The Evolution of Bank Fraud

Fraud first hit financial institutions' radar 20 years ago. This timeline, provided by Wachovia Senior Vice President Shirley Inscoe, tracks how fraud has spread and how banks have responded.

1984

• Check fraud rare
• No prevention systems
• No tracking

1989

• Losses start increasing — (charge-offs for overdrawn accounts)
• Banks start implementing new account screening tools to control DDA overdraft losses
• Actual check fraud still relatively rare
• Banks focus on catching "amateur fraudsters" but hold out no hope of stopping rings or "professionals"

1994

• Check fraud begins to rise
• Large banks begin implementing additional new account screening systems to curtail fraud; identity theft begins rising
• 13 of the largest banks collaborate to begin sharing loss data and discuss prevention strategies

1996

• Large banks begin implementing more sophisticated systems to monitor transactions
• Fraud losses are increasing so rapidly, banks prioritize fraud as a major issue
• More banks create cross-functional steering committees to address fraud or create centralized units to do so

1998

• Larger banks experience major fraud losses
• BITS creates the Fraud Reduction Steering Committee
• Technology is the fraudster's best friend (color copiers, PCs, etc.)

2000

• Losses for big banks begin trending down as a result of industry collaboration (sharing account data, best practices, etc.)
• Losses for smaller banks begin to rise
• Fraud attempts continue to skyrocket and ring activity becomes more prevalent, but prevention systems are working well

2001

• Fraud losses at largest banks continue to trend downward
• Attempts continue to skyrocket and ring activity becomes more prevalent
• Community banks and credit unions begin to experience more fraud
• Fraud occurs more rapidly than ever before via the Internet and other electronic means
• 9/11 brings search for terrorist funding techniques into focus

2004

• Fraud rings are more prevalent, sophisticated, more dangerous
• Some have political agendas — investigation has proven that "fraud," not just "money laundering," often funds terrorist cell activity
• Fraud attempts are initiated through every payment system and delivery channel
• Largest banks are integrating results from various fraud filters to realize operating efficiencies, handle fraud hits more accurately, etc.