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Remote Deposit: Minimize Fraud Exposure

A loss control advisory from the CBA-sponsored insurance program underwritten by Progressive

Bankers focusing on issues surrounding image and transmission quality of Remote Deposit technology need to be conscious of potential fraud exposures.
Many bankers rely on hold harmless agreements to put liability for fraud in the customer’s hands; however, deflecting liability does not minimize the risk to your reputation when a perpetrator takes advantage of easy access through technology. More importantly, if the customer itself is the perpetrator – or even if not – funds may not be available to reimburse the bank.
Focus increased attention to these basic bank practices to minimize exposure:
• If remote deposit is a tool for pursuing         new customers outside the bank’s foot        print, “know your customer” becomes         more important than ever. Screen businesses         to make sure that they have a reputable         track record; visit the business and         evaluate the deposit customer as a credit         risk, just as you would for a potential         Automated clearing house or  accounts         receivable check customer;
• Audit the customer’s business processes         that surround the remote deposit process:         is the customer technically and functionally         mature enough to handle check processing
    and control? The customer should be able          to exhibit segregation of duties and
    controlled access of these negotiable
    instruments – before, during and after         scanning;
• Understand how the customer intends         to store the checks, how long they will         be kept and how they will be disposed of         (shredder or dumpster?). Investigate         who has building access, and who has         access to both the documents and the         images from the customer side. Make         recommendations on segregation, access         and disposal processes and follow up to         ensure they are followed;
• Evaluate the customer’s IT security – the         firewalls and security in which you have         so heavily invested are equally important         on your customer’s systems if check images         reside on them;
• Explore the remote deposit vendor’s         fraud mitigation technology. Do not assume         that fraud detection software is in place         unless specified in the contract;
• Make sure all the bank’s associated
    exception processes – signature verification,         large item review, stop payment – are         appropriately integrated for remote
    deposit accounts; and
• Focus increased attention to exception         reports on remote deposit accounts to         understand business volumes and detect         any unusual activity. u
Progressive Insurance products are endorsed by the Connecticut Bankers Association. For more information, contact Colleen Clancy at the CBA or Judi Kovach, loss control manager for Progressive, at (800) 274-5222.

Posted on Wednesday, April 04, 2007 (Archive on Wednesday, April 04, 2007)
Posted by Scott  Contributed by Scott


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