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SECURITY, FRAUD, AND ETHICS

SECURITY, FRAUD, AND ETHICS. 11. 11.1 Robbery Prevention and Response 11.2 Ethics in Banking 11.3 Fraud and Scams 11.4 Identity Theft. 11.1 ROBBERY PREVENTION AND RESPONSE. GOALS. Discuss how security measures can prevent bank robbery.

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SECURITY, FRAUD, AND ETHICS

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  1. SECURITY, FRAUD, AND ETHICS 11 11.1 Robbery Prevention and Response 11.2Ethics in Banking 11.3Fraud and Scams 11.4Identity Theft

  2. 11.1ROBBERY PREVENTION AND RESPONSE GOALS Discuss how security measures can prevent bank robbery. Describe what bank employees should do during a robbery.

  3. TERMS • Bandit barrier

  4. SECURITY AS PREVENTION • In 2007, there were 7,175 bank robberies in the U.S. • A 5 percent decrease from the previous year • A bank robbery is a federal offense.

  5. PHYSICAL SECURITY • Building design • Surveillance and alarm technology • Safety devices • Bandit barrier • A bulletproof plastic shield that can be positioned in front of a teller’s station • Transportation security

  6. BEST PRACTICES RECOMMENDATIONS • “Best practices” • Help deter bank robberies • Aid in the apprehension of bank bandits • Training is the core of preventing robbery.

  7. checkpoint What factors do you believe are responsible for bank robberies?

  8. ROBBERY PREPARATION • Training should include these instructions: • Remain calm • Obey the robber’s instructions • Trigger foot-pedal or bill trap alarms and security cameras as soon as possible • Use decoy or marked money, or specially prepared dye packs

  9. Call 911 as soon as reasonably possible • Keep anything that might provide fingerprint identification • Note the physical characteristics of the robber or of the get-away vehicle • Write a description of the robber as soon as possible

  10. Bank employees should always remain alert to subtle changes in co-workers’ behavior. • Changes could indicate that co-workers are dealing with a robber.

  11. TYPES OF BANK ROBBERIES • Morning glory • Before bank opens • Robbers break in or seize employees outside bank • Takeover • While bank is open • Multiple robbers carry weapons and invade the bank • Note passing • While bank is open • Robber passes note demanding money to employee

  12. THE FDIC AS A SAFETY NET • The FDIC • Insures deposits up to $100,000 per depositor • Emergency Economic Stabilization Act of 2008 • FDIC deposit insurance increased to $250,000 per depositor • Through 2009

  13. checkpoint Why is it important that bank employees not resist a robbery attempt?

  14. 11.2ETHICS IN BANKING GOALS Explain how ethics applies to financial institutions. Identify ethical dilemmas that occur in banking.

  15. TERMS • Ethics • Code of ethics • Conflict of interest

  16. ETHICAL BEHAVIOR • Ethics • The process of determining standards and procedures for dealing with judgmental decisions affecting other people • Ethical dilemma • A problematic situation • Makes a person questions what is the “right” or “wrong” thing to do • Code of ethics • A statement adopted by a businesses to guide employees in taking appropriate actions in critical situations that could reflect on the organization

  17. IMPORTANT ELEMENTS IN A CODE OF ETHICS • Confidentiality • Dishonesty and fraudulent behavior • Representation of the institution • Gifts

  18. Financial management • Conflict of interest • When two interests are at cross-purposes • Compliance with laws and regulations • Responsibility for violations

  19. checkpoint What is the purpose of a code of ethics?

  20. ETHICAL ISSUES IN BANKING AND THE CORPORATE WORLD • PNC Financial Services Group Inc. • U.S. Bancorp • Citigroup Inc. • Enron Corporation • Merrill Lynch & Co., Inc. • Arthur Andersen

  21. SARBANES-OXLEY ACT OF 2002 • Established a new Public Company Accounting Oversight Board • Protects corporate whistle-blowers • Makes security fraud a criminal offense • Places restrictions on loans by corporations to their executives • Eliminates interest free loans

  22. EVERYDAY ETHICAL DILEMMAS IN BANKING • All bank employees face ethical dilemmas. • Dishonest coworkers • Mistakes made honestly but which require correction • Insider information • Misleading information

  23. ETHICAL BEHAVIOR AS THE FINAL DECISION • Ethics should be the ultimate factor in making decisions in the financial world. • Bankers should ensure that sufficient information about the bank’s products and services is available to customers. • Bankers should offer customized advice to customers.

