Bank fraud is a form of crime whereby one uses unlawful means to acquire assets, money or anything else held or possessed by a financial institute. It can as well mean obtaining money from account holders by deceptively posing as a bank or other financial establishment. However, that is not to mean that financial institutions are the only victims since many people also fall victim of financial losses that are instigated by bank fraud each year. In most cases, a bank fraud is considered a felonious crime. In some countries like the United States, bank fraud it is a serious problem that causes millions of dollars in damages annually and therefore a federal offense. This paper discusses the methods that the criminal uses to commit their crimes as well as the measures taken to prevent them.
Methods of Banking Fraud
There are many types of duplicitous activities that take place in the world of banking. Normally, the criminals have numerous diverse methods that they use to steal the information. These methods include:
Phishing is one of the common and fastest increasing online cybercrime method used to steal private information. The impostors use phishing in order to gain access to an individual’s personal information. Usually, they use bank card phishing so as to secure a customer’s bank card as well as PIN code. They may ask the victim to replace the bank card through an email or a message. In other cases, they can send a message to the customer telling them that their bank card is no longer valid. They then provide a link that directs to a false website where the victim is asked to send his or her bank card specific details including the PIN code. Once the fraudster gets hold of the bank card and the PIN code, it becomes easier to steal the money. As well, the information which is stolen can be used to carry out identity thefts. By this, the hacker can disguise as the one whose information he has gotten and perform various activities under the victim’s name.
This is a form of credit card stealing whereby, the criminals use a very tiny device known as skimmer to illegally obtain credit card data in a genuine debit or credit card transaction. It is one of the slightest frauds that can happen and the most difficult to notice. The skimmer usually skims a credit card and keeps the information in the magnetic strip. The credit card skimming victims are fully blindsided by the stealing in a way that they only detect money withdrawn from their accounts or fraudulent charges on their accounts while still in possession of their cards. Once the card is swiped through the skimmer, it gets hold of it and stores all the details in the card’s magnetic strip (Fell, 2017).
The credit card skimmers are normally positioned over the card swipe device on automated teller machine. When the card is slide into the automated teller machine, one is innocently sliding it through the forgery reader which skims and keeps all the data on the magnetic strip. The criminals may then set a small unnoticeable camera close to record the PIN as it is entered. This gives the criminal all the information required to withdraw money from the cardholder’s account as well as making counterfeit cards. Once the information is stolen from the credit card, the criminal may create duplicated credit card so as to make acquisitions in hoard, sell the information on the internet or else use the account to make online procurements.
This is a software that is projected to impair or disable computers as well as the computer systems. Malware affects the usual computer activities and steals the information. The imposters are gradually turning to banking malware as well as computer viruses explicitly to target people banking online. Generally, duplicitous payment orders are acquiesced or personal information is stolen without noticing. The fraudsters normally use this method in order to obtain cash out of one’s account as well as committing identity theft (Wells, 2017).
In most cases, malware is usually veiled in an open software that is downloaded from the internet for instance, a program or file such as video, music or a peer-to-peer transfer system. When one visits such websites, a pop up message may appear stating that it has found a virus on the computer. One may therefore install a free virus scanner thereby getting an email that appears to be from the bank requesting to connect the attached update so as to plug a hole in their internet banking security. When one gets a video on the internet, a special plug-in has to be installed for it to play. As well, an e-mail with really great offers may tempt someone open the photos and the computer gets infected with malware (Loader & Thomas, 2013).
This type of fraud involves a malicious computer software that allows the hacker to attack businesses that have online checking account with the bank. The impostor gets access to the bank’s computer or business computer and acquires the user identification as well as the PIN and then transmits numerous wire transfer orders from the victim’s checking account that are owed to financial records at other faraway United States banks. The people involved in the scam speedily wire the finances to a distant bank for credit into a customer account. Despite the fact that banks usually put balances and checks in place, there is the risk that the people operating within the bank may try to use counterfeit documents which demand a bank shareholder’s money be connected to another bank normally an offshore account in far-off foreign country. However, the risk may be great when dealing with Internet banks (Fell, 2017).
