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FDIC Consumer News - Summer 1998
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Fraudulent Internet Banks
The FDIC has developed a new, user-friendly service that enables Internet users to check the validity of a bank on the Net and to report suspicious sites to the FDIC via e-mail. Just go to the FDICs Suspicious Internet Banking site. (In the spring 1998 issue of FDIC Consumer News, we said the new service was on the way.)
The Suspicious Internet Banking site gives you new ways to avoid being victimized by a fraudulent Internet operation that may be luring innocent victims with unusually attractive offers, such as 20 percent interest on a deposit (which you may never see again) or an unbelievably good deal on a credit card (perhaps just a ploy to get you to divulge personal financial information that later can be used fraudulently).
Its true that an Internet bank may be able to offer consumers higher interest rates on deposits due to their lower overhead costs, but their costs are not so low that they can pay 20 percent when everyone else is paying six percent, says Jeffrey Kopchik, an attorney in the FDICs Office of Policy Development. Our goal is to protect consumers by finding these sites and getting them off the Net before they do any harm.
The FDICs new Suspicious Internet Banking site can help in two main ways if you want to shop the Internet for deposit interest rates, credit cards or other banking services.
1. You have access to a database of legitimate banking institutions. Lets say you find a bank Web site thats offering something that sounds too good to be true. As a first step, check the Special Alert list on the Suspicious Internet Banking page. There we name banks already identified by government authorities as not authorized to conduct banking business (or otherwise being fraudulent).
Also, you can click on FDIC Institutions Search Engine to check out our database of banks and savings associations that are legitimately chartered and FDIC-insured. Why is this list helpful? Because to conduct banking business in the United States, a bank or savings association must get permission from a federal or state agency. So, if you dont find an Internet bank in our database, be very careful before sending money or doing any business with it. (Note: Credit unions arent in the FDIC database. To check out a credit union that has a Web site, contact the National Credit Union Administration.)
2. You can tip us off to suspicious Web sites and help the FDIC try to get fraudulent banks off the Internet. Lets say you dont see your bank Web site listed on either of the lists mentioned previously. You may have found a fraudulent Internet bank unknown to the FDIC and law enforcement agencies. You can help bring the bogus bank to the FDICs attention by filling in an online report form and e-mailing it to us. (Just click on Report Suspicious Internet Bank Sites.) The FDIC will investigate what youve found.
If it turns out that the Web site is fraudulent, the FDIC will work with federal law enforcement agencies to get that site off the Internet. Kopchik explains that shutting down a fraudulent Web site isnt always easy, especially if it originates outside of the U.S. The FDIC will add the entitys name to our Special Alert list, so that other consumers will be warned not to do business with it.
John Jackwood, Special Assistant to the Director of the FDIC Division of Compliance and Consumer Affairs, sums up the benefits of the new Web service this way: An Internet user now has a simple and quick way to help guard against becoming a victim of Internet banking fraud. At the same time, one consumer can help many other consumers by reporting suspicious banking activity on the Internet to the FDIC.
In a related development, the FDIC recently began a pilot program to search the Internet for institutions that may be misrepresenting themselves as legitimately chartered or federally insured. Employees from the FDIC, as well as from other federal and state bank regulatory agencies, spend time each week surfing the Net looking for fraudulent banks. Suspicious banks will be referred to the appropriate law enforcement authorities and, if possible, put out of business. Their names also will be added to the FDICs Special Alert list.
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