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Confidence Crime And The Banking Industry

Prepared by: Jon Grow, Executive Director,
The National Association of Bunco Investigators, Inc.
November 1, 1994

The prevalent attitude regarding Confidence Crime and its effect on the Banking Industry is that the victim alone suffers a loss and the institution is not harmed. The victim was duped for what ever reason (i.e. greed, lack of knowledge, etc.) and is solely responsible for their own loss. While this may be a comforting rationalization for the individual institutions, a look at the total picture involving Confidence Crime shows an entirely different scenario.

Confidence Crimes, sometimes referred to as Bunco, is designed to relieve the victim of currency through a series of false representations. The term Bunco, is derived from the Spanish word for bank. In most cases the victims must withdraw currency from a banking institution. In fact, the withdrawal of funds by the victim is the weakest part of the crime. Many programs been developed by the banking industry and law enforcement to combat this problem. However, for every defense put in place, the suspects develop successful countermeasures.

Three specific areas that directly affect the banking industry as a result of a loss by a depositor to a Confidence Crime are loss of customer confidence or accounts, potential civil liability and financial losses by the institutions.

  1. Loss of Confidence in the Bank and/or Loss of Accounts

    Experience has shown that in the majority of cases the victim eventually places partial blame for the loss on the bank. This develops from a rationalization process generated by the victim to feel less culpable for the loss.

  2. Civil Liability

    In some cases, courts in California have held that the financial institution has a fiduciary responsibility to its depositors, particularly vulnerable elderly depositors, and have transferred the losses back to the institution.

  3. Institution Loss Due to Document Fraud

    By adapting the scheme to avoid defenses put in place to deter it, the perpetrators have included the use of any type of transaction and document to obtain the needed currency. This includes raised checks, altered checks, stolen forged checks, split deposits on good accounts, identity theft fraud, and the increasing use of bank and credit cards at ATM machines without the victim's knowledge. In many cases, the institution and not the victim, suffer the loss.

With growing competition within the financial industry it would appear to be beneficial to take a proactive stance in combating Confidence Crime as no business can successfully complete if it has losses in these areas. Moral and ethical issues aside, good business sense would dictate that the financial institutions adopt measures to protect themselves.

Some suggested measures to use in solving the problem are education, developing proactive prevention programs, and support of allied organizations.

  1. Education

    Educate all employees on a continuing basis to make them aware of confidence crime and accompanying fraud to protect both the institution and depositors

  2. Proactive Programs

    Develop policies and internal backing to encourage involvement of branch personnel to help stop the offenses at the time of withdrawal.

    Institute programs to warn depositors of possible fraud by the use of placards, advisory forms, etc.

  3. Support

    Provide support to existing organizations that are active in the area of prevention and investigation regarding these crimes, particularly in the areas affecting the elderly. these groups in turn can educate the three groups involved in these crimes, law enforcement, financial industry and citizens groups.


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