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Financial Fraud: Building a Better Mousetrap |
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Written On: November/December 2003 |
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Written By: By Carly West |
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From the inception of money there have always been people around who want more than they have and are willing to go to nearly any length to get more. With the number of forms money comes in—cash, checks, credit cards, etc.—and the advances in technology, these days financial fraud is a mounting concern for consumers, bankers, and retailers a like. “In Washington alone, $50 million per year is lost in financial fraud, not including identity theft,” says Jim Pishue, President of Washington Bankers Association. He goes on to add, “The retail industry loses about $60 million per year.” Those two numbers alone are a clue as to how much of an issue this is, but the events of September 11 helped to bring financial fraud to the front of people’s minds at a national level.
When the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) was passed by the federal legislature shortly after September 11, 2001, it included a lengthy section—“International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001”—which addressed how the United States would take on international financial fraud under the over all goal of preventing further acts of terrorism. Jim Boora, President and CEO of Anchor Bank and AWB Board Member, remarks, “The Patriot Act heightened awareness to identity theft, but financial fraud is something that affects all of us in the industry and has for a long time.”
While the legislation passed in the Patriot Act required banks to institute certain policies pertaining to what is constituted as financial fraud and how to go about prosecuting offenders, specifically on an international level, those in the financial industry here in Washington felt there needed to be more strict legislation on the books on how to deal with this issue at a state level. It is widely known in the industry that until recently Washington state has had some of the most out of date financial fraud policies in the nation. Over the past couple of years this has changed.
Beginning in 2001, the Washington Bankers Association (WBA) launched a comprehensive campaign to attempt to reduce losses seen by all parties of financial fraud. This campaign began with the WBA working along side the Attorney General as well as the House of Representatives and the Senate in the state of Washington to adopt comprehensive legislation on identity theft. With identity theft becoming one of the top means of financial fraud this legislation helped to combine what used to be separate crimes under one category. The work continued last year with WBA joining forces once again with the legislative body in Washington state to pass legislation that strengthens penalties for bank robbers.
Last year also saw the development of the Financial Fraud Task Force formed by Senators Shirley Winsley (R-Fircrest), and Margarita Prentice (D-Seattle). Comprised of 46 voluntary members from credit unions, Money Tree lending company, the food industry, the retail industry, financial institutions, FBI, the Federal Trade Commission, credit card companies, Washington State Retailers, WBA, Senators and Representatives, this is a comprehensive taskforce whose goals are to “talk about financial fraud and identity theft and come up with practices and legislation for stiffer penalties as well as educational programs,” says Pishue. The task force was successful in passing five fraud bills including such topics as production and sale of fraudulent driver’s licenses, the criminalization of possession and/or production of tools used to commit financial fraud (i.e. scanners, skimmers, etc.), and allowing merchants to request additional forms of identification to process credit and debit card transactions.
The hard work on legislation cannot be the end of the discussion on financial fraud, however. As Boora says, “I don’t know about the legislation helping unless we can actually catch and prosecute those committing fraud.” With this in mind, the next step for those on the Financial Fraud Task Force and others with a stake in combating fraud is the launch of a financial fraud alert system by the end of the year. Being launched through the Washington Banker’s Association, the Credit Union League, and Washington Savings League, this system is designed following the system already in use by the Florida Banker’s Association. The purpose of the system is to establish a network where different financial institutions, as well as law enforcement agencies, can share information pertaining to fraud with each other. The hope is that by sharing information it will be easier to link smaller occurrences of fraud and make a bigger picture with a higher over all monetary value making it easier to prosecute. “Often times there are a fraud committed for $2,500 in Bellevue, one for $5,000 in Vancouver, and another for $5,000 in eastern Washington. Individually they are not of much concern, but if linked together for a total fraud of over $10,000 they are much more likely to result in charges being filed,” says Pishue.
In addition to sharing information, WBA is providing law enforcement agencies with free educational sessions on identifying fraudulent activity from some their member bank’s fraud investigators. It is this cooperative effort by both those involved in the fraud alert system and on the Financial Fraud Task Force that Pishue feels is most important. In the past there have been small steps made by individual institutions and/or agencies, but by working together and presenting a united front with strong penalties to back it up; those in the financial industry are looking forward to getting even greater results.
While much work has been done over the past couple of years to strengthen Washington state’s defense against financial fraud, there is still more work to be done. That is why there is likely to be more on this topic in the next legislative session. Meanwhile, those in the financial industry advise to take the extra time to look over bank and credit card statements because even with this legislation there is still the possibility of fraud. Also, Boora advises, “Be careful who you give information to. Especially with the Internet it is easy to become a victim of fraud.” It is the hopes of all involved that by having consumers, retailers, bankers, and law enforcement all working together to catch and prosecute fraudulent activities that Washington state will see its losses due to fraud significantly reduced over the next several years.
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