Pub. 3 2014 Issue 1

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 12 W IRE TRANSFER FRAUD HAS GROWN to unbelievable levels. It is most often perpetrated by crooks in foreign countries. These international crooks have no fear of punishment. The complicated aspects of cooperation between law enforcement of several countries to catch such crooks results in few being caught. The international crooks that have been prosecuted have, in some cases, received no prison time. Catching the crooks is not the solution. Prevention of losses is the only reasonable solution. Safeguards on the business customers end of the transaction are necessary to prevent these losses. Until the business customer has a stake in that prevention, his convenience will be his largest concern. Preventing these types of losses needs to be a major concern both for banks and customers. Recently a bank received by e-mail a wire transfer request from a long-time, financially solid, well respected customer. In fact, the customer was very well-known to all the bank employees. The bank had procedures to verify any wire request by calling the customer at a pre-verified phone number. However, when the customer did not answer the phone, the bank, desiring to provide excellent service to this customer, chose to send the wire to the foreign destination without doing a confirmation. Three more requests were received the next day which were also processed in the same manner. Later that day the bank learned that someone had taken over the customer’s computer and e-mail account. The wire requests were fraudulent and because the bank did not follow its own procedures, the bank lost almost $1,000,000. Huge wire fraud losses are occurring at banks of all sizes. Banks and their customers have become too comfortable with electronic forms of communication without remembering or realizing how easy it can be to take over a customer’s computer. These sophisticated crooks have been taking over customer’s e-mail accounts, internet banking functions, and/ or even fax document creation which is often done from the SECURITY OFFICER’S BY-WORD SHOULD BANKS STOP DOING WIRE TRANSFERS? Charles M. Towle, KBS President Kansas Bankers Surety, Topeka, Kansas continued on page 14