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Banking fraud is a criminal act where a criminal uses illegal methods to obtain money or other types of financial assets. Nowadays, there are dozens of different kinds of financial fraud. In fact, in 2021, the Federal Trade Commission, also known as FTC, received 2.8 million fraud reports. As the FTC official website mentions, this represented a more than 70% increase compared to the previous year.
Knowing how some of the most common types of fraud work and how to avoid them can help keep your financial future and your accounts protected. In this article, we go through some typical ways fraudsters try to steal money and how to deal with those types of threats.
What Are The 5 Most Common Types of Banking Fraud?
Here are some of the most common types of banking fraud:
1. Phishing Emails
This is one of the most common email scams. In this case, you receive an email claiming to be from a bank, government agency, or some company.
An official logo very often accompanies this email to make it look genuine. If you click on the link in the text, it might install malware on your computer. With this malware, a fraudster can gather personal information from you to access your bank account.
Some more advanced fraudsters design fake online banking pages to trick people into entering their usernames and passwords, which they can use later to steal money. This is one of the drawbacks of online banking.
2. “Advance Fee” For Winning Large Amount
This is another banking fraud, often initiated by email. In this case, fraudsters ask victims for assistance in recovering their inheritance or moving a large amount of money out of their country.
This assistance involves making an advance fee payment for notary costs, bank processing fees, or tax payments. In return, they promise to give them a certain percentage of this large amount of money.
More advanced fraudsters might even call you on the phone to build some trust. If you make this payment, they will disappear, and you will lose your money for no measurable gain.
3. Vishing Scams
This name represents a shortened version of voice phishing. In this case, scammers call their victims, claiming to be a representative of a bank, credit union, government official, or insurance agent.
They might also have information about the victim, such as name or address. Scammers try to trick their victims into giving personal information, as well as their bank account details and passwords.
The scammers can use legit apps such as Zelle to transfer money to their accounts. In some cases, it won't be easy to get your money back.
After that, they use this information to steal money from their victims.
4. Identity Theft
This involves identity theft. If fraudsters find your card or steal it from you, they can not simply withdraw money from ATM since they do not know your PIN.
However, they can make some purchases using pay wave technology at the register. Alternatively, they can enter their card details online and make some online purchases.
Another type of credit card fraud is when fraudsters open a credit card account in your name, change your billing address and use this card for cash withdrawals and purchases.
5. Credit/Debit Card Skimming
Some fraudsters are installing small cameras at ATMs to gather credit and debit card information from their victims and their passwords when customers withdraw or deposit cash on ATMs.
Once they gather enough information, they can use those details to steal some funds from the bank accounts tied to debit and credit cards.
Tips to Protect Your Bank Account
Despite all those threats from fraudsters, which we discussed above, some ways can help you reduce your risk exposure and keep your accounts secure. Here are some of those tips:
Tips to Protect Your Bank Account
Be cautious when clicking e-mail links
Do not provide any banking information over the phone
Consider Freezing If You Needed
Create strong passwords
Before clicking any links on your email, it is vital to ensure the email is genuine. One way to do this is to check the details of the sender.
It might have the same logo as the company it claims to represent, but in most cases, with scammers, the email will be different and belong to the company they claim to represent.
Before entering your username and password, checking whether the online banking website is genuine is important.
It is important to remember that your bank will call you to ask you for your account number, social security number, access codes, and other types of sensitive information.
Bank of America has warned its clients not to provide financial or personal information when receiving unsolicited calls. If you receive those types of calls and questions, you are most likely dealing with fraudsters who steal your identity and drain your bank accounts for financial gain.
It is always helpful to review your financial statements for personal finance analysis and security reasons. If you discover an unauthorized transaction, you must block your credit or debit card in question as soon as possible. You can also set up credit card fraud alerts.
In this way, criminals can no longer use your card for purchases or ATM cash withdrawals. Nowadays, many banks allow their clients to block their cards using online or mobile banking app features.
If you believe that your identity has been stolen, then just blocking your card might not be enough to ensure the security of your finances. The fact of the matter is that in the case of identity theft, criminals may try to apply for credit cards in your name.
