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

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.
Conclusion

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.

References

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. www.mindstreamanalytics.com/wp.../07/Recognise_the_many_faces_of_Fraud.pdf
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),
   

521-533.