-" 

u.s. Department of Justice 

Bureau of Justice Statistics /'" t I ['v 

Electronic Fund 

Transfer Fraud 

The rapid increase in the use of 

computer-based systems for financial 

transactions has heightened public and 

private concern over the potential for 

electronic fund transfer (EFT) crime or 

fraud. Two ~'rincipal types of crime 

highlighted by this report are incidents 

associated with automatic teller machines (ATMs) and with wire transfer, 

that is, the tr8I'.sfcr of funds by 

electronic means between banks. 

Data from a survey of 16 American 

banks, all but one with deposits in 

excess of one billion dollars, and 

related industry data sources reveal the 

following estimates of level of activity 

in electronic transfers and the extent 

of crime: 

• In 1983, there were 2.7 billion 

transactions involving $262 billion 

processed through automatic teller 

machines (ATM). 

• Of a sample of 2,707 ATM-related 

incidents (transactions resulting in 

accountholder complaints), 45% of all 

incidents were found to be potentially 

fraudulent, involving, ftJr example, 

unauthorized use of lost or stolen cards, 

overdrafts, and "bad" deposits . 

• Nationwide ATM bank loss from fraud 

during 1983 i.& estimated in the range 

between $70 and *lOO million based on 

bank characteristics and a median bank 

los,,'l of approximlltely $84 million 

calculated on the basis of 2.7 billion 

transactions. 

• In 1980, roughly 60 million wire 

transfers were completed involving 117 

trillion dollurs. 

• The average exposure to loss (i.e., 

loss potential) in 139 problem wire 

tran')fer incidents report~d by 12 of the 

16 banks was $833,279; actual losses 

ot!clJrred in 56% of these incidents. 

-- - .... -

The need to assess potential levels 

of fraud in electronic fund transfer 

systems has been apparent for some 

tim e. This report presents findings 

of the first pilot effort to develop 

such estimates on the basis of data 

obtained directly from a sample of 

banks. 

It should be recognized that obtaining fraud data directly from 

banks represents a major breakthrough. Banks have traditionally 

been reluctant to share any information that might shake the 

consumer's confidence in tt.~ banking system. Similarly, bank record 

systems have not been organized to 

permit easy identification of EFTrelated loss incidents. Despite 

these difficulties, a selected sample 

of banks agreed to participate and 

to provide BJS with data for this 

study. Total anonymity was assured 

to all participants. 

Particular thanks should be 

expressed to the Association of 

• Anticipated losses from wire transfer 

fraud were estimated to increase 

approximately 70% over the next 5 

years by a cross-section of bank 

managers and wire transfer experts. 

BACKGROUND 

The study described in this report 

represents the first pilot effort to 

obtain consistent incident-based data 

on EFT fraud from a small panel of 

financial institutions; prior to this 

effort, no valid data existed on the 

Jsaa, 

March 1985 

Reserve City Bankers for their 

support in the effort. 

In reviewing the report, it must 

be recognized that the pilot semple 

of 16 financial institutions cannot 

be considered as representative of 

the over 14,000 commercial banks 

in America. Subsequent contacts, 

however, indicate an interest by 

additional banks in participating in 

an expanded study. Date. from Duch 

a survey would more clearly illustrate the nature of EFT fraud and 

more precisely define the scope of 

potential losses. 

Data on EFT fraud is relevant for 

both planning and legislative consideration. This study has demonstrated that consistellt Ijata can be 

obtained from a panel of banks. A 

larger panel is now required to provide an ongoing source of inform9.-

tion on EFT fraud and loss. 

Steven R. Schlesinger 

Director 

nature or extent of computer fraud 

associate1 with electronic fund 

transfers. The study focuses on 

h1cidents involving automatic teller 

machines (ATM) .rnd wire transfer 

se~·vices • 

At present, ATM represents the 

most established retail application of 

EFT technology. Other retail applicatiQns also include telephone bill paying, 

home banking and "point of sale" fund 

transfers. It is estimated that in 1983, 

2.7 billion transactions (withdrawals 

g 
... .... "'. • • , r • ; ..' • ••• ~ 

and deposits) worth $262 billion were 

proces~ed through 43,800 installed 

ATMs. 

At the corporate level, wire transfer, i.e., the transfer of funds by 

electronic means between financial 

institutions, represents the most 

established use of EFT technology. 

Approximately 60 million wire transfers 

were complete~ in 1980 involving 117 

trillion dollars. This was 45 times the 

value of the nation's 1980 gross national 

product. 

AUTOMATIC TELLER MACHINE 

FRAUD 

Causes of ATM-related 

incidents 

A sample of 2,707 ATM- related 

illci1ents were identified in the survey. Table 1 describes the basic causes of the 2,707 ATM-related incidentJ, classified according to whether 

the cause was related to a withdrawal 

or deposit. 

As shown, almost three-fourths 

of all incidents were caused by 

withdrawal-related events. Almost a 

third of these involved unauthorized 

transactions with a stolen or lost card. 

Another 15% involved unauthorized 

transactions completed while the card 

was held by the accountholder. Almost 

a third of the incidents resulted from 

mechanical problems that caused inaccurate dispensing of funds or posting of 

withdrawals. 

ATM-related incidents resulting in 

apparent loss to an accountholder or 

bank may result from technical failure, 

human error or fraud. For purposes of 

this study, individual incidents were 

classified as "fraudulent" on the basis 

of the facts involved as indicated in 

bank records, including in some cases 

exist~ce of actual fiscal loss to the 

bank. Law enforcement investigation 

and judicial review might result in a 

reclassification of some of these 

incidents. 

As table 1 shows, 45% of all identified incidents were found to be 

fraudulent. Almost all of these fraudulent incidents involved unauthorized use 

of lost or stolen cards or cards still held 

by the accountholder, I)verdrafts, and 

"bad!' deposits (for example, deposits of 

stoien or uncollectible checks and 

"empty envelope" deposits). 