After that, they can change the billing address and use that card for purchases and card withdrawals. To prevent that, you have the option to freeze your credit. This procedure is free; in this case, nobody can take out any type of loan in your name. Once you get your financial affairs in order and settle your security concerns, you always have the option to unfreeze credit.
It is important to remember that at some point, hackers might try to get access to your online banking application, where they can take full control over your bank accounts. This is why it is essential to keep strong passwords. Passwords like 1234, 5555, or 54321 are too easy to guess.
Many online security experts recommend having at least eight characters in passwords and using both letters and numbers. This can make it difficult for fraudsters to get their hands on your bank accounts.
What To Do If I Have Been Scammed?
If you believe that you are a victim of a scam, there are several things you can do to protect your finances, try to reclaim losses, and make sure that you do not lose any more money. Here are some of the tips for this situation:
- Stop communicating with a scammer – At the first stage, it is important to cut your losses as soon as possible. The fact is that some scammers might try to convince you to send them more money. It is important not to believe their promises and stop communicating with them. Yes, losing money is always painful, but in this case, you can at least limit the damage and avoid further losses.
- Report the scam to FTC – You can report the scam to Federal Trade Commission, also known as FTC, over the phone or online. This does not guarantee immediate results, but as more reports come in, it becomes more likely for law enforcement to track those scammers down so that they can answer for their crimes and stop their illegal activities.
- Ask your bank to reverse the transaction – This does not necessarily guarantee that you will get your money back, but in some cases, it might work. You can call your bank or visit a bank branch in person and tell them that you were a victim of a scamming operation and ask them to reverse the transaction.
What To Do If You Can't Open a Bank Account Because of Fraud?
There can be several reasons why you might be rejected to get a bank account. This can happen due to a history of misusing bank accounts or poor credit rating.
However, in some cases, somebody might have stolen your identity and applied for a credit card in your name and, after withdrawing or spending those funds, did not make any payments and consequently damaged your credit rating significantly.
Despite all of the difficulties with this situation, there are still some things you can do to retake control of your finances and get a bank account.
- Report identity theft – You can report identity theft After filling in all the required details, you can also get a recovery plan. This is key for regaining control and stopping criminals from stealing money from you.
- Apply for an account with a different bank – It might be worthwhile to apply for a checking account with another bank. Generally speaking, banks are always looking for new customers, and chances are that at least one of them might decide to let you open a checking account, especially if you explain to them that you are a victim of identity theft.
You can report a fraud on your bank account on the Federal Trade Commission website, also known as FTC. Besides other activities, Federal Trade Commission regularly collects and analyzes all financial fraud reports. In addition to that, you also have an option to report fraud over the phone.
At the same time, it is crucial to alert your bank about fraudulent activities on your bank accounts to take timely measures to limit the potential financial damage from those illegal activities.
There are several different types of check frauds criminals use. One of the methods is to take your check, forge your signature and write your name and other details as a receiver. As a result, they can cash in this check at the bank and use your money to buy goods and services.
According to the SQN Banking Systems website, some criminals go as far as to use different chemicals to wash away some of the information written on the check. After that, they can replace the receiver's details with their name, allowing them to cash in a check.
Banks always have the ability and right to freeze any bank account if they suspect that the account itself is used for illegal activities or money laundering.
This might not happen 100% of the time, but if mail fraud occurs, it is likely that sooner or later bank accounts will be frozen sooner or later.
According to US Federal law, your liability in the case of fraudulent charges on your credit or debit cards is limited to $50. However, one necessary condition is that you must report this fraudulent charge within two business days.
On the other hand, if you are a victim of a scam, the banks are not under a legal obligation to refund you all of the losses. However, in some cases, it might be possible to reverse the transaction and recover your lost funds in the process.
There are many ways how criminals can steal money from your account. For example, if they have all your credit or debit card details, they can make purchases in your name and receive goods and services.
At the same time, if they can access your online or mobile banking application, they can transfer funds to their accounts or make bill payments for themselves.
The potential financial damage depends on the type of banking details the scammer has. For example, in some cases, they might be able to steal money from your credit or debit card or make purchases.
In the worst-case scenario, they can take over control of all of your accounts and transfer funds to their own bank accounts.
If you think that scammer has your bank details, blocking your credit and debit cards as soon as possible is important. It might also be useful to freeze your credit to avoid further losses.