Gartner Study Shows Thefts from Unauthorized Access to Checking Accounts Resulted in $2.4 Billion in Direct Fraud Losses for U.S. Banks in Past 12 Months
STAMFORD, Conn. June 15, 2004 — Illegal access to checking accounts is the fastest-growing type of U.S. financial consumer fraud, and thieves appear to be proliferating through online channels, according to a survey by Gartner, Inc.
Based on a survey of 5,000 online U.S. adults in April of 2004, Gartner estimates 1.98 million online adults have experienced this sort of crime in the past 12 months. The cost is approximately $2.4 billion in direct fraud losses, or an average of $1,200 per victim.
"In most cases that are not inside jobs, thieves likely stole account numbers and passwords to get into accounts online or through telephone banking services," said Avivah Litan, vice president and research director at Gartner. "Neither method involves face-to-face transactions."
Just by clicking on a pop-up ad, Web users can inadvertently download spyware (technology that gathers information about a person or organization without their knowledge). In these situations, when users click on the ad, it traps the user ID and password for their online bank account without them ever knowing about it.
"It will take time for the financial services industry to develop sophisticated back-end tools, but banks must implement stronger access controls to online and telephone banking systems," Ms. Litan said. "Shared-secret authentication is a good practical solution for strengthening access controls for online and telephone banking."
In shared-secret authentication, a consumer might select a topic, such as "name of a favorite pet", and enter an answer that is shared with a service provider either when the consumer registers on its site or when the provider sends an e-mail to the consumer. In another option, a photograph is chosen or sent by the consumer and stored in a financial institution's database as part of the consumer's profile. Gartner analysts said banks can take these steps now to improve user identification. However, in the longer term, banks need more effective tools to detect fraud and stop checking accounts from being hijacked.
Gartner's survey examined five types of consumer fraud: new account fraud, check forgery, unauthorized access to checking accounts, illegal credit card purchases and fraudulent cash advances on credit cards. Unauthorized access to checking accounts, in which someone transfers money out of a customer's account illegally, grew the fastest in the past year. Almost half (44 percent) of reported incidents took place in the past year, compared with 34 percent of illegal credit card purchases, 30 percent of new account frauds, 24 percent of check forgeries, and 29 percent of fraudulent cash advances.
In terms of absolute number of victims, checking account hijacks were the second most prevalent type of crime in the 12 months ending April 2004. The most common was the much more familiar fraudulent credit card purchase, where a thief uses a stolen credit card to buy goods or services.
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