Magazine article American Banker

Banks Bolster Insurance against Electronic Fraud

Magazine article American Banker

Banks Bolster Insurance against Electronic Fraud

Article excerpt

Bankers are beefing up insurance coverage to protect against electronic-fraud losses, which is now considered a much greater risk than physical storage of cash or documents, according to recently published research.

The Bank Insurance Survey Report, released last week by the American Bankers Association, found that more than 90% of medium-to to large-sized banks and two-thirds of community banks surveyed carry policies covering computer systems and electronic funds transfer fraud.

A total of 376 banks responded to the survey, conducted by the ABA's Security and Risk Management Division.

"While electronic-payment systems offer speed, cost efficiency, and convenience, they have replaced the bank vault as a target for criminal violations," stated the report.

Higher Fraud Losses

"The number of bank robberies far exceeds the number of wire transfer crimes. But if you are hit with a wire transfer fraud, chances are your losses are going to much higher," said Dennis W. Kleiner, vice chairman of the ABA'S Security and Risk Management Division, which conducted the report.

Mr. Kleiner also is a vice president and assistant secretary of Mercantile -- Safe Deposit and Trust Co., a $2.2 billion-asset institution in Baltimore.

Computer system, or EFF, coverage is generally carried as a rider to a bank's financial institution bond, which covers risk associated with criminal activity. Internal fraud would be covered by a bank's fidelity rider.

Separate Coverage Used

However, 8% of the banks surveyed carry separate coverage for electronics or computer crime. …

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