Banking fraud

Presentation of the Issue

Banks are not being prepared for their client’s online bank accounts to under come frauds. Not all banks have good security systems and blame their clients with the benefit for thief.

               An opportunistic thief who stole £ 14,000 from a woman’s bank account after she failed to log out of a public computer has avoided a jail term.¹ When the woman complained to the bank, they refused to reimburse her because of her “negligence” in failing to log off.¹

               The negative impact of this issue shows that, online banking fraud increased 55 percent to £39 million in the first six months of the year compared to the same period a year ago, said Financial Fraud Action U.K.(FFA).² The main issue consumers have with online banking is security.³ The head of the U.S. Federal Bureau of Investigation has stopped banking online after nearly falling for a phishing attempt.4

               Positive impacts of using online banking are; elimination of paper³, cheaper than traditional methods, available 24/7 without the need of going out from home, fast payment for delivery services.

Technology Background of the Issue

E-banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet.5 Hundreds of financial institutions offer online banking services, making it possible to pay bills, check account balances, and transfer funds using software.6

Customers access e-banking services using an intelligent electronic device, such as a personal computer (PC), personal digital assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone.5 While the risks and controls are similar for the various e-banking access channels, this booklet focuses specifically on Internet-based services due to the Internet’s widely accessible public network.5 Failing to log off in public places, leads to online banking fraud. Only with the help of the court people can get their money back. The court heard that the woman had used the internet banking computer to transfer £ 1,000 from her account, then left believing she had logged out correctly.¹

A widely know online banking fraud is phishing. In phishing scams, criminals send spam e-mails to their victims, hoping to track them into entering sensitive information such as usernames and passwords at fake Web sites.4 Phishing has evolved into a big problem, not just for banks, but for online retailers and even providers of consumer Web applications such as Facebook and Yahoo.4 Nonetheless, most bank security measures are defeatable if a person fails victim to a phishing scam and sends a fraudster their authentication credentials.²

Impact of the Issue

               Online fraud increased very much over the last year. The rise in banking fraud comes as U.K. banks have taken more rigorous measures to combat online fraud.² While U.S. banks have often only require a log-in and password to get access to online banking, U.K. banks often have several more steps.²

               The most known fraud is phishing. It has become widely popular not only present in online banking. People lose a great amount of money with this fraud, due to the fact that they are not aware there are the victims of phishing. If the fraud is small usually clients to do not recognize it, and it is harder to get their money back from the bank. Only if the phishing is done for a big scale of consumers, it can be identified by the bank software. FBI Director Robert Mueller said he has recently came “just a few clicks away from falling into a classic Internet phishing scam” after receiving an e-mail that appeared to be from his bank.4 “Far too little attention has been paid to cyber threats and their consequences,” Mueller said.4 “Intruders are reaching into our networks every day looking for valuable information.4 Unfortunately they’re finding it.”4

               Another fraud connected with online banking is the usage of online banking on public computers. This increases the probability of online banking fraud. This was the case of the woman, whose money have been stolen by Max Glover, who observed her and transferred money from her account onto his. She later discovered that her account was overdrawn and that money have been transferred without her knowledge.¹

But data such as log-in can be saved on the computer’s web site history in form of a cookie. A small data file created by a Web server that is stored on your computer either temporarily for that session only or permanently on the hard disk (persistent cookie).7 Cookies provide a way for the Web site to recognize you and keep track of your preferences.7

Although online banking should be secure it still contains many positive impacts. It is very ecological, due to the fact that paper is not used. It is cheaper than the standard bank account because the customer does not pay for the worker as he does everything by himself. It is easier and faster for buying products from the Internet. Online banking is available from every place on earth, 24/7, so the client does not need to look for his bank on holidays, but he can easily transfer the money.

Solutions to the Problem Arising

               The problem of the woman in my article can be easily eliminated by not using online banking in public places. If there is such need, the customer should remember to log out and clear the history and the Internet.

               The solutions arising from my issue, should be implied by banks. They should install better security software, so that online banking fraud will be eliminated or at least reduces. A U.K. security company is giving to banks, for free, security software that it says can block malicious software from manipulating online banking transactions or stealing data, even if the computer is infected.9

Online banking should be fast, easy and secure.8 Firstly and foremost, the site should be secure with strong validation process and data encryption.8 For example, NatWest- owned by the Royal Bank of Scotland Group- requires customers to enter their birth date plus a unique four digit code.² During the second step, a person is prompted to enter some digits of a separate four-digit PIN (Personal Identification Number), which is not the same as the person’s at ATM card.²

Even if banks install new security software, it won’t eliminate online banking fraud completely. This can only cause reduction, because hackers will unlock the codes to the online bank software. This will take time but as the new security system is created by human it can be unscrambled by them.

Bibliography

¹ http://news.bbc.co.uk/2/hi/uk_news/scotland/edinburgh_and_east/8017138.stm

² http://www.pcworld.com/businesscenter/article/173267/online_banking_fraud_in_the_uk_hits_a_new_high.html

³ http://articles.moneycentral.msn.com/Banking/BetterBanking/TheTop10OnlineBanks.aspx

4 http://www.pcworld.com/article/173319/citing_cybercrime_fbi_director_doesnt_bank_online.html

5 http://www.ffiec.gov/ffiecinfobase/booklets/e_banking/ebanking_00_intro_def.html

6 Tomorrow’s Technolgy and you pg.164

7 http://www.pcmag.com/encyclopedia_term/0,2542,t=cookie&i=40334,00.asp

8 http://www.moolanomy.com/1817/best-online-bank-for-savings-and-checking/

9 http://www.pcworld.com/businesscenter/article/181310/software_shields_online_banking_on_infected_pcs.html