FINANCIAL INSTITUTION FRAUD MISSION Financial Institution Fraud (FIF) is a Tier One strategic priority within the Federal Bureau of Investigation's (FBI) Strategic Plan. Through this national strategy the FBI's goal in addressing FIF is to create an effective and ongoing deterrent designed to prevent criminal conspiracies from defrauding major U.S. industries and the United States government1. FIF investigations are among the most demanding, difficult and time-consuming cases undertaken by law enforcement. Efforts by the FBI and the Department of Justice have attained extraordinary results since the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. Areas of primary investigative interest relative to FIF include bank failures, check fraud and counterfeit negotiable instruments, check kiting, and loan fraud. FIF investigations related to emerging technologies and computer-related banking are taking on added significance among the nation's financial institutions. Since the 1992 peak of the savings and loan crisis, the FBI has been able to refocus its investigative efforts from failed financial institution cases to other high-priority FIF matters. At the close of fiscal year (FY) 1999, the total number of pending FIF investigations for the FBI was 8,799. Of this total, 129 failure cases, or 1.5 percent, involved criminal activity related to a failed financial institution. This statistic reflects an 83 percent reduction in failure investigations since the July 1992 peak of 758 cases. However, as the number of failure investigations has declined, the number of major FIF investigations has remained substantial. As of FY 1999, the FBI was investigating 3,855 major cases, or 43.8 percent of all pending FIF cases.2 This is significant in view of the fact that convictions related to major case investigations have remained constant since FY 1995, surpassing total convictions for major cases during the 1992 peak. During the late 1980s and early 1990s, approximately 60 percent of the fraud reported by financial institutions related to bank insider abuse. Since then, external fraud schemes have replaced bank insider abuse as the dominant FIF problem confronting financial institutions. The pervasiveness of check fraud and counterfeit negotiable instrument schemes, technological advances, as well as the availability of personal information through information networks have fueled the growth in external fraud. In many instances, the international aspects associated with many of these schemes have increased the complexity and severity of the schemes being committed. For the period of April 1, 1996 through January 31, 2000, the FBI received 91,322 Suspicious Activity Reports (SARs) for criminal activity related to check fraud, counterfeit negotiable instruments, and related schemes. These schemes accounted for 48 percent of the 190,752 SARs filed by United States financial institutions (excluding Bank Secrecy Act violations), and equaled approximately $2.89 billion in losses.3 The FBI continues to concentrate its efforts on organized criminal groups involved in these activities. These organized groups are often involved in the sale and distribution of stolen and counterfeit corporate checks, money orders, payroll checks, credit and debit cards, U.S. Treasury checks, and currency. Furthermore, the organized groups involved in check fraud and loan fraud schemes are often involved in illegal money laundering activities in an effort to conceal the proceeds from their crimes. Criminal activity has become more complex and loan frauds are expanding to multi-transactional frauds involving groups of people from top management to industry professionals who assist in the loan application process. These professionals include loan brokers, appraisers, accountants, and real estate attorneys. Such transactions are sometimes hidden against a backdrop of genuine transactions which give them an appearance of legitimacy.  Due to the complexity of these crimes, more proactive FIF investigations are being initiated than ever before. These cases target large-scale fraud operations, often involving hundreds of subjects in multiple jurisdictions. The line between traditional banking services and the expansion into other financial services provided by banks are blurring. As financial institutions become less regulated and provide more financial services to the public through the sale of insurance, securities, investment products and on-line banking, the nature of FIF will change in terms of the potential impact to the nation's financial institutions. The FBI responded to these trends by providing proactive deterrents to assist the nation's banking infrastructure in combating FIF.  The FBI is fully supportive of the inkless fingerprint program for non-bank customers as a preventive measure in combating check fraud and counterfeit negotiable schemes. Additionally, the FBI and the Office of The Comptroller of the Currency published Check Fraud: A Guide to Avoiding Losses to assist financial institutions in identifying these schemes. In an effort to assist financial institutions in the identification of computer-related crimes, the FBI obtained the concurrence of the federal banking regulatory agencies to modify the Suspicious Activity Report with areas for financial institutions to report these crimes. _______________________________________________ 1FBI Strategic Plan 1998-2003. 2A major case is defined as an investigation pertaining to a failed financial institution or where the loss or loss exposure to the financial institution exceeds $100,000. 3These statistics are derived from the Suspicious Activity Report database, which is maintained by the U.S. Treasury Department's Financial Crimes Enforcement Network.  To Top