![]() The refusal of many large banks to even respond to small banks' so-called fraudulent returns claims led the trade group to ask for joint supervisory guidance. The Independent Community Bankers of America said incidents of check fraud more than doubled last year, with 501,477 incidents reported in 2022 and 249,812 incidents reported in 2021. ![]() "From a deposit perspective, some banks do not perform the same level of due diligence because the bank assumes the risk of loss to them is zero or minimal, and fails to consider losses due to fraud incurred by the counterparty banks. "Clearly the problem with Know Your Customer rules for banks is that if someone applies for credit - like a credit card or a personal line of credit - a lot of due diligence goes into making sure we know the customer's identity, because if the bank is wrong, the bank is likely going to lose money," said Steven Gonzalo, president and CEO of American Commercial Bank & Trust, a $1.3 billion-asset bank in Chicago, Ill., and a member of the trade group. Rampant check fraud indicates egregious violations of Know Your Customer rules that were created in 2014 by the Financial Crimes Enforcement Network to help prevent identity theft, money laundering, financial fraud and other financial crimes, the bankers say. Small banks say they can't even find the right person or department at a large bank to determine if their claims have been received. Only Navy Federal Credit Union responded, saying through a spokesman: "Navy Federal works diligently to help protect our members from fraud and works closely with law enforcement to hold perpetrators accountable."Ĭommunity banks have been complaining for the past two years that their large-bank counterparts show no urgency or professionalism in resolving claims for fraudulently-altered checks. The large banks either declined to comment or did not respond to a request for comment. "We certainly believe regulators have a responsibility to address this issue," Schroeder said. The Fed, FDIC and OCC all declined to comment. Bank, PNC Financial Services Group, Truist Financial, Capital One Financial, Regions Bank and Citigroup are all institutions that repeatedly fail to reimburse for bad checks.įederal regulators generally do not get involved in bank versus bank disputes. The bank trade group named names - Bank of America, JPMorgan Chase, Wells Fargo, Navy Federal Credit Union, U.S. Schroeder described a cycle of criminality in which check fraud has become so commonplace in the financial system that small banks are being pitted against large banks. "This is a big bank problem and it's impacting customers of small community banks who are the front-line victims of this fraudulent activity." "We want action, we want something done," said David Schroeder, senior vice president of federal government relations at the Community Bankers Association of Illinois, who sent a letter this week to prudential regulators.
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