banking systems, 2nd edition complete searchable part6

Username: in laws . The Federal Trade Commission (FTC) is dedicated to helping individuals and businesses avoid becom- ing victims of identity theft. Access www.cengage. com/school/pfinance/banking and click on the link for Chapter I I. Go to the Federal Trade Commission website. Review the content in the Hot Unks section. What are some new identity theft schemes? How can you and your employer work to avoid them? www.cengage.com/school/pfinance/banking Trash Retrieval Dumpster diving occurs when a thief goes through the trash of a business or in- dividual with the specific intent of finding either personal identifying information or account infor- mation to construct a false identity. Observation In this day and age, it's hard to know who is watching you. Discrete image-taking devices, ranging from cell phone cameras to pocket -sized video recorders with micro button cameras, can record you discretely. Thieves can record an image of a credit card left exposed on a restaurant table or can photograph a customer entering a PIN in a retail store. Electronic Ways to Commit Identity Theft The Internet has streamlined fmancial transac- tions. It has also streamlined identity theft. The Internet allows individuals or companies to communicate with tens of thousands of people without spending much time, effort, or money. The Securities and Exchange Commission says that spam, or junk e-mail, allows "the unscrupulous to target more potential investors than cold calling or mass mailing." Spammers can use a bulk e-mail program to send personal- ized messages to thousands oflnternet users at a time. In addition, anyone can also reach a large audience by posting a message on an online bulletin board. Fraudsters use spam to find investors for bogus investment schemes. Electronic methods for stealing identities abound. Phishing Common attacks on banks through the Internet include phishing ("fishing"), which is the act of sending a user an e-mail falsely claiming to be a legitimate enterprise in an attempt to solicit private information. The e-mail directs the users to visit a website onto which they are to update personal information, such as passwords and credit card, Social Security, and bank ac- count numbers. The scammer commits identity theft using this information. Hacking Computer hackers that gain access to records or systems pose another threat to consumers and banks. Banks should use tools such as anti- virus software and autobots, programs that constantly monitor all transac- tions looking for abnormalities. Firewalls, programs that monitor and limit incoming and outgoing transmissions, have become increasingly important as banks allow access to records for online banking via the Internet. Banks must safeguard the technology that makes doing business possible. Fraudelent HELOC Accounts A HELOC loan enables borrowers to borrow against a home equity line of credit. Withdrawals against the credit can be made by check or credit card. An identity thief can open an online HELOC account using a false identity and then methodically withdraw funds from the account. 3541 Chapter I I Security, Fraud, and Ethics L Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied. scanned, or duplicated, in whole or in part. Username: in laws . Fake Websites There are multiple ways to extract personal information from fraudulent websites. One method is to develop a website that looks like an authentic business and prompt people to pay for a product or service from that web- site. When the victim enters identifying credit information, the thieves can use that information for their own purposes. Another method exploits design weaknesses in the Domain Name System (D.N.S.). In the early 1980s, the D.N.S. was developed to provide Internet addresses. The sys- tem was not initially intended to safeguard transactions, like credit transactions, that required specific identity verification. Internet-savvy thieves can exploit the D.N.S. to redirect website visitors to nonlegititmate locations where their personal account information can be collected. Personnel Data Theft In the age oflaptops and flash drives, it is fairly easy for confidential employee information to be lost or stolen. In recent years, electronic versions of per- sonnel data has been stolen from a diverse array of organiza- tions including the United States Veteran Affairs, Equifax, the District of Columbia, and Google. In many instances, an employer will offer employees a one-year free subscription to an identity-theft monitoring service after a data theft occurs. Looking for Opportunities Some thieves seek to abuse wi-fi systems used by stores to transmit customer credit information. War driving refers to the criminal practice of driving around to find retailers with weaknesses in their Internet security systems. Once a weakness has been found, sniffer programs, which are electronic programs that capture account numbers and PINs, can be installed. One particularly effective example of this was widely reported during the summer of2008. In this case, an international ring of thieves exploited weaknesses in the Internet security of major retailers including T.J. Maxx, Barnes & Noble, and OfficeMax. More than 41 million debit and credit card numbers were stolen. Sometimes the stolen numbers were sold online and sometimes they were used to manufacture fraudulent ATM cards. Cash could be withdrawn from victims' accounts with the fraudulent ATM cards. ch List six ways to steal identity information electronically. Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. I 1.4 Identity Theft 355 Username: in laws . IDENTITYTHEFT PREVENTION • • • • • • • • • • • • • • • • • • There are a number of ways to proactively protect your personal informa- tion to try to avoid being an identity theft victim. Common Sense Precautions Keep your radar up at all times regarding any suspicious activities or in- quiries. If someone unfamiliar is walking around your neighborhood and looking into mailboxes, keep an eye on them. If you think they are stealing mail, contact law enforcement authorities. Never provide account access codes, Social Security numbers, or other personal identifying information over the phone or online unless you are absolutely certain of the validity of the parties with whom you are interacting. Shred all documents containing personal identifying information-including offers for new credit that arrive in the mail. Electronic Precautions A fraud alert is an electronic warning placed on your accounts to monitor for suspicious financial activity. According to the FTC, you are legally enti- tled to two free types of fraud alerts. An initial fraud alert is good for 90 days and could be put in place if you suspect you may soon be a victim of identity theft. (If perhaps, your wallet was recently stolen.) An extended fraud alert lasts for seven years. An extended alert is a good idea if you have been a victim of identity theft. A copy of the Identity Theft Report must be submitted before an extended fraud alert can be placed on your account. A credit freeze prohibits access to your credit report. These electronic protections provide a good first step, but they do not necessarily prevent all types of identity theft. Commercially Sold Identity Protection Packages Many private companies offer a variety of services to help combat identity theft. Some companies offer services, like fraud alerts, that are actually available for free. Some companies may help you resolve complications re- sulting from being an identity theft victim. Carefully evaluate the services and costs of such programs. Determine the true value they offer before pur- chasing them. ~ check Distinguish between the two types of fraud alerts. 356 Chapter I I Security, Fraud, and Ethics __ ___ _. Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Username: in laws . assessment I 1.4 Think Critically 1. Identify financial costs associated with identity theft. 2. Name four manual ways to commit identity theft. 3. How have electronic transactions and the Internet made identity thieves more efficient? 4. List some ways to prevent identity theft. Make Academic Connections 5. LAW ENFORCEMENT The postal service is actively involved in trying to catch criminals. Go to their website at http://postalinspectors.uspis.gov/. Review the information on consumer awareness. List and define the types of fraud on the website that are not covered in this section. Be prepared to discuss your answers with the class. 6. CURRENT EVENTS Recently the post office made 77 arrests that spanned three countries to stop the flow of 666,000 fake checks. Research other recent arrests for fraud. Summarize the nature of the crime, the amount of the damage, and the agency that caught the thieves. Be prepared to share your research with the class. Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. I 1.4 Identity Theft 357 Username: in laws . a. bandit barrier b. check counterfeiting c. check kiting d. code of ethics e. conflict of interest f. credit freeze g. ethics h. forgery i. fraud j. fraud alert k. house flipping I. phishing m. scam n. sniffer program 0. spam p. straw buyer q. war driving chapter II assessment Chapter Summary 11.1 Robbery Prevention and Response A. Robbery prevention involves installing security equipment and train- ing employees how to behave during a robbery. B. During a bank robbery, employees should be concerned with the twin goals of safety and identification. 11.2 Ethics in Banking A. Many banks provide written codes of ethics to help their employees know how to choose the "proper" behavior in specified circumstances. B. Making the correct ethical decision for a company has become clouded recently with the concern for the "bottom line." Banks must be especially careful to make ethical decisions. 11.3 Fraud and Scams A. Banking fraud has always occurred, but methods of performing bank fraud have increased with technological advances. B. Checking account scams seek to find ways to illegally obtain money from the accounts of unsuspecting victims. 