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Inactive Financial Institution Letters

Section 6
Industry Forum

In each issue of the SAR Activity Review, representatives from the financial services industry will offer insight into some aspect of fraud prevention. In this issue, the American Bankers Association (ABA) offers their “Check Fraud Loss Report” from the first quarter of 2000. One interesting statistic is the relatively high percentage of losses due to new account fraud in the western part of the U.S. For more information, please contact John Byrne, ABA Senior Counsel and Compliance Manager, at jbyrne@aba.com.

CHECK FRAUD LOSS REPORT
First Quarter 2000

National Summary

TOP FIVE LOSS CATEGORIES (by Number of Accounts)
  1. Return losses excluding closed accounts, NSFs, and stop payment
    (other return loss reasons) (1)*
  2. Forged maker’s signature (3)
  3. Counterfeit (2)
  4. NSFs (4)
  5. Closed accounts (6)

Last quarter’s rank in parentheses.

  • Check-related losses decreased from $1.12 per transaction account to $0.94 in the first quarter. A year ago, check-related losses totaled $1.26 per transaction account.

  • Compared with the same period a year ago, losses were lower in the Northeast, Southeast, and West, but were higher in the Central and Southwest regions. By type of fraud, lower losses were reported for most categories. The most significant improvement appears to be losses associated with return items.

  • The Central region had the highest losses (at $1.41 per transaction account), followed by the Southwest ($1.18), West ($1.02), Southeast ($0.90), and Northeast ($0.65) regions.

  • “Other return loss reasons” was the leading loss category in the Central, Southwest, and West regions. In the Northeast and Southeast, the top loss category was counterfeit. A year ago, the leading loss categories included counterfeit (the Northeast) and “other return loss reasons” (all other regions).

  • Combining all classifications, losses per case averaged $1,838, down from $2,007 in the fourth quarter and $1,972 a year ago. Losses per case averaged $1,307 in the West, $1,649 in the Southwest, $2,425 in the Southeast, $3,028 in the Northeast, and $3,185 in the Central region.

  • New account losses amounted to $0.19 per transaction account or $6.04 per new account opened, compared with $0.31 and $8.01, respectively in the fourth quarter, and $0.38 and $8.70, respec-tively, a year ago. Except for the West, all regions reported a decrease in new account losses in the first quarter. The West experienced an increase in new account losses per new account opened.

  • Nationally, 20 percent of fraud losses were associated with new accounts, a substantial improve-ment from the 30 percent in the first quarter 1999. By region, losses attributed to new accounts ranged from 7 percent in the Central region to 25 percent in the West.

Survey results reveal that losses associated with true name fraud appear to be rising, particularly in the Northeast.

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Last Updated 11/17/2000 communications@fdic.gov

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