An individual may transmit a wire transfer from one country to another. Since this only takes a few days for the transmission to clear and be free to withdraw, the other person may be able to withdraw the money from the other bank. A corrupt cashier may authorize the withdrawal given that it is in awaiting status which then the other person stops the wire transfer and therefore the bank takes a financial loss. In other cases, fraudster may create fake profiles on online socializing sites, and public interacting sites with intention of meeting potential scam victims. They build online relationships and convince the victims to send money to them for various reasons such as charity, medical expenses, school expenses and so on.
This is a method where the cyber crooks make a direct contact with someone using phones or emails. They try to gain someone’s trust and once they are successful, they get the information they require since it is very easy get basic information about someone from the Internet (Wells, 2017). The cyber criminals try to befriend the victims using this information as the base and then disappear leaving them susceptible to different monetary damages either directly or indirectly. They can secure loan under the victim’s name or even sell the information therefore, one should be very cautious when dealing with strangers both on the internet or phone.
Methods that can be used to Prevent or Stop Bank Fraud
Prevention will always remain the best line of defense against cyber criminals. The banking industry has developed some prevention tools which include:
According to Herley, (2014), online bank fraud can also aim at the banks’ customers. In this case, making sure that online banking customers have an informed protection on the computer or the devices they use for online banking is the best defense against probable future attacks. Therefore, users should be urged to have a conversant firewall and anti-virus software on their home computers. Installing software patches and updates regularly to keep security as current as possible is another key preventive measure for the users.
Antivirus software comprises of programs that tries to detect, prevent and remove computer viruses as well as other spiteful software. Anti-spywares on the other hand are used to regulate backdoor program as well as other spy wares to be connected on the PC. Internet Service Providers as well should deliver a high level of security at their servers with the purpose of keeping their customers protected from all forms of viruses as well as malicious programs (Herley, 2014).
The science of encoding and decoding information is known as cryptography. This method of cybercrime prevention is very essential as it uses algorithms in order to rearrange the bits that denote the information in a manner that only the sanctioned users can arrange them to get the genuine information. Mostly, cryptographic procedures make use of arithmetic in order to attain successful reordering. Most frequent cryptographic models are free whereby, the procedures are identified and issued but the ingenious mathematics make it impossible to interpret the shuffled bits (Loader & Thomas, 2013).
Organizations such as banks should add extra layer of defense against malware using a technique which is known as threat emulation in order to lessen this risk. This helps examine the files transmitted in emails for virus-like behavior and separates any doubtful file before they get into the employees’ e-mail inboxes and risk infecting the system through an unintentional click.
Financial establishments should focus on providing their clients with a reliable and safe process of validation that reduces potential possibilities of attack particularly those beyond the control of the user or the bank. Getting to know the types of attacks that can happen is a necessity for determining what authentication methods are required. Using unique pictures or images as a shared secret to detect a server before the user enters their password is also necessary.
In conclusion, it can be seen that the effect of frauds on banks as well as the financial cost of frauds can be enormous in terms of possible distraction in financial institutions as well as the payment system. In addition, frauds can have a possibly devastating upshot on confidence in the banking system and may even harm the reliability and solidity of the economy. It can destabilize the central bank’s managerial role and even generate social conflict as well as bringing about political upheavals. In the case of an individual, it is important to protect cash from online theft, identity theft and other forms of fraud by applying basic safety measures such as destroying account statements, having multifaceted PINs, protecting the PIN and only performing online and mobile banking through protected internet connections.
Fell, J. (2017). Cyber-crime-History: Hacking through history. Engineering & Technology, 12(3), 30-31.
Herley, C. (2014). Security, cybercrime, and scale. Communications of the ACM, 57(9), 64-71.
Loader, B. D., & Thomas, D. (Eds.). (2013). Cybercrime: Security and surveillance in the information age. Routledge.
Wells, J. T. (2017). Corporate fraud handbook: Prevention and detection. John Wiley & Sons.
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