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Bank Absorbs Costs of Fraudulent Activity on Customer’s Account

In a recent case, a customer’s account was targeted by fraudulent activity, resulting in significant financial losses. However, the bank has decided to absorb the costs of the fraud rather than pass them on to the customer.

According to banking industry experts, this decision is not uncommon. In many cases, banks will choose to cover the costs of fraud themselves in order to maintain a high level of customer service and user experience. This approach helps to build trust with customers and demonstrates a commitment to protecting their financial well-being.

When Banks Choose Not to Reimburse

In some instances, however, banks may choose not to reimburse the customer if they believe that the individual was somehow involved in or contributed to the fraudulent activity. If this is the case, the customer would need to pursue legal action against the fraudster themselves.

Factors Influencing Bank’s Decision

The bank’s decision to absorb the costs of the fraud is likely due to a combination of factors, including:

• The desire to keep customers happy and maintain their loyalty
• The relatively low cost of the fraud compared to the time and resources required to investigate

Banks Pursue Legal Action Against Fraudulent Merchants

The bank has also chosen to pursue legal action against the merchant who is believed to be liable for the fraudulent activity. This involves charging them a chargeback fee and seeking reimbursement for the lost funds.

Improving Future Fraud Detection and Prevention

In other cases, banks may choose to pursue legal action against the fraudster themselves in order to recover their losses. However, this approach can be costly and time-consuming, which is why improving future fraud detection and prevention strategies is so important.

Banks Take Steps to Prevent Future Fraud

To prevent similar incidents from occurring in the future, banks must integrate the knowledge gained from these types of fraudulent activities into their fraud detection and prevention strategy. This involves:

• Updating systems to close loopholes that expose them to fraud
• Improving the ability to identify and prevent further cases

Additionally, financial institutions are required to submit Suspicious Activity Reports (SARs) to report suspicious activity to the authorities.

Optimizing Fraud Investigations with Unit21

Fraud investigations are a constant trade-off between the potential fraud losses that are saved and the time and resources invested in the investigation. By using advanced technology and specialized software, banks can optimize and streamline their fraud investigation process, allowing them to prioritize cases more effectively and reduce the time and resources required to investigate each case.

Unit21’s Case Management software helps teams manage investigations by prioritizing and managing workloads, while Alert scoring systems allow for prioritization of the most critical cases. Additionally, Transaction Monitoring can help mitigate the need for investigations altogether by monitoring for indicators of potential fraud before it occurs.

Schedule a Demo Today

To learn more about how Unit21 can help improve your fraud investigation times and optimize performance, schedule a demo today.