What Are the Different Types of Financial Institution Fraud?

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  • Written By: Melissa Barrett
  • Edited By: A. Joseph
  • Last Modified Date: 12 August 2019
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The types of financial institution fraud are almost as unlimited as the number of criminals committing the crimes. Although the details of each scheme might be different, many of these scams fall into two categories: check fraud and electronic fraud. Generally, people committing check fraud use written drafts to obtain money, and electronic fraud exploits information gathered over the Internet.

One of the most common types of financial institution fraud is check fraud. In its simplest form, this scam is accomplished by altering the recipient information or payment amount of a legitimately written check. More complicated schemes include counterfeiting checks or obtaining blank checks by theft. These types of fraud are generally aimed at account holders. Certain other cons, including fraudulent accounts and purposeful overdrafts, primarily affect the financial institution.

Many banks have added security measures to protect themselves and their customers from financial institution fraud by check, but individuals are encouraged to take certain steps to further protect their accounts. To guard against theft, for example, it is recommended that all checks be mailed to and received from locked mailboxes. All fields on a draft should be filled in completely with lines drawn from the end of writing to the end of field. It also is suggested that blue pen be used, because it is more difficult to duplicate mechanically. In addition, frequent reconciliation between bank statements and personal records can help identify fraudulent activity and take steps against future occurrences.


In an effort to combat financial institution fraud, many banks and customers choose to conduct their business electronically. This reduces the possibility of check fraud, but it creates the possibility of computer-assisted attacks. Most institutes that handle financial information have responded admirably to this threat by creating extremely secure websites. Criminals, however, have responded by attempting to scheme the account holders instead.

Electronic financial institution fraud is most frequently the result of a practice called phishing. In this practice, the criminal sends people emails that have clickable links to banks, online stores or utilities companies that the recipients use. These links do not lead to the actual businesses' websites, however, but pages that appear to be identical to the legitimate sites. After the victim has entered his or her password information, the scammer can access the victim's account on the legitimate site. The most effective way for people to combat this type of scam is to never click on a link in an email but either visit the website directly or call the business.


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