11.4 ldentityTheft A. Existing Credit Card Only, Existing Non-Credit Card Account, and New Accounts and Other Frauds are categories of identity theft. B. Identity theft can be prevented. Vocabulary Builder Choose the term that best fits the definition. Write the letter of the answer in the space provided. Some terms may not be used. 1. Another term for junk e-mail 2. Act of sending an e-mail to a user falsely claiming to be an estab- lished legitimate enterprise to scam the user 3. Process of determining standards and procedures for dealing with judgmental decisions affecting other people 4. Situation in which two interests are at cross-purposes 5. Using a fraudulent appraisal to extract value on a loan for a prop- erty you plan to default on 6. Slang term for something that is fraudulent or a swindle 7. Deception deliberately practiced to secure unfair or unlawful gain 8. Name for bulletproof plastic shield at a teller's station 9. Act of opening accounts at two or more institutions and using the "float time" of available funds to create fraudulent balances 10. Statement adopted by management to guide employees in taking appropriate actions in critical situations that could reflect on the organization Chapter I I Security. Fraud, and Ethics Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Username: in laws . Review Concepts 11. Discuss the way security can be described as robbery prevention. 12. Name several actions that should be part of a "best practices" list for a bank. 13 . Why is training the key to preventing robbery? 14. Discuss some actions that tellers should take during a robbery to help identify a suspect afterward. 15. Explain how fraud related to banking may be committed. 16. How does a credit freeze help prevent identity theft? 17. Discuss the signs to look for that could identify counterfeit checks. 18. List and explain some steps to take to avoid becoming the victim of check fraud. Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Cllapter I I Assessment Username: in laws . 19. Describe what is involved in identity theft. 20. What is the relationship between war driving and sniffer programs? 21. What is the Sarbanes-Oxley Act? What behavior does it seek to prevent? Apply What You Learned 22. Why are the services of an appraiser critical for an illegal mortgage flipping scheme? 23. Why do banks insist that employees not take any heroic measures during a robbery? 24. What aspects of currency design can help prevent counterfeiting? 25. How has computer technology affected bank fraud? 26. Give at least two examples of a conflict of interest or of a breach of confidentiality that could occur in banking. Chapter I I Security. Fraud, and Ethics Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Username: in laws . 27. What do you think caused the accounting scandals of the early twenty-first century? 28. Why should you be concerned about who is watching your financial transactions? Make Academic Connections 29. CRIMINOLOGY Crooks can be quite clever. Use the Internet or other research materials to learn about some specific forms of fraud that are currently problematic. Present a report to the class about how they work and how they can be prevented. 30. PROBLEM SOLVING As the head of the HR department in your bank, you must develop screening procedures to be used during the hiring process. Create a list detailing the background information required of prospective employees and the steps to take to verify the information. 31. ETHICS Make a list of ethical dilemmas you have experienced dur- ing your daily life and describe how you handled each situation. 32. COMMUNICATION Do you believe that fraud can ever be effectively eliminated from the banking system? Explain your answer. Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Cllapter I I Assessment Username: in laws . Bank Marketing 12.1 Define the Customer 12.2 Develop and Maintain the Customer 12.3 Public Relations 12.4 Customer Service 12.5 Marketing and Advertising 362 Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Username: in laws . !;! ~ skills that pay dividends Understanding Consumer Motives People have a variety of reasons for buying products and services. Some of these reasons are based on thoughts and some are based on feelings. Banking is a basic need in modem society. Intellectually, most people understand that they need a bank to deposit a paycheck, to hold their funds, to provide various checking and savings accounts, and to provide ATM services. How a bank is chosen depends on the personality and values of the customer. An analytical customer may do a lot of research to compare products, service levels, and costs among competing banks. If an analytical customer values cost effectiveness and efficiency, they may select the bank that provides the best combination of both. This analytical customer takes a detached, objective approach to decision making. Some customers take a more emotional approach when choosing a bank. A customer who either lived through the depression or who is worried about the lasting impact of the 2008 credit crisis may place a high premium on the security of their funds. This customer may gravitate to a bank with personnel that convey a strong sense of financial knowledge and financial