Incidents involving lost 

01' stolen cards 

Reports of the 644 incidents involving lost or stolen cards (table 1) were further analyzed. 

Table 1. Cause of ATM incidents and number of fraudulent incidents 

Incid&nts in samEle Classified as 

Cause of incident Number Percent fraudUlent 

Withdrawal-re!ated 2,069 73.4% 

Unauthorized withdrawala 

ATM card lost or stolen 644 22.9 644 

A TM card in possession of accountholder 313 11.1 313 

OverdraftS 

Against insufficient/bad deposit 51 1.8 51 

Bank computer suspected to be off line 171 6.1 171 

Bank posting procedures known to be delayed 10 .3 10 

No fraudb 

Accountholder confused 235 8.3 0 

Inaccurate posting by bank due to mechanical 

579 20.6 0 failure 

Otherc 66 2.3 12 

Deposit-related 412 16.8% 

Bad deposit by accountholderc 

Empty envelope deposited 29 1.0 17 

Stolen/fraudulent check deposited 10 .3 10 

Uncollectible (not stolen/fraudulent) 

check deposited 25 .9 14 

Bad deposit by person other than 

accountholdera 76 2.7 76 

No fraudb 

ACCfluntholder confused 137 4.9 0 

Accountholder made deposit to wrong account 50 1.8 0 

Amount deposited different from amount 

in envelope or keyed in 43 1.5 0 

Inaccuracy in posting of deposit 

by bank 66 2.4 0 

OtherC 36 1.3 2 

Unreported and otberc 276 9.8% 19 

a All incidents classifien as fraudulent. 

b All incidents classified as not fraudulent. 

c Incidents classified as fraudulent only where bank l>ustRined loss. 

d Total incidents involving identified causes exceeds total number of 

incidents because individUal incident may have more than one cause. 

• Location of 10S$ or tb~ft. Cards were 

lost or sto]~~ in the home (25%), retail 

establishmeuts (20%), cars (l8%), 

places of employment (12%), streetsl 

(8%) or schools (7%); these proportions 

are based on 395 incident reports on 

location of loss. 

• Nature of theft. Where cards were 

stolen, approximately two-thirds (66%) 

were taken as the result of a theft of a 

purse or wallet (purse snatching). 

Cards were also the specific object of a 

theft (26%) and were taken as part of a 

more general theft of personal 

belongings (8%). These proportions are 

based on 379 incident reports describing 

the nature of the theft. 

II Number of unauthorized transactions 

per incident. The number of unauthorized transactions is relevant since 

maximum daily ATM withdrawal limits 

(generally $20u-300) are established by 

banks. Based on 535 incident reports, 

cards were generally used once (27%), 

twice (24%), or between 3 and 5 times 

(28%). In 13% of reported incidents, 

however, cards were used between 6 

and 10 times. In 8% of incidents, cards 

were used more than 10 times in 

connection with unauthorized 

transactions. 

• Date of last transaction. Once notified of a loss or theft, ATM cards are 

lIhot-carded" to prevent further trans2 

actions with the card. Of 440 incident 

reports, the last unauthorized transaction was made 1 or more days before 

notification in 48% of incidents, on the 

day of notification in 38% of incidents, 

and after the day of notification in 13% 

of incidents, suggesting some failure 

by banks to "hot-card" the card immediately • 

• Location of personal identification 

number (PIN). PINs were recorded and 

kept near the ATM card (typically in 

the p'lrse or wallet) in 72% of 437 

incidents. PINs were actually written 

on the card in 6% of the incidents and 

were written and kept separate from 

card or purse in 7%. In 15% of incidents, the accountholder claimed that 

PINs were not written down. 

Use of cameras 

A photograph of the alleged offender was available in only 24% of the 

fraudulent incidents. Even when one 

was available, however, the alleged 

offender was identified in only 38% of 

the cases. Equipping all ATM's with 

cameras may not be I' solution to ATM 

fraud because there appear to be many 

ways to "fool" the camera. Equipping 

some ATMs with cameras, on the other 

hand, may be cost-effective, because 

uncertainty regarding use of photographic eqUipment may encourage carelessness by potential offenders. 

< 

Extent of ATM loss 

Potentially fraudulent ATM 

incidents may result in loss to the 

• accountholder only (where claimed 6 

losses are denied in full by the bank); 

• bank only (where bank claims are not 

recovered in full or bank waive~ 

accountholder partial liability); 

• both accountholder and bank (where 

accountholder liability is limited or 

where bank claims against an accountholder are only partially recoveredl; 

• neither bank nor acc:ountholder 

(where, for example, recovery is made 

from a third party or stolen checks are 

deposited but no withdrawals are made). 

Table 2 describes the average loss 

to the bank, accountholder, or both, 

resulting from potentially fraudulent 

ATM incidents. Losses exceeded $2,500 

per incident in about 1% of the sample. 

Table 2 also describes the average 

number of transactions involved in each 

type of incident. The data show that 

multiple unauthorized transactions (3.6 

on average) often occur in an incident, 

resulting in losses in excess of the daily 

ATM withdr!l.wallimit. 

Federal Regulation E 

The vast majority of the 202 incidents in which both the ac~ountholder 

and the bank sustained a loss involved 

Federal Regulation E. Federal Regulation E provides that accountholder 

liability is limited to $50 (if card is 

reported missing within 2 days of discovery) or $500 (if card is reported 

missing more than 2 days aft.~r discovery). In such cases the remaining part 

of the claimed loss must be covered by 

the bank. The average accountholder 

loss in this sample of 202 incidents was 

$74, suggesting that missing cards were generally reported within 2 days 

of discovery. The data also indicate 

that.in several instances banks did not 

press Regulation E liabiW:y in order to 

maintain good customer ... elations. 

The 202 ir.cidents of joint bank and 

accountholder loss include 182 incidents 

of lost or stolen cards. In 65% of these 

incidents, the report indicated that the 

personal identification number (PIN) 

had been kept on or near the card. 

