Bank Fraud and Bank Errors: Two Common Causes of Loss

In today’s digital banking world, instant electronic payments and money transfers are becoming the norm to take care of everything from paying for a haircut to buying shoes online to paying for groceries. Apps like Venmo and Cash App are upending the way people carry around their money and link to their bank accounts.

But with the ease of access and streamlined financial services comes the potential for bank fraud to occur as well as banking errors.

These apps and the new way to spend and send money is still in its infancy, so some kinks have to be worked out in the meantime. But in the meantime, there’s the potential for major losses due to bad actors infiltrating accounts. Then there are the traditional ways fraud can be committed within a bank. Either way, it’s important to be on the lookout for fraud and errors, and be able to tell the difference.

Bank Crime Insurance

For banks, carrying bank crime insurance will help to provide financial help in the time of a claim. Even if a claim is thrown out or reduced, the time it takes to go through litigation and proving innocence can cost major dollars.

It’s important to have a high level of bank crime insurance, like wire fraud protection, in place to combat mistaken claims or legitimate claims of negligence or bank errors. This will help to keep banks from taking too much of a financial and reputational hit, which in the long run matters the most when trying to retain customers and attract new ones.

Bank Fraud

There are many versions of bank fraud, but the most important thing to look out for is the difference between fraud and an error. Fraud comes with bigger complications and is taken more seriously, including putting efforts behind investigation and finding the culprit(s) of the problem at hand.

  • Wire Transfer Fraud: This kind of fraud includes all cases of fraud involving wire transfers or the Internet. The scammers in some cases pilfer the username and password of a banking customer then go on to wire money to themselves.
  • Bank Account Takeover Fraud: A major kind of fraud that can spell long-term trouble for individuals is if someone gets access to their bank account. This happens when someone steals a check or gets ahold of an account through an email scam by using malware to gain access. This kind of fraud will drain someone’s bank account if they don’t act quickly and they may never get their money back. They may also feel inclined to bring charges against a bank, suing for the reason of the bank being negligent.

Bank Errors

Mistakes happen and not everything goes according to plan. Setting up direct deposit or paying a bill online can be seamless, but there are always little moments where something doesn’t add up. Bank errors, while innocent in nature, can create big problems for customers.

  • Transaction Error: This unfortunate instance can happen when someone running a register enters the wrong amount, maybe leaving out a decimal, for example. Suddenly, a $70.00 charge becomes a $700.00 charge. This can be detrimental to someone who may not even have that much in their account. A bank can be on the lookout for something like this and be able to work with the customer if an error has been made.
  • Bank Error in Someone’s Favor: It would seem like a great thing for someone to end up with an additional $23,000 in their account, but what if that happened by mistake? It’s not unheard of for people to see a major financial boom in their account, albeit rare. If a mistake happens where someone ends up getting a giant unexpected jackpot one day, it may not actually be their doing. Banks should be able to work through an investigation to find the reason behind the mishap.

About Financial Guaranty Insurance Brokers

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.