should ensure that the online banking services have updated authentication software to avoid opportunistic fraudsters who exploit outdated software. Consumers can help banks in avoiding fraud by knowing the Product Disclosure Statements for products like Visa and MasterCard. A reduction in the number of online banking fraud results in lesser reported losses in a financial year. In turn, the financial statements look appealing to the current investors and potential investors of the bank. Pre-employment screening is a vital means for XYZ Bank to curb occupational fraud. Considering most fraudsters have had a long relationship with their employers, it's necessary to ensure ongoing employee monitoring. Evidently, XYZ Bank will significantly reduce bank fraud through enhanced due diligence.


  1. Council, F. F. I. E. (2005). Bank Secrecy Act Anti-Money Laundering Examination Manual. Federal Financial Institutions Examination Council.
  2. DiNapoli, T. P. (2008). Red Flags for Fraud. State of New York Office of the State Comptroller.
  3. Federal Trade Commission. (2009). Fighting fraud with the Red Flags Rule: a how-to guide for business.
  4. IBM Software (2010) .Recognize the many faces of fraud. Business Analytics.
  5. Ramamoorti, S. (2008). The psychology and sociology of fraud: Integrating the behavioral sciences component into fraud and forensic accounting curricula. Issues in Accounting Education, 23(4),



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