Thus, accountholders might have sustained greater losses if liability had 

been assessed to reflect a negligent 

failure to conceal adequately the PIN. 

Estimated nationwide ATM fraud loss 

To estimate nationwide bank losses 

attributable to ATM fraud, the ratio of 

1983 ATM fraUd losses to the volume of 

ATM transactions (withdrawals and 

deposits) and the dollar value of ATM 

transactions were calculated for each 

Table 2. Average loss per fraudulent ATM incidr.dlt 

Fraudulent inci1ents Average loss to Average 

Loss incurred by: Number 

Neither bank nor accountholder 46 Accountholde~ only 369 

Bank only 446 

30th accountholder and bank 202 

Unreported 153 

panel bank.8 Nationwide A'I'M fraud 

loss estimates were then del ived by 

applying these ratios to 1983 national 

estimates of the total number of ATM 

transactions and the total c10llar volume 

of ATM transactions. 

Table 3 shows the high, low, and 

median loss ratios in each category. 

(Average values tor all panel banks 

combined are not shown' since they 

obscure the wide variation between 

banks and may be misleading.) 

Table 3 also describes the high, 

median and low estimates of to'tal1983 

bank losses from ATM fraud calculated 

on the basis of the high, median, and 

low loss ratios. By way of explanation, 

the "high" ratio estimation represent.s 

the estimated loss that might be 

expected if all banks shared the 

characteristics and anticipated losses 

of the panel bank with the highest ratio 

of ATM fraud losses to the number or 

value of ATM transactions. 

As :~!lnk5 vary widely in these characteristics, it is likely that total 

estimated fraud losses would be in a ra.nge close to median value estimates 

shown in table 3, or approximately $70-

$100 million. 

Comparison with credit 

card fraud loss 

Current data indicate that the level 

of credit card fraud loss per transaction 

and per dollar volume exceeds comparable ATM losses. In 1983, for example, 

VISA reported a loss per transaction of 

$0.081 and a loss per $1,000 transaction 

volume of $1.59. One possible explanation for these differences is that 

organized fraud, ~sDecialiy card COUl1-

terfeiting opera,ms, does not appear 

to be a problem III the ATM industry at 

this time. Additionally, more lenient 

withdrawal limits and a greater inabilAccount- number of 

Percent Bank holder transactions 

3.8 $ 0 ~ 0 2.2 

30.3 0 255 3.5 

36.7 330 0 3.3 

16.6 365 74 4.8 

12.6 - - -

ity to control "hot-carded" transactions 

may result in higher credit card losses. Overall, estimated nationwide 

losses for ATM fraud are considerably 

less than es~imated losses for credit 

card fraud. 

WIRE TRANSFER FRAUD 

Public concern over potential major 

EFT fraud loss is focused in the area of 

wire transfer. At this time, however, no formal i'ecording mechanisms exist 

for the ongoing do1'Omentation of wire 

transf er incidents. Findings in this 

section are based, therefore, on data 

submitted by the 16 panel banks in 

response to a data collection instrument requiring description of all 

incidents occurring within the preceding 5 years. A total of 139 incidents 

were described by 12 of the 16 banks; 4 

panel banks indicated that no incidents 

had occurred. 

In light of data collection difficulties and of the potential for underreporting of undetected or embarrassing 

incidents, the data. collected must be 

viewed as only a sample of total wire 

transfer incidents and cannot be used to 

estimate total wire transfer losses. 

The sample does represent, however, 

the largest single and systematic collection of data describing wire transfer 

incidents and should serve as a baselevel resource for analysis of wire 

transfer incidents. 

Type of incident 

Table 4 describes the nature of 

the potentially fraudulent incidents 

reported. Reported incidents included cases where losses were actually sus- tained (columns A and G) or where 

similar acts resulted in exposure without actual loss ('!cl.umns Band D)-

where, for example, the bank successTable 3. ATM bank fraud loss ratios and nationwide fraud loss estimates for 1983 

Low Median High 

Fraud loss ratios: 

Loss per transaction (withdrawal OJ' deposit) $0.013 $0.031 $0.073 

Loss per $1000 of transaction volume 0.128 0.321 1.122 

Nationwide fraud loss estimates: 

Based on estimate of 2.7 billion 

transactions in 198311 $35.1 million $83.7 million $197.1 million 

Based on estimate of $262 billion 

in transaction volume in 1983a 33.5 84.1 294.0 

a Source: See footnote 2. 

3 
fully recovered an erroneously credited 

payment prior to its withdrawal. 

As shown, unintentional errors 

leading to loss or exposure occurred in 

94% of the incidents, which far exceeded intentional fraudulent acts 

(6%). This confirms the hypothesis that 

intentionally fraudulent acts, although 

potentially costly, are quite rare. The 

nine intentionally fraudulent incidents 

clearly do not provide an adequate basis 

for meaningful analyses. 

As table 4 shows, errors lead!ng to 

potential fraud are generally clerical, 

committed by bank employees and 

related to the duplication or misrouting 

of messages and payments. Such inadvertent errors (which may involve a 

"typo," a misplaced digit or an erroneous currency conversion) may result 

in major loss (or, at the least, exposure 

to fraudulent loss) if recipients of 

erroneously credited payments abscond 

with the funds, claim that funds were 

legitimately "owed," or otherwise spend 

windfall receipts in alleged ignorance 

of the fund source. Recovery of such 

losses may be legally complex and 

costly. 

Extent of exposure to loss 

As l:Ihown in table 5, the average 

loss to which banks were exposed, per 

reported incident, was $883,279. The 

maximum reported exposure level was 

over $37 million. Although actual losses 

oc~urred in only about 56% of these 

incidents, the data confirm the high 

dollar value of potential wire transfer 

loss. 