  24. checkpoint Why is it necessary to provide special protection to corporate whistle-blowers?

  25. 11.3FRAUD AND SCAMS GOALS Identify types of fraud that are committed against banks. Discuss mortgage-based scams.

  26. TERMS • Fraud • Check kiting • Forgery • Check counterfeiting • Scam • House flipping • Straw buyer

  27. FRAUD RELATED TO BANKING • Fraud • A deception deliberately practiced to secure unfair or unlawful gain • Online fraud in the U.S. in 2007 • $240 million • $2,500 was the average per victim loss • Most frauds are crimes of opportunity

  28. COUNTERFEIT CURRENCY AND NEW DESIGN • Estimated losses in the U.S. in 2006 due to counterfeiting • $62 million • Currency security features • Watermark • Security thread • Color-shifting ink

  29. CHECK FRAUD • Recently postal inspectors seized more than $2 billion of fake checks. • Check kiting • Opening accounts at two or more institutions and using “the float time” of available funds to create fraudulent balances

  30. Money laundering • Intentionally concealing illicitly acquired funds by converting them into seemingly legitimate income • Forgery • Counterfeiting a check or other document with the intent to defraud

  31. Counterfeiting and alterations • Check counterfeiting • Either entirely creating a check with desktop publishing equipment or simply duplicating a check with advanced color photocopiers • Alteration • Removes or modifies handwriting and information on the check • Paperhanging • The act of purposefully writing checks on closed accounts or reordering checks for closed accounts

  32. SIGNS OF COUNTERFEIT CHECKS • Lack of perforations • A low number • No address for the customer or the bank • Stains or discoloration • Irregularities in the Magnetic Ink Character Recognition coding number

  33. CONSUMER TIPS FOR PREVENTING CHECK FRAUD • Use checks that have built-in security features. • Don’t have your social security number imprinted on checks. • Don’t endorse a check until just before you cash or deposit it.

  34. Don’t leave spaces on checks. • Reconcile your account regularly. • Shred statements, canceled checks, ATM slips, and credit card receipts. • Never give out account information or numbers to anyone you don’t know or of whom you are not certain.

  35. checkpoint How has computer technology affected counterfeit checking scams?

  36. MORTGAGE-BASED SCAMS • Scam • A slang term for something that is fraudulent or a swindle

  37. ILLEGAL MORTGAGE PRACTICES • Between 2003 and 2007, mortgage fraud rose from 7,000 cases to 47,000 cases.

  38. House flipping • The practice of buying a house for below market value and selling the house at or above market value • Straw buyer • Someone who agrees to use their personal information to buy the home at a falsely inflated price

  39. OTHER MORTGAGE-BASED SCHEMES • Builder-Bailout Schemes • Seller Assistance Scams • Short-Sale Schemes • Foreclosure Rescue Scams

  40. checkpoint What is the necessary step in the process to ensure that an illegal house flipping scheme achieves a profit?

  41. 11.4IDENTITY THEFT GOALS Explain the concept of identity theft. Describe various identity theft methods. Discuss identity theft prevention.

  42. TERMS • Spam • Phishing • War driving • Sniffer program • Fraud alert • Credit freeze

  43. AN OVERVIEW OF IDENTITY THEFT • Categories of identity theft • Existing Credit Card Only • Existing Non-Credit Card Account • New Accounts and Other Frauds

  44. COSTS OF IDENTITY THEFT • $500 is the median value of goods and services obtained by identity thieves • Other costs include • Attorney fees • Loss of salary • Loss of time

  45. checkpoint What are the three general categories of identity theft?

  46. METHODS FOR STEALING IDENTITIES • As technology evolves and as customer payment systems change, new methods of obtaining personal information become available.

  47. MANUAL WAYS TO COMMIT IDENTITY THEFT • Telephone scams • Mail theft • Trash retrieval • Observation

  48. ELECTRONIC WAYS TO COMMIT IDENTITY THEFT • Spam • Junk e-mail • Phishing • The act of sending a user an e-mail falsely claiming to be a legitimate enterprise in an attempt to solicit private information • Hacking • Fraudulent HELOC Accounts

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