responsibility. During banking transactions, this customer may often seek reassurance that their funds are safe. A customer with a strong need either to feel like part of a community or to do business with people they know socially may place a higher premium on banking where one can develop strong personal relationships. This customer may not thoroughly comparison shop and may select, instead, to choose a bank where they feel they can trust the people they know. When interacting with customers regarding product or service selection, ask them to rank what is most important to them in their selection pro- cess. Their answers will reveal whether they are more analytical, emotional, or a combination of both. Using their responses to frame your discussion, emphasize the qualities of your products or services that are most impor- tant to them. For example, efficiency- and value-driven customers might be influenced to buy from you if they hear about all of the free online services offered by your bank. Socially oriented customers might like to hear about outings to pro baseball games sponsored by your bank. Customers make post-purchase evaluations. Followup with customers after a purchase to see if there's anything you can do to improve their satisfaction. Develop Your Skill In small groups, assign the role of an analytical customer and a social customer to group members. Assign the role of a bank representative,focus- ing on specific bankproducts, like a checking account or a CD, to other group members. The bank representatives should try to sell each type of customer their product by first asking the customer to list their decision priorities and then by framing the discussion around those priorities. Re- flect on how the approaches and conversations are differ- ent based on the personality type of the customer. Be pre- pared to share your findings with the class. ~ ~ ~ Chapter 12 Bank Marketing l6l Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. [...]... BMW offers a variety of financial products The credit card, personal banking, and home and auto insurance products they offer directly compete with traditional banking services In their mission, vision, and values statement, BMW indicates they offer these services to enhance the BMW customer relationship by offering comprehensive banking and insurance services tailored for the BMW driver BMW is cross-selling... gets 60 miles to the gallon of gas won't be the same as the one for a large vehicle that gets 15 mpg t What is demographic information? IDENTIFYING A BANKING CUSTOMER • • • • • • • • • • • • • • There are multiple ways to define, group, service, and sell to banking customers The way that a bank defines its customers will impact how it provides products and services to those customers Individual Customers... may range from house cleaning services to consumer products companies to agricultural businesses Nonprofit groups, ranging from Girl Scout troops through various charities, need banking services Religious institutions also need banking services New Immigrants People who have recently immigrated to the United States, including those who do not speak English as a primary language, are a potential customer... help the business manage all types of routine transactions, from merchant services through payroll, is one approach Functionality Approach A national banking chain presents their products from a more functional standpoint Their website breaks down personal banking services into the categories of earned income, loans, and savings accounts Specific product offerings, from checking accounts through investment... current banking relationships 12.2 Develop and Maintain the Customer Copyright 2010 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated in whole or in part 371 _ , Username: in laws Competitive Threats Companies are leveraging the comfort that younger customers have with social networking sites to further business opportunities Access www.cengage com/school/pfinancelbanking...Username: in laws 12.1 Define the Customer goals + Understand customer characteristics Banking Scene + Apply customer characteristics to banking customers Y""' u,, ;, "ew to the dty He grew "P '" • """'' oomm""'ty where mou peo- pie know each other, and he went to college in a nearby small town He needs to find... May not be copied, scanned, or duplicated, in whole or in part Username: in laws 12.2 Develop and Maintain the Customer goals + Discuss a strategic approach for developing and maintaining profitable Banking Scene customer relationships + Explain how to keep y , U""' I• h'PPY w . Apply customer characteristics to banking customers. terms + demographics + need + want + customer segmentation + target market Define the Customer Banking Scene Y""'. demographic information? IDENTIFYING A BANKING CUSTOMER • • • • • • • • • • • • • • There are multiple ways to define, group, service, and sell to banking cus- tomers. The way that. groups, ranging from Girl Scout troops through various charities, need banking services. Religious institutions also need banking services. New Immigrants People who have recently immigrated