Table 5 also shows that the average 

loss to which banks were exposed was 

more than 50 times higher in ((hose incidents in which no loss resulted. This is 

consistent with the view that, where 

exposure is large, all efforts are made 

by banks to recover funds and to thus 

eliminate the possibility of actual 

losses, This factor may also explain the 

seemingly low average level of net loss 

($18,861), which the data indicate occurred in incidents resulting in actual 

loss. 

The magnitude of the difference in 

exposure levels among banks having a 

1 .It '\ and those not having a loss, however, may also indicate that some incidents in which exposure resulted in 

large actual losses may not have been 

reported i.n the study. 

ExposUre time 

As in the case of ATM loss, the 

longer the elapsed time between the 

incident leading to loss and the bank 

notification or discovery of the loss 

(exposure time) , the greater the actual 

expected loss. As shown in table 5, 

Table 4. Cause of wire transfer inc?OO'lts 

(A) 

Suuce.'lSful 

fraudulent 

transfer 

Incident (N=4) 

Cause of incident 100.0% 

Message duplicated 0.0 

Message misrouted 0.0 

Wrong amount 25.0 

Entry to wrong account 0.0 

Wrong currency 0.0 

External collusion 2!>.0 

Insufficient funds 0.0 

Test word not validated 0.0 

Misuse of ID/password 0.0 

Data line compromise 0.0 

Unreported 50.0 

Jncident caused by 100.0% 

Bank employee(s) 100.0 

Corporate customer 0.0 

ilund transfer network 0.0 

Bank computer system 0.0 

Individual customer 0.0 

Unreported 0.0 

Table 5. ExposIire to loss in wire transfer incident 

Wire transfer 

incidents 

Incidents Number Percent 

All incidents 134a 100.0% 

Incidents resulting in: 

Some bank loss 75 56.0 

No bank loss 59 44.0 

aData unavailable on 5 reported incidents. 

exposure time for incidents with some 

loss (158 days) was 5 times longer than 

that for incidents with no loss. This 

basically reflects the increased difficulty of recovering (or preventing 

withdrawal of) funds after longer 

periods of time. 

SUrvey of attitudes toward 

wire-transfer fraud loss 

Although available data do not 

permit estimates of actual wire transfer fraud levels, data obtained in a 1983 

survey of bank officials describe current attitudes regarding the extent, 

cause and futurr1likelihood of such wire 

transfer losses. 

Estimates of the extent of current 

annual losses and the anticipated level 

of loss in 5 years are sho~n in table 6. 

As in the case of incidents reported by 

panel banks, it is reasonable to pzume 

that incidents are infrequent and that 

major losses may not be fully 

reported. It is relevant, however, that 

average anticipated losses ($39,548) 

exceed current net loss estimates 

($23,327) by 70%, reflecting a high 

level of concern among bank officials. 

Table 7 describes survey respondents' views regarding the current and 

anticipated causes of wire transfer 

frauds. As shown, respondents indicate 

4 

-

1 

-

(B) (C) (D) 

Attemptlld Error leading Error leading 

fraudulent to fraudulent to exposure 

transfer loss wi thout loss 

(N=5) (N=71) (N=59) 

100.0% 100.0% 100.0% 

0.0 54.9 23.8 

0.0 5.7 30.4 

0.0 12.7 5.1 

0.0 8.4 13.6 

0.0 5.6 6.7 

60.0 0.0 0.0 

20.0 0.0 3.4 

0.0 1.4 1.7 

20.0 0.0 0.0 

0.0 0.0 1.7 

0.0 11,3 13.6 

100.0% 100.0% 100.0% 

20.0 94.3 79.6 

0.0 0.1l 8.5 

0.0 1.5 3.4 

0.11 0.0 3.4 

20.0 0.0 0.0 

60.0 4,2 5.1 

Average 

Bank e)!Eosure number 

of days of 

Minimum Average Maximum exposure 

$30 $ 883,279 $37,357,000 101 

30 34,729 315,000 158 

30 1,961,945 37,357,000 30 

that identified causes, and particularly 

those involving sophisticated technology, will have an increasing impact on 

wire trl,Ulsfer fraud. 

.-

The distinction between respondents 

whose institutions have and have not 

suffered prior wire transfer loss is 

shown in table 8. The data indicate 

that those tlStitutions with no loss 

experience are more than twice as 

concerned about the contributiolls that 

the stated causes would make to wire 

transfer fraud than those with loss 

experience, mo:;t probably because 

those with loss experience know that 

certain steps could be taken to mitigate 

these causes. 

Table 6. Wire transler survey findings: 

Estimated current and anticipated annual 

wire transfer f1'l'ud loss 

Loss Low Average High 

Loss estimates: 

Current annual 

net loss per 

bankll $100 $23,327 $215,000 

Anticipated loss 

perb~in 

5 years 100 39,548 500,000 

a Based on 35 banks that sustained a loss. 

b Based on 28 banks that responded to this 

question and assuming that no new fraud 

prevention measures are adopted. 

"' 

I. ." • !., .' •.. . . . .-,. " , 

Methodology~ A panel approach 

In collaboration with the Association of Reserve City Bank(;:rs (ARC B), 

data in this study were collected from 

a panel of 16 ARCB member banks. 

Because few small financial institutions 

can justify extensive EFT systems, the 

study panel banks were intentionally 

selected from among the ARCB member banks, as they inclUde some 200 of 

the largest commercial banks in the 

United States. Thus, whereas only 1 % 

to 2% of all commercial banks have 

deposits exceeding $1 billion, all but 

one of the panel banks have deposits 

greater than $1 billion. Geographically, 

all regions of the country are included 

in the panel: the Northeast, Southeast, 

Midwest, Southwest., Rocky Mountain 

States, and Far West. 

The panel banks themselves are not 

representative of all commercial banks, 

but their EFT operations can be 

considered to be somewhat representative of established EFT systems. Tn 

the ATM area, panel banks have had 

ATM systems for an average of 9 

years. Additionally and on the average, 

each panel bank owns 146 ATM terminals and processes 4,300 transactions 

(i.e., withdrawals and deposits) a 

month, a figure close to the industry 

average. 'rwelve of the panel banks 

belong to a regional or nationwide ATM 

network; four do not. In the wire 

transfer area, the ~anel banks process 

from 400 to 28,000 transactions a day. 

Confidentiality of all data associated with the survey is specifically 

protected under Department of Justice 

legislation and regulations. 

Data collectioll focused on ATM and 

wire transfer activity. In the ATM 

area, a relatively large sample of 

potentially fraudulent incidents was 

identified, thus allowing for a detailed 

understanding of the nature and extent 

of ATM fraud. (The sample includell 

every fifth reported incident.) In the 

aroa of wire transfer, the sample 

included all potentially fraudulent 

incidents identified by panel banks. 

Additionally, a questionnaire was used 

to surve1' wire transfer managers. 

Although these data permit a 

general review of the nature of wire 

transfer fraud, no consistent data are 

available to estimate the extent I')f such 

fraud. The overwhelming reason for 

th~ disparity in available fraud-related 

data in these two technologies is 

compliance with Federal Regulation EWhich, in addition to specifying limits 

on accountholder liability, requires that 

all ATM-related consumer complaints 

be formally processed. 

Table 7. Wire tran-ner survey findings: Current and anticipated I.'.auses of fraud 

Percent res"ondents indicating 

that the stated cause: 

Currently WIll in 5 year.; 

Number of contributes cOlltribute 

Cause respondents to fraud and loss to fraud and 10ssa 

All causes - 38.9% 50.8% 

Call-back failure 45 53.3 71.1 

Collusion (internal) 38 28.9 55.3 

Collusion (external) 37 37.8 59.5 

Data line compromise 39 25.6 43.6 

Entry posted to wron,; accoun~ 50 84.0 86.0 

Insufficient funds 45 53.3 53.3 

Message altered 42 26.2 4il.5 

Message duplicated 46 80.4 71.7 

Misuse of password 44 29.5 38.6 

Payment without proper 1.0. 41 41.5 48.8 

PiN compromised 36 25.0 36.1 

Test key compromised 41 17.1 39.0 

Unauthorized access to oDeration area 46 19.6 26.1 

Unauthorized alteration of data base 36 22.2 41.7 

a Assuming no new fraud prevention measures are adopted in the interim. 

Table 8. Wire transfer survey findings: Perceived causes relative to prior loss ~erience 

Banks rel20rting I2rior loss Banks rel20rting no I2rior loss 

Percent of Percent of respon- responNumber dents dents indicating indicating Number 

that stated cause of that stated cause of 

currently contributf's respon- currently contributes respollto fraud and loss Cause dents to fraud and loss dents 

All causes - Call-back failure 30 

Collusion (internal) 28 

Collusion (external) 29 

Data line compromise 28 

Entry passed to wrong 

account 32 

Insufficient funds 2!1 

Message altered 30 

Message duplicated 32 

Misuse of password 30 

Payment without proper 1.0. 29 

PIN compromised 27 

Test key compromised 30 

Unauthorized access to 

operations area 30 

Unauthorized alteration of 

data base 28 

Conclusion 

Although loss from an individual 

wire transfer fraud is considerably 

greater than that from an ATM fl'aud, 

it should be recognized that there are 

many more fraudulent acts in ATM than 

in wire transfei'. Consequently, the 

banking industry should have s!.bstantial 

concern with ATM fraud, especially as 

such acts affect a larger portion of the 

general public. 

The rapid growth of EFT systemsfueled by advances in computer and 

communications technology and by 

competition resulting from a continuing 

deregulation of the banking industrymakes it critical to assess their risk-tofraud on an ongoing basis. This is 

especially important, as EFT systems 

tend to complement each other's 

growth. 

References 

lSee I{. W. Colton, J. M. Tien, S. Tvedt, A. I. 

Barnett (Public Systems Evaluation, Cambridge, 

MA), Coml2uter Crime: Electronic Fund Transfer 

5 

24.6% - 51.8% 

I 33.3 22 72.7 

7.1 20 50.0 

31.0 17 58.8 1 

0.0 21 47.6 j 

87.5 22 72.7 

51.7 22 50.0 

6.7 21 47.6 

71.9 22 68.2 

16.7 22 50.0 

20.7 21 57.1 

3.7 20 45.0 

6.7 18 33.3 

3.3 22 36.4 

3.6 22 36.4 

Systems and Crime, Washington, D.C.: Bureau of 

Justice StatistiCS, NCJ-83736, September 1982. 

More recently, a general stUdy of comput.!r crime was completed by the American Bar Association's 

(ABA's) Task Force on Computer Crime-Report on 

Coml2uter Crime, Washington, D.C.: June 1984. 

The ABA study, based on 283 responses to a survey 

mailing to approximately 1,000 private organizations and public agencies, revealed that high levels 

of loss were estimated for overall computer crime. 

Since only 16 of the ABA respondents represented 

the banking community however, the findings do not 

directly address the issue of EFT fraud. 

2To the extent possible, 1983 estimates are ba.sed 

on trend analyses. These figures are lower than 

thosc estimated by one industry expert, L. F. 

Zimmer-"ATMr 1983: A Critical Assessment," 

Bank Administrdtion, May 1984. However, the 

estimates are probably higher than those estimated 

by another industry expert, H. S. Nilson-as 

documented by R. M Garsson in ''Two Consultants' 

Totals Vary for Nation's Teller Machine," American 

Banker, August 10,1983. 

3See Association of Resel'\'e City Bankers (ARC B), 

Risks in the Electronic Payment.Systems: Report 

of the Risk Task Force, Washington, D.C.: 

December 1983. 

4For purposes of the survey. an "incident" is defined as an event resulting in a complaint by the accountholder. Accountholder complaints may be prompted 

by discovery of an apparent bank error or may arise 

in response to bank notification that some apparently improper transaction has occurred (~.g., bad 

deposit, overdraft check). For purposes of loss 
estimation, a single "incident" includes all unauthorized transactions arising out of the initial 

event (e.g., multiple uses of a stolen ATM card). 

5lncidents where pottmtially irregular transactions 

(e.g., mechanical failures, empty envelope deposits) 

were corrected by the accountholder or bank to 

avert loss were classified as nonfraudulent; this may 

underestimate the level of fraudulent incidents. 

6 Actual accountholder losses (if any) are difficult to 

ascertaln where claims are denied (generally in cases of allegedly unauthorized transactions ms.de while 

the card is held by the accountholder). For purposes 

of the study, accountholder losses (as shown in table 

2) are based on the amount of unrecovered claims. 

7 Losses refer to direct payments to cover accountholder claims and do not inclUde administrative, 

legal, or interest costs associated with processing or preSSing A T!l1 claims. 

8Calculation of loss ratios was clJrnplicated by the 

fact that bank records frequently do not distinguish 

between ATM and other losses, between ATM fraud 

and other incidents, or between deyt>Sits/withdrawals 

and other nonfraud-related ATM transactions. Where 

panel banks were members of bank networks, efforts were also required to segregate transactions. 

Despite these difficulties, 12 of 16 panel banks 

provided relevant loss and transaction data with sufficient completeness to use for calculation of fraud 

loss ratios. ATM fraud loss tables could not be 

derived from a total of reported incidents because 

they constituted just a sample. 

9ln 1983, VISA reported $113 million fraud loss (VISA 

Turning the Cards on Fraud, VISA San Francisco, 

California, Feb. 1984); Master Card reported $65 

million fraud loss (conversb.tion with a rpokesperson 

for Master Card, N.Y., N.Y., Feb. 13,1985); fraud 

loss data from other credit cards (e.g., American 

Express, Diners, etc.) was not available to the 

study. However, the Nilson Report (Report No. 347, 

Los Angeles, Calif., Jan. 1985) estimates total credit 

card fraud loss at $561 million. 

10Errors or inquiries concerning wire transfer are 

usually kept on a log, while incidents requiring further investigation or legal action are described in 

note form and kept in folders that may be maintained 

by the bank's Wire transfer manager, security office or audit Md control office. 

llQuestionnaires were distributed to 155 wire transfer managers and bank officials (one per bank) attending the 1983 Bank Administration Institute's 

Money Transfer De"elopments Conference. The 

overall response rate was 4796, although all respondents did not reply to all questions; about threefourths of the respondents were wire transfer 

managers. In general, respondents represent major 

financial institutions (the volume of wire transfers 

per day was 2,072 on average and ranged up to 

30,000; the average value of transfers was $7.6 

billion and ranged to $110 billion). Almost half of 

respondents indicated a willingness to provide 

additional incident-based data in the future. 

Bureau of Justice Statistics 

Special Reports are prepared 

principally by BJS staff under the 

direction (If Joseph M. Bessette, 

deputy director for data analysis. 

This report was written by James 

M. Tien, Thomas F. Rich, and 

Michael F. Cahn, Public Systems 

Evaluation, Inc., Cambridge, 

Mass., and Carol G. Kaplan, chief, 

Federal statistics and information 

policy branch. The report was 

edited by Benjamin H. Renshaw, 

deputy director for management. 

Marilyn Marbrook, publications 

unit chief, administered report 

production, assisted by Millie 

Baldea, June I. Maynard, and 

Joyce M. Stallford. 

March 1985, NCJ-96666 

8Jreau of Justice Statistics 

Special Reports 

State court caseload statistics, 

1977-81 

Feb. 1983, NCJ-87587 

Criminal victimization in the 

U.S., 1973-82 trends 

Sept. 19t13, NCJ-90541 

Career patterns in crime 

June 1983, NCJ-88672 

Electronic fund transf er and crim e 

Feb. 1984, NCJ-92650 

Habeas corpus: Federal review 

of State ~risoner petitions 

Mru'ch 1084, NCJ-92948 

Family violence 

April 1984, NCJ-93449 

The economic cost of crime 

April 1984, NCJ-93450 

Time served in prison 

June 1984, NCJ-93924 

Criminal defense systems: 

A national survey 

Aug. 1984, NCJ-94630 

Prison admissions and releases, 1981 

Sept. 1984, NCJ-95043 

Sentencing practices in 13 States 

Oct. 1984, NCJ-95399 

Returning to prison 

Nov. 1984, NCJ-95700 

The prevalence of guilty pleas 

Dec. 1084, NCJ-9601$3 

Pretrial misconduct: Federal 

offenses and offenders 

Jan. 1985, NCJ-96132 

Examining recidivism 

Feb. 1085, NCJ-96501 

Electronic fund transfer fraud 

Mar. 1985, NCJ-96666 

a.treau of Justice Statistics 

ailletins 

Measuring crime 

Feb. 1981, NCJ-75710 

The prevalence of crime 

April 1981, NCJ-75905 

Prisoners in 1980 

May 1981, NCJ-76803 

Capital punishment 1980 

July 1981, NCJ-77750 

Prisoners at midyear 1981 

Sept. 1981, NCJ-78756 

Veterans in prison 

Oct. 1981, NCJ-79232 

Crime and the elderly 

Nov. 1981, NCJ-79614 Vic~ims of crime 

Dec. 1981, NCJ-79615 

Prisons and prisoners 

Jan. 1982, NCJ-80697 

Federal justice statistics 

March 1982, NCJ-80814 

Violent crime by strangers 

April 1982, NCJ-80829 

Prisoners in 1981 

May 1982, NCJ-82262 

6 

-

Criminal justice information 

policies 

June 1982, NCJ-80836 

Death-row prisoners 1981 

July 1982, NCJ-83191 

Probation and parole 1981 

Aug. 1982, NCJ-83647 

Households touched by crime 1981 

Sept. 1982, NCJ-84406 

Prisoners at midyear 1982 

Oct./Nov. 1982, NCJ-84875 

Prisoners 1926-81 

Dec. 1982, NCJ-85861 

Prisoners and alcohol 

Jan. 1983, NCJ-86223 

Jail inmates 1982 

Feb. 1983, NCJ-87161 

Prisoners and drugs 

March 1983, NCJ-87575 

Prisoners in 1982 

April 1983, NCJ-87933 

Victim and witness assistance: 

New State laws and the system's 

response 

May 1983, NCJ-87934 

Households touched by crime 1982 

June 1983, NCJ-866'l1 

Capital punishment 1982 

July 1983, NCJ-89395 

Setting prison terms 

Aug. 1983, NCJ-76218 

Probation and parole 1982 

Sept. 1983, NCJ-89874 

Prisoners at midyear 1983 

Oct. 1983, NCJ-91034 

Tracking off enders 

Nov. 1983, NCJ-91572 

The American response to crime: 

An overview of criminal 

justice systems 

Dec. 1983, NCJ-91936 

The severity of crime 

Jan. 1984, NCJ-92326 

Federal drug law violators 

Feb. 1984, NCJ-92692 

Prisoners in 1983 

April 1984, NCJ-92949 

Households touched by crime, 1983 

May 1984, NCJ-93658 

Criminal victimization, 1983 

June 1984, NCJ-93869 

Capital punishment 1983 

July 1984, NCJ-93925 

Bank robbery: Federal 

off enses and off enders 

August 1984, NCJ-94463 

Probation and parole 1983 

Sept. 1984, NCJ-94776 

Case filings in State courts, 1983 

Oct. 1984, NCJ-95111 

The 1983 jail census 

Nov. 1984, NCJ-95536 

Tracking offenders: The child victim 

Dec. 1984, NCJ-95785 

Household burglary 

Jan. 1985, NCJ-96021 

The growth of appeals: 

1973-83 trends 

Feb. 1985, NCJ-96381 

t I 

• '~, ~ ~ -c:;< " " • ' ..:: ,', ", • ~ " ' " ... • • 

Bureau of Justice Statistics reports 

(revised February 1985) 

Call toll-free 800-732-3277 (local 

'251-5500) to order BJS reports, to be added 

to one of tre BJS mailing lists, or to speak 

/;rf to a referei'ce specialist in statistics at the 

II Justice Statistics Clearinghouse, National 

1(:",' Criminal Justice Reference Service, II Box 6000, Rockville, MD 20850_ Single 

copies of reports are free; use NCJ number 

to order. Postage and handling are charged for bulk orders of single reports_ For single 

copies of multiple titles, up to 10 titles are 

free; 11-40 titles $10; more than 40, $20; 

libraries call for special rates. 

Public-use tapes of BJS data sets and 

other criminal justice data are available 

from the Criminal Justice Archive and 

Information Network, P.O_ Box 1248, Ann 

Arbor, MI48106 (313-764-5199)_ 

National Crime Survey 

Criminal victimization in the U.S.: 

1982 (final report), NCJ-92820, 11/84 

1973-82 trends, NCJ-90541, 9/83 

1981 (final report), NCJ-90208 

1980 (final report), NCJ-84015. 4/83 

1979 (final report), NCJ-76710. 12/81 

BJS special reports: 

The economic cost of crime to victims, NCJ93450,4/84 

Family violence, NCJ-93449, 4/84 

BJS bulletins: 

Household burglary, NCJ-96021, 1/85 

Criminal victimization 1983, NCJ-93869, 6/84 

Households touched by crime, 1983, NCJ93658,5/84 

Violent crime by strangers, NCJ-80829, 4/82 

Crime and elderly, NCJ-79614, 1/82 

Measuring crime, NCJ-75710, 2/81 

Victimization and fear of crime: World 

perspectives, NCJ-93872, 1/85 

The National Crime Survey: Working papers. 

vol. I: Current and historical perspectives, 

NCJ-75374,8/82 

vol. II: Methological studies, NCJ-90307, 12/84 

Crime against the elderly in 26 cities, 

NCJ-76706,1/82 

The Hispanic victim, NCJ-69261, 11/81 

Issues :n tile measurement of crime, 

NCJ-74682,10/81 

Criminal victimization I)f California residents, 

1974-77, NCJ-70944, 6/81 

Restitution to victims of personal and household 

crimes, NCJ-72770, 5/81 

Criminal victimization of New York State 

residents, 1974·77, NCJ-66481, 9/80 

The cost of negligence: Losses from preventable 

household burglaries, NCJ-53527, 12/79 

Rape victimization in 26 American cities, 

NCJ-55878, 8/79 

Criminal victimization in urban schools, 

NCJ·56396, 8/79 

Crime against persons in urban, suburban, and 

rural areas, NCJ-53551, 7/79 

An introduction to the National Crime Survey, 

NCJ·43732,4/78 

Local victim surveys: A review of the issues. 

NCJ·39973, 8/77 

Corrections 

BJS bulletins and special reports: 

Retuming to prison, NCJ-95700, 11/84 

Prison admissions and releases 1981 , 

NCJ-95043, 9/84 

Capital punishment 1983, NCJ-93925, 7/84 

Time served in prison, NC,;-93924, 6/84 

Prisoners in 1983, NCJ-85861, 12/82 

Prisoners in State and Federal institutions on 

Dec_ 31, 1982 (final), NCJ-93311, 12/84 

Dec. 31, '\ 981 (final), NCJ-86485, 7/83 

Capital punishment 1982 (final), NCJ-95133, 

11/84 

Ca~ital punishment 1981 (final), NCJ-96484, 

5/83 

1979 sU/vey of inmates of State correctional facilities 

and 1979 census of State correctional facilities: 

BJS special reports: 

Career patterns in crime, NCJ-88672, 6/83 

BJS bulletins: 

Prisoners and drugs, NCJ-87575, 3/83 

Prisoners and alcohol, NCJ-86223, 1/83 

Prisons and prisoners, NCJ·80697, 2/82 

Veterans in prison, NCJ-79232, 11/81 

Census of jails and survey of jail inmates: 

The 1983 jail census (BJS bulletin. NCJ-95536, 

11/84 

Jail inmates 1982 (BJS bulletin), NCJ-87161, 2/83 

Census of jailS, 1978: Data for individual jails, 

vols. I-IV, Northeast, North Central, South, West, 

NCJ-72279-72282, 12/81 

Profile of Jail inmates, 1978, NCJ-65412, 2/81 

Census of Jails and survey of jail inmates, 1978, 

preliminary report, NCJ-55172, 5/79 

Parole and probation 

BJS bulletins: 

Probation and parole 1983, NCJ-94776. 

9/84 

Setting prison terms, NCJ-76218, 8/83 

Characteristics of persons entering parole 

during 1978 and 1979, NCJ-S724S._5/83 

Characteristics of the parole population, 1978, 

NCJ-66479,4/81 

Parole in the U.S., 1979, NCJ-69562.3/81 

Courts 

BJS bulletin: 

Case filings in State courts 1983, NCJ-95111, 

10/84 

BJS special reports: 

The prevalence of guilty pleas, NCJ-96018, 

12/84 

Sentencing practices in 13 States, NCJ-95399. 

10/84 

Criminal defense systems: A national 

survey, NCJ-94630, 8/84 

Habeas corpus, NCJ-92949, 3/84 

Case filings in State courts 1983, 

NCJ-95111,10/84 

State court caseload statistic!:', 1977 and 

1981, NCJ-87587, 2/83 

The prosecution of felony arrests, 1979, NCJ86482,5/84 

State court organization 1980, NCJ-76711, 7/82 

State court model statistical dictionary, 

NCJ-62320, 9/80 

A cross·clty comparison of felony case 

processing, NCJ-55171. 7/79 

Federal criminal sentencing: Perspectives of 

analysiS and a design for research, NCJ-33683, 

10/78 

Variations in Federal criminal sentences, 

NCJ-33684, 10/78 

Predicting sentences in Federal courts: The 

feasibility of a national sentencing policy, 

NCJ·33686, 1Ot7C 

State and local prosecution and civil attorney 

systems, NCJ-41334, 7/78 

Expenditure and employment 

Justice expenditure snd employment In the 

U_S., 1971'79, NCJ-92596, 11/84 

7 

Justice expenditure and employment in the 

U.S., 1979 (final report), NCJ-87242, 12/83 

Prillacy ~';nd security 

Comput{u cJ'ime: . 

Electronic fund transfer and Crime, 

NCJ-92650,2/84 

Compute,' security techniques, 

NCJ-84Ci49, 9/82 

Electronic fund transfer syotems and crime, 

NCJ·83736, 5/82 

Legislative resource manual, NCj-78890,9/81 

Expert witness manual, NCJ-77927, 9/81 

Criminal justice resource manual, NCJ-61550, 

12/79 

Privacy and security of criminal history 

information: 

A guide to research and statistical use, 

NCJ-69790, 5/81 

A guide to dissemination, NC~-40000, 1/79 

Compendium of State leglslataon: 

NCJ-48981, 7/78 

1981 supplement, NCJ-79652, 3/82 

Criminal justice information policy: . 

Victim/witness legislation: An overview, 

NCJ-94263. 12/84 

Information policy and crime control stra~egies 

(SEARCH/BJS confer~nce). NCJ-939'_6, 

10/84 

Research access to cr'mine .. ' justier data, 

NCJ-84154, 2/83 

Privacy and juvenile justice records, 

NCJ-84152,1/83 

Survey of State laws (BJS bulletin). 

NCJ-80836, 6/82 

Privacy and the private employer, 

NCJ-79651.11/81 

Federal offenses and offenders 

BJS special reports: 

Pretrial release and misconduct, NCJ-96132. 

1/85 

BJS blllletins: 

Bank robbery, NCJ-94630, 8/84 

Federal drug law violators, NCJ-92692, 2/84 

Federal justice statistics, NCJ-80814, 3/82 

General 

BJS bulletins: 

Tracking offenders: The child victim, NCJ95785, 12/84 

The severity of crime, NCJ-9~326, 1/84 _ 

The American response to crime: An overview 

of criminal justice systems, NCJ-91936, 12/83 

Tracking offenders, NCJ·91572. 11/83 

Victim and witness assistance: New State 

laws and the system's response, NCJ-87934, 

5/83 

BJS telephone contacts, NCJ-95505, 10/84 

How to gain access to BJS data (brochure). 

BC-000022, 9/84 

Sourcebook of Criminal Justice Statistics, 1983, 

NCJ-91534, 10/84 

Information policy and crime control 

strategies, NCJ-93926, 10/84 

Proceedings of the 2nd workshop on law and 

justice statistiCS, 1984, NCJ-93310, 8/84 

Report to the nation on crime and justice: 

The data, NCJ-87068, 10/83 

Dictionary of criminal justice data terminology: 

2nd ed .. NCJ-76939, 2/82 

Technical standards for machine-readable data 

supplied to BJS, NCJ.75318, 6/81 

Justice agencies in the U.S., 1980, NCJ-65560, 

1/81 

A style manual for machine-readable data, 

NCJ-62766, 9/80 
To be added to any IDS mailing list, copy or cut out this page, fill it in and mail it to: 

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don't fill them in again. If your address does not show your organizational affiliation (or 

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Privacy and security of criminal history information and information policy-new 

legislation; maintaining and releasing intelligence and investigative records 

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Courts reports-State court caseload surveys, model annual State reports, State 

court organization surveys 

Corrections reports-results of sample surveys and censuses of jails, prisons, parole, 

probation, and other corrections data 

National Crime Survey reports-the only regular national survey of crime victims 

Sourcebook of Criminal. Justice Statistics (annual)-broad-based data from 153 

sources in an easy-to-use, comprehensive format (433 tables, 103 figures, index) 

u.s. Department of